Gonzaga Debate Institute 2008

Lacy/Symonds/Bowen

1 R&B (Oil)

R&B Index
(Renewables and Backstopping) R&B Shell (1/3)..............................................................................................................................................................3 ***Renewables DA***...................................................................................................................................................6 Renewables 1NC Shell....................................................................................................................................................7 High Oil Prices Solve Warming Now.............................................................................................................................8 High Oil Prices  Renewable Shift in the SQ (1/3)......................................................................................................9 Global shift to Renewables now...................................................................................................................................12 Renewable Shift Underway (1/6)..................................................................................................................................13 EU = Renewables now..................................................................................................................................................19 Renewables Brink.........................................................................................................................................................20 Businesses Going Green...............................................................................................................................................21 Businesses Going Green – High Oil Prices..................................................................................................................22 Businesses Going Green – Public Pressure...................................................................................................................23 Policy changes reduce the price of oil...........................................................................................................................24 US consumption key to global oil market.....................................................................................................................25 AE switch causes Oil Prices to drop (1/3)....................................................................................................................26 Cheap Oil halts Renewable Transition (1/3).................................................................................................................29 Cheap Oil boosts Consumption and Warming (1/2).....................................................................................................32 SUV/Trucks Add-on.....................................................................................................................................................34 Oil prices declines = war...............................................................................................................................................35 ***Backstopping DA***..............................................................................................................................................36 Backstopping 1NC Shell (1/2)......................................................................................................................................37 Oil Prices are Stable (1/2).............................................................................................................................................39 Natural Gas Prices High Now.......................................................................................................................................41 A2: Renewables in the SQ should cause the DA..........................................................................................................42 Boosting Alternative Energy causes Backstopping (1/3)..............................................................................................43 Saudis will flood the market if Oil Prices drop.............................................................................................................46 Multiplier: Saudi capacity would devastate the market................................................................................................47 Saudis are watching alternative energy closely to enforce prices.................................................................................48 OPEC has Spare Capacity (1/4)....................................................................................................................................49 Saudis have Spare Capacity (1/2).................................................................................................................................53 Oil production can pace demand...................................................................................................................................55 OPEC perceives biofuel investment.............................................................................................................................56 Backstopping Crushes Renewables (1/2)......................................................................................................................57 Perceived Backstopping Causes Oil Price Drop (1/2)..................................................................................................59 Backstopping will lower Oil Prices..............................................................................................................................61 Cheap Oil increases Consumption (1/3).......................................................................................................................62 A2: OPEC can’t flood the market – they’ll create the perception................................................................................65 ***Renewables DA Answers***..................................................................................................................................66 No transition to Renewables now (1/2).........................................................................................................................67 SQ Renewables DO NOT solve the case......................................................................................................................71 SQ Biofuels investments are way small/slow...............................................................................................................72 No Price Drop – Chinese Demand will fill in (1/5)......................................................................................................73 No Price Drop – China/India Demand will fill in (1/4)................................................................................................78 No Price Drop – General Fill In (1/2)...........................................................................................................................82 Alternative Incentives don’t reduce Oil Prices.............................................................................................................84 Price Drop doesn’t Crush Renewables..........................................................................................................................85 Turn – Alternatives Increase Energy Prices..................................................................................................................86 A2: If you solve, you link.............................................................................................................................................87 ***Backstopping DA Answers***...............................................................................................................................88 High Oil Prices Inevitable (1/2)....................................................................................................................................89 Oil Price Swings Now (1/4)..........................................................................................................................................91 No Backstopping – Production Bottlenecks (1/4).........................................................................................................95 A2: Backstopping – Oil Prices will stay high...............................................................................................................99 TURN: OPEC will cut production and increase prices...............................................................................................100

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

2 R&B (Oil)

A2: Renewables increase Oil capacity........................................................................................................................101 OPEC can’t flood the market – No spare capacity (1/7).............................................................................................102 Saudi Arabia can’t flood the market – no spare capacity (1/3)...................................................................................109 Saudi Arabia can’t flood the market – Production problems......................................................................................112 Saudi Arabia will only slightly increase production...................................................................................................113 Saudi Arabia won’t flood the market..........................................................................................................................114 Non-OPEC countries running out of capacity............................................................................................................115 OPEC won’t flood the market (1/3)............................................................................................................................116 OPEC can’t reduce Oil Prices (1/4)............................................................................................................................119 Crunch inevitable – OPEC can’t meet demand...........................................................................................................123

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

3 R&B (Oil)

R&B Shell (1/3)
A. Alternative energy transition already underway thanks to oil prices Lynas, author of 'High Tide', ‘08
Mark, New Statesman, “After the Oil Crunch?” 6/12/08, http://www.newstatesman.com/environment/2008/06/oilprices-lynas-world-carbon Accessed: 7/2/08 But peak oil may not be quite the crisis the catastrophists predict. So far, the price hike has been an environmental boon: the rise in fossil fuel prices has made emitting carbon more expensive, helping to make up for the more or less total failure of world climate change policymaking. Higher oil prices have made renewables more competitive, spurring rapid developments in wind and solar power: installed capacities of each are now doubling every two years. In the US, SUV sales have slumped - General Motors may now drop t he Hummer and focus production instead on its new plug-in electric hybrid model, the Chevrolet Volt. The aviation industry has seen its profits evaporate, with many analysts declaring that the era of cheap flights is over. All of these should be causes for celebration. In global warming terms, oil at $139 a barrel has been the best thing to happen for a decade.

B. Adoption of renewable energy lowers price of fossil fuels significantly Goldman Chairman and Founder of both BrightSource Energy Inc. and LUZ II, Ltd (which in turn is a world leader in construction of solar arrays). Currently working at Tel Aviv University. ’08 Arnold, TAU “Renewable
Energy and Beyond” May 2008 http://energy08.tau.ac.il/media/goldman.pdf Accessed:7/6/08 Large scale adoption of solar and other renewable technologies, coupled with the implementation of strong regulations encouraging the conversion of transportation systems to plug-in hybrid and electric vehicle technology, will reduce the demand of fossil fuel significantly. The price of fossil fuel would drop to much lower levels and materially reduce the balance of payment deficit, and economic drain on many economies. These economic benefits attained by the substitution of renewable energy should find some way of positively entering into the renewable energy pricing system.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

4 R&B (Oil)

Backstopping/Renewables Shell (2/3)
C. Independently, any policy that attempts reduce demand for oil causes prices to lower which increases consumption Feldstein, Chairman of the Council of Economic Advisers under President Reagan, Professor at Harvard and a member of The Wall Street Journal's board of contributors, 2008 (Martin, Wall Street Journal, “We Can Lower Oil Prices Now”, 07-01-08, http://online.wsj.com/article/SB121486800837317581.html?mod=googlenews_ws, accessed 0701-08)
The relationship between future and current oil prices implies that an expected change in the future price of oil will have an immediate impact on the current price of oil.
Thus, when oil producers concluded that the demand for oil in China and some other countries will grow more rapidly in future years than they had previously expected, they inferred that the future price of oil would be higher than they had previously believed. They responded by reducing supply and raising the spot price enough to bring the expected price rise back to its initial rate. Hence, with no change in the current demand for oil, the expectation of a greater future demand and a higher future price caused the current price to rise. Similarly, credible reports about the future decline of oil production in Russia and in Mexico implied a higher future global price of oil – and that also required an increase in the current oil price to maintain the initial expected rate of increase in the price of oil. Once this relation is understood, it is easy to see how news stories, rumors and industry reports can cause substantial fluctuations in current prices – all without anything happening to current demand or supply. Of course, a rise in the spot price of oil triggered by a change in expectations about future prices will cause a decline in the current quantity of oil that consumers demand. If current supply and demand were initially in balance, the OPEC countries and other oil producers would respond by reducing sales to bring supply into line with the temporary reduction in demand. A rise in the expected future demand for oil thus causes a current decline in the amount of oil being supplied. This is what happened as the Saudis and others cut supply in 2007.

Now here is the good news. Any policy that causes the expected future oil price to fall can cause the current price to fall, or to rise less than it would otherwise do. In other words, it is possible to bring down today's price of oil with policies that will have their physical impact on oil demand or supply only in the future. For example, increases in government subsidies to develop technology that will make future cars more efficient, or tighter standards that gradually improve the gas mileage of the stock of cars, would lower the future demand for oil and therefore the price of oil today. Similarly, increasing the expected future supply of oil would also reduce today's price. That fall in the current price would induce an immediate rise in oil consumption that would be matched by an increase in supply from the OPEC producers and others with some current excess capacity or available inventories. Any steps that can be taken now to increase the future supply of oil, or reduce the future demand for oil in the U.S. or elsewhere, can therefore lead both to lower prices and increased consumption today.

D. Turns the Case – Only sustained high oil prices can guarantee a smooth transition to renewables Bryce managing editor of Energy Tribune. He is the author of Cronies: Oil, the Bushes, and the Rise of Texas, America's Superstate ‘07
Robert, Petroleum World “The Politics of Cheap Oil” 1/28/07 http://www.petroleumworld.com/SF07012801.htm Accessed: 7/3/08 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.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

5 R&B (Oil)

Backstopping/Renewables Shell (3/3)
E. Turns the Case – An abundance of cheap oil leads to an increase in consumption CNN ‘08
“US Gas: So cheap it hurts” 5/6/08 http://money.cnn.com/2008/05/01/news/international/usgas_price/? postversion=2008050109 Accessed: 7/4/08 Gas consumption Europe vs. U.S. There is some evidence Europe's high gas taxes have capped its oil consumption. Oil use in the United Kingdom has basically stayed flat from 1980 to now, while in France it's dropped 17%, according to figures from the Energy Information Administration. In the U.S., meanwhile, oil use is up 21% over the same period, although the country has added more people and seen its economy grow slightly faster. Americans have taken advantage of cheap gas prices to do other things - like buy bigger cars and bigger houses further away from city centers, said Schipper.

F. Rapid supply depletion caused by low prices causes nuclear conflict. Robert Paehlke, Environmental and Resource Studies, 1989
[Environmentalism and the Future of Progressive Politics,p. 240] Declining oil prices, of course, assure more rapid depletion of global oil supplies. A sudden shortfall in oil supplies may goad government decision makers to subsidize the expansion of the nuclear industry. Or worse, it might encourage one or more nations to fight for their supplies of oil. Energy conservation will seem less important if further declines in energy prices are anticipated. But neither renewable sources nor nuclear power would be sufficient if energy demand in nuclear-armed nations again began to grow rapidly. An orderly transition to renewable sources of energy, and a greater likelihood of peace will be associated with gradual, steady increases in oil prices.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

6 R&B (Oil)

***Renewables DA***

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

7 R&B (Oil)

Renewables 1NC Shell
A. Alternative energy transition already underway thanks to oil prices Lynas, author of 'High Tide', ‘08
Mark, New Statesman, “After the Oil Crunch?” 6/12/08, http://www.newstatesman.com/environment/2008/06/oilprices-lynas-world-carbon Accessed: 7/2/08 But peak oil may not be quite the crisis the catastrophists predict. So far, the price hike has been an environmental boon: the rise in fossil fuel prices has made emitting carbon more expensive, helping to make up for the more or less total failure of world climate change policymaking. Higher oil prices have made renewables more competitive, spurring rapid developments in wind and solar power: installed capacities of each are now doubling every two years. In the US, SUV sales have slumped - General Motors may now drop t he Hummer and focus production instead on its new plug-in electric hybrid model, the Chevrolet Volt. The aviation industry has seen its profits evaporate, with many analysts declaring that the era of cheap flights is over. All of these should be causes for celebration. In global warming terms, oil at $139 a barrel has been the best thing to happen for a decade.

B. Adoption of renewable energy lowers price of fossil fuels significantly Goldman Chairman and Founder of both BrightSource Energy Inc. and LUZ II, Ltd (which in turn is a world leader in construction of solar arrays). Currently working at Tel Aviv University. ’08 Arnold, TAU “Renewable
Energy and Beyond” May 2008 http://energy08.tau.ac.il/media/goldman.pdf Accessed:7/6/08 Large scale adoption of solar and other renewable technologies, coupled with the implementation of strong regulations encouraging the conversion of transportation systems to plug-in hybrid and electric vehicle technology, will reduce the demand of fossil fuel significantly. The price of fossil fuel would drop to much lower levels and materially reduce the balance of payment deficit, and economic drain on many economies. These economic benefits attained by the substitution of renewable energy should find some way of positively entering into the renewable energy pricing system.

C. Turns the Case – Only sustained high oil prices can guarantee a smooth transition to renewables Bryce managing editor of Energy Tribune. He is the author of Cronies: Oil, the Bushes, and the Rise of Texas, America's Superstate ‘07
Robert, Petroleum World “The Politics of Cheap Oil” 1/28/07 http://www.petroleumworld.com/SF07012801.htm Accessed: 7/3/08 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.

D. Rapid supply depletion caused by low prices causes nuclear conflict. Robert Paehlke, Environmental and Resource Studies, 1989
[Environmentalism and the Future of Progressive Politics,p. 240] Declining oil prices, of course, assure more rapid depletion of global oil supplies. A sudden shortfall in oil supplies may goad government decision makers to subsidize the expansion of the nuclear industry. Or worse, it might encourage one or more nations to fight for their supplies of oil. Energy conservation will seem less important if further declines in energy prices are anticipated. But neither renewable sources nor nuclear power would be sufficient if energy demand in nuclear-armed nations again began to grow rapidly. An orderly transition to renewable sources of energy, and a greater likelihood of peace will be associated with gradual, steady increases in oil prices.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

8 R&B (Oil)

High Oil Prices Solve Warming Now
High oil prices are a blessing in disguise as they reduce CO2 emissions. It’s counterproductive to pay attention to the negative aspects or instituting policies that drop the price of oil Rhein, Senior Analyst, European Policy Centre, Advisor for European Policy Center, 08
(Eberhard, Blog Active EU “The High Oil Price is a Blessing in Disguise,” 7/7, date accessed: 7/12/08) Last not least, the high oil price will lead to a more efficient use of heating fuel, which is a major source of C02 emissions in the northern hemisphere. The inadequate thermal insulation of most buildings in the world, especially in the USA and the former socialist countries, engenders an extraordinary waste of costly energy. With or without public support programmes for thermal insulation home owners will have little choice but to retrofit their buildings. The necessary investments for double glazing, insulated roofing etc. will pay much faster because of the prohibitive cost of heating fuel. The high prices will, no doubt, unleash an investment boom in retrofitting of buildings, the results of which will become visible in a few years. In conclusion, the high oil price will be blessing in disguise. It would be wise for politicians to emphasise the positive aspects of the rising oil prices, instead of only bemoaning their negative impact. It would therefore be contra-productive to offset the higher oil prices by providing tax reductions on fossil energy or specific subsidies for heating or commuting. If governments want to remedy the pinch high oil prices may cause to poor citizens, they should focus on supplementary income payments limited to the very poor.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

9 R&B (Oil)

High Oil Prices  Renewable Shift in the SQ (1/3)
High oil prices lead to the development of alternative energy Meyer and Swartz Writers for the Dow Jones newswire ‘08
Gregory and Spencer, CattleNetwork, “Energy Matters: Saudi Fears Of High Oil Prices Fade With Demand”5/5/08. http://www.cattlenetwork.com/Content.asp?contentid=218898 Accessed: 7/2/08 HOUSTON (Dow Jones)--For all the benefits of soaring oil prices, Saudi Arabia has historically viewed them with a measure of trepidation. Besides the worry that high energy prices could hinder economic growth and eat into demand, Saudi officials have traditionally argued that sky-high crude prices would hasten the development of renewable energy that would displace petroleum.

High oil prices are causing investment in alternative energy. Efstathiou, Staff Writer, 08
(Jim Jr, “Global Clean-Energy Investment Rose 60% in 2007,” http://www.bloomberg.com/apps/news? pid=20601081&sid=apeyv.EIQQv4&refer=australia, 7/2/08, date accessed: 7/2/08) July 1 (Bloomberg) -- Wind, solar and biofuel companies received a record $148 billion in new funding last year as rising oil prices and climate-change rules encouraged investment in renewable energy, the United Nations Environment Program said. Wind power attracted the most financing at $50 billion, according to a report today from the Nairobi-based UNEP. Overall, investment in clean-energy and energy-efficiency industries rose 60 percent from 2006. Carbon dioxide, the byproduct of burning coal, oil and natural gas, is the main pollutant blamed for global warming. Fossil-fuel burning power plants are the world's biggest source of CO2, according to the Paris-based International Energy Agency. ``We have a significant economic signal here that goes well beyond what even 10 years ago some of the mainstream energy think tanks or international finance institutions thought would happen,'' Achim Steiner, the director general of UNEP, said on a conference call. ``It reflects a clear understanding in the marketplace that environmental change scenarios are indeed driving public policy.''

High oil prices spur interest in alternative energy AP, 04
(Associated Press, “Rising oil prices boost renewable energy,” 10/21, http://www.msnbc.msn.com/id/6271966/, date accessed: 7/2/08) SAN FRANCISCO - With oil reaching record high prices and natural gas doubling in the last two years, renewable energy is looking a lot better — not just on environmental merits, but on price. Wind, solar, geothermal and other green power sources have long been championed by people worried about smog and global warming, but until recently they were too costly to compete. But the soaring cost of fossil fuels is changing the economics of the energy market. "Rising fossil fuel prices are making renewable energy more competitive in the power market," said Steve Taub, an alternative energy analyst at Cambridge Energy Research Associates.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

10 R&B (Oil)

High Oil Prices  Renewable Shift in the SQ (2/3)
In time of crisis is where radical change occurs. The squo is transitioning alternative energy into the fastlane. Kelly, Federal Energy Regulatory Commissioner, 07
(Suedeen, FERC, “Transition to renewables, carbon-neutral power under way, must be pushed,” 6/18, Lexis, date accessed: 7/2/08) "This is all-around negative news, and we can correctly call this a crisis," Kelly said. But the good news is that "crises uniquely enable change to occur. It pushes transitions into the fast lane," she said. "The transition to a new energy economy in the electric sector is beginning to happen." With no time to build more generation in the very near term, efficiency and demand side management are key, Kelly said. The lesson from use of demand resources last summer is that "even small reductions in load at peak can disproportionately reduce stress on the electric delivery system and lower prices," she added, noting that a 1.4% reduction in load on PJM Interconnection brought peak prices down $300/MW "for a one-day savings of $230 million." So the immediate solution is more demand response programs, Kelly said, adding that "FERC is working with the organized regional transmission systems to ensure that they can be implemented as well as, if not better than, last year." Looking at the new energy economy, Kelly observed that in the short run more renewables will be introduced to the grid, while "in the long run, I believe more carbon-neutral fuels will be introduced to the grid, including clean coal. I say that because consumers want that, and they are demanding that."

High oil prices means focus on alternative energy. Baker, Staff Writer, 04
(Mark, Radio Free Europe, “World: Rise In Oil Price Shifts Focus To Use of Renewable Resources,” 6/1, http://www.rferl.org/content/article/1053079.html, date accessed: 7/2/08) Interest in the use of alternative resources -- like wind and solar power -- is rising as the price of oil on world markets touches 20-year highs. That explains the attention focused on an international conference this week in Germany that aims to promote such renewable energy resources. Nearly 3,000 delegates are attending, including leaders and ministers from more than 100 countries. RFE/RL takes a closer look at the conference's aims and renewed prospects for renewable energy.

Interest in alternative energy on the rise in the US and internationally due to high oil prices. Baue, Staff Writer, 05
(William, Social funds, “Rising Oil Prices Fuel Investment Returns in Renewable Energy for New Alternatives Fund,” 10/14, http://www.socialfunds.com/news/article.cgi/1834.html, date accessed: 7/2/08) The first environmental mutual fund is also globalizing its reach to capitalize on innovative developments in alternative energies in other countries. SocialFunds.com -- Rising fossil fuel prices are sparking interest in renewable energies and activity in alternative energy is globalizing. This combination is powering strong investment returns for the New Alternatives Fund (ticker: NALFX). Founded by father-and-son team Maurice and David Schoenwald in September 1982 as the seminal environmental mutual fund, the fund been on a hot streak lately with one-year returns of 21.54 percent. These results place the fund in the ninth percentile compared to peer funds of similar style and asset class as well as other attributes--including both those in the socially responsible investing (SRI) realm with New Alternatives and those in the mainstream. In other words, New Alternatives has outperformed 91 percent of like funds over the past year. Looking at the longer term, the fund's three-year annualized returns stand at 18.18 percent, placing it in the 29th percentile. All fund statistics cited in this article are based on data provided to SocialFunds.com by Thomson Financial Network covering the period ending September 30, 2005. "There certainly has been increased interest in alternate energy in the US, but I think the interest is greater overseas and has been for a number of years," David Schoenwald told SocialFunds.com. "I'm sure the higher oil and natural gas prices have contributed to the investment interest and stock performance in alternative energy."

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

11 R&B (Oil)

High Oil Prices  Renewable Shift in the SQ (3/3)
High oil prices keep alternative energy competitive Renewable Energy, Energy Blog, 07
(“U.S. ethanol companies thrive as oil tops $100,” 1/7, http://renewenergy.wordpress.com/2008/01/07/us-ethanolcompanies-thrive-as-oil-tops-100/, date accessed: 7/3/08) Oil’s jump to more than $100 per barrel has helped boost shares of ethanol companies as interest swells in the domestic source of motor fuel, analysts said. U.S. oil futures briefly hit a record of more than $100 per barrel Thursday as the country’s crude supplies fell for the seventh week running amid soaring global demand. “One hundred-dollar oil eliminates a lot of problems for ethanol,” Ron Oster, an analyst at Broadpoint Capital Inc in Missouri, said in an interview. Times had been tough as recently as October for ethanol companies. A 40 percent jump in U.S. capacity to make the alternative fuel during the year lead to fears of oversupply. The doubling in prices for corn, the main U.S. feedstock for ethanol, to well over $4 a bushel also hurt profit margins and company shares. And questions over whether ethanol made from corn cuts emissions of the main greenhouse gas, carbon dioxide, have lingered, reducing some interest in the fuel as a green replacement for gasoline. But oil’s rise of about $20 a barrel since early October, combined with mandates for a six-fold increase in ethanol production over the next 15 years in the new U.S. energy law, have pushed shares higher. VeraSun Energy shares jumped 62 percent since lows this fall, U.S. BioEnergy Corp shares were up nearly 97 percent, Pacific Ethanol Inc shares were up nearly 107 percent, and Aventine Renewable Holdings shares were up nearly 67 percent.

High oil prices mean renewable energy is developed faster Reuters, 08
(“Norway says oil price helps renewables push,” 6/12, http://uk.reuters.com/article/environmentNews/idUKL1256160020080612, date accessed: 7/3/08) OSLO (Reuters) - High oil prices make life difficult in poorer countries but at the same time also help fuel development of renewable energy sources, Norway's Energy and Petroleum Minister Aaslaug Haga told Reuters on Thursday. "There are several dilemmas regarding the high oil price," Haga said in an interview. "It makes it difficult for the poor countries. At the same time renewable energy will be developed faster, which is good."

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

12 R&B (Oil)

Global shift to Renewables now
Multitudes of countries are successfully embracing the need for alternative energy PEMBINA Institute, not-for-profit environmental policy research and education organization specializing in the fields of sustainable energy ‘08
“The Global Energy Transition” Last date cited: March 18th 2008. http://re.pembina.org/global Accessed: 7/2/08 Recognizing the benefits of renewable energy, countries around the world are introducing policies to encourage their development. According to the Worldwatch Institute’s report, Renewables 2005 - Global Status Report , at least 48 countries now have some type of renewable energy promotion policy, including 14 developing countries. Most targets are for shares of electricity production, typically 5— 30%, by the 2010—2012 timeframe. Mandates for blending biofuels into vehicle fuels have been enacted in at least 20 states and provinces worldwide as well as in three key countries — Brazil, China and India. Government leadership provides the key to market success, according to the report.

Multiple key states are already using incentives to shift towards renewable energy PEMBINA Institute, not-for-profit environmental policy research and education organization specializing in the fields of sustainable energy ‘08
“Supportive Policy” Last date cited: March 18th 2008. http://re.pembina.org/global/support Accessed: 7/2/08 Substantial policy mechanisms to support green power for electricity generation are in place in Brazil, China, Denmark, France, Germany, India, Japan, Ontario, Portugal, Spain, Sweden, Korea, the United States and the United Kingdom. Feed-In Tariffs Renewable energy feed-in tariffs, also known as advanced renewable tariffs or standard offer contracts, are used by most countries that successfully support green power. Feed-in tariffs allow for green power generators to sell power to the grid operator at premium fees set by government. The fees are usually set at different rates for different technologies. For example, Germany has different feed-in tariffs for hydropower, wind, solar, geothermal and biomass projects. If it becomes apparent that one technology is not being developed at a rate necessary to meet targets, the fees can be adjusted. The grid operators are legally required to give priority connections to plants generating electricity from low-impact renewable energy sources. The highest feed in tariffs have been set by Korea at 70 cents/kWh for solar electric power. Ontario has recently introduced a standard offer contract for wind, biomass and solar green power sources. The use of the feed-in tariff approach can be used to support the development of a well-balanced green power portfolio. If it includes long-term commitments with fair pricing, this approach can provide a stable investment environment and lead to the establishment of local green power manufacturing facilities. It can also result in a diverse ownership structure for green power involving farmers and municipalities, which leads to more rural and economic development. Renewable Portfolio Standard (RPS) Another successful approach is to allow grid operators to use their own means to meet legal green power targets or a Renewable Portfolio Standard (RPS). The state of Texas in the U.S. has become a leader in using the RPS approach. At the end of 2005, Texas had an installed wind generation capacity of 1,995 MW. As of 2006, a total of 21 U.S. states have RPS regulations . Several members of the European Union have RPS or Renewable Obligations including the United Kingdom and France. An RPS sets an escalating set of green power goals and places responsibility for meeting those goals on the electric retailers, with significant penalties for non-compliance. An RPS is often supported by renewable energy certificate (REC) trading that allows utilities with legal commitments to purchase green power from third parties if it is cheaper to do so. Because of the focus on low-cost green power, the RPS approach has been most successful in stimulating wind power development. To support other green power resources, an RPS has to assign distinct targets for each green power source. Financial Incentives Several countries including Canada and the United States provide production incentives for wind generated green power. These are paid to the producer of green power on the basis of each kWh of power generated. Green power generating equipment and systems often qualifies for accelerated depreciation under tax laws making investment in green power more financially attractive.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

13 R&B (Oil)

Renewable Shift Underway (1/6)
A successful global movement towards alternative energy is already underway, decentralizing control over energy price and supply PEMBINA Institute, not-for-profit environmental policy research and education organization specializing in the fields of sustainable energy ‘08
“The Global Energy Transition” Last date cited: March 18th 2008. http://re.pembina.org/global Accessed: 7/2/08 A global transition to renewable energy is already underway. Renewable energy offers an alternative to conventional sources and grants us greater control over future energy prices and supply. Individuals, businesses, and communities can meet their energy needs through local, distributed energy production that provides additional economic benefits including jobs and community development. Public and private sector investment in renewable energy is growing rapidly. Increased awareness of renewable energy opportunities and government policies supportive of renewable energy development are helping to speed this transition to a sustainable energy future. Examples of supportive policies and innovative financing solutions from countries around the world provide examples and opportunities for Canada to pursue.

Renewable energy is coming now Pagnamenta, Energy and Environment Editor of Times Online, 2008 (Robin, Times Online, “Renewable energy in ‘green gold rush,’”07-01-08, http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article425 1280.ece, accessed 07-01-08
Million (74.3 billion) last year and is still accelerating despite the slowdown in the wider economy, according to the United Nations. Wind energy attracted the biggest amount of around $50.2 billion and solar, the fastest growing area, attracted investment of $28.6 billion. Since 2004, the global market for solar energy has grown by annual rate of 254 per cent. The report from the UN’s Environmental Programme (UNEP) likened the flood of investment to the renewable energy sector to a “green gold rush”. “Just as thousands were drawn to California and the Klondike in the late 1800s, the green energy gold rush is attracting legions of modern day prospectors in all parts of the globe,” said Achim Steiner, head of UNEP. Public investment in renewable energy via the markets more than doubled to $23.4 billion, up from $10.6 billion in 2006, the report said. While there was strong growth in wind and solar energy, the biofuel sector was weaker with funds dropping by nearly one third to $2.1 billion. The report indicated that the renewable energy sector is set to expand to $450 billion by 2012, and $600 billion by 2020. “We have a significant economic signal here, that goes well beyond what, 10 years ago, energy thinktanks or international.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

14 R&B (Oil)

Renewable Shift Underway (2/6)
Businesses are proving now there is huge support for movements toward alternative energy Business and Finance, 07
(Business and Finance, “EVERYTHING'S GONE GREEN,” 7/13, Lexis, date accessed: 7/2/08) High returns, together with low costs and political support, are spurring companies towards alternative energy investment, writes Romil Timbadia. With the Middle East crisis and political instability, and the increasing demand for energy and fuel worldwide, it doesn't take a rocket scientist to figure out that the cost of oil - a major source of energy - can only spiral upwards. Only last week, global oil prices touched a 10-month high, breaking past the $73 a barrel level, with indications that it can go much higher. At this critical juncture in the energy world, companies and financial institutions are scrambling towards alternative energy investments, where costs are lower, resources are aplenty and government support is strong - but more importantly, where returns are very high. Last month, JP Morgan established an alternative energy investment banking unit in a bid to capitalise on the boom in environmentally friendly technologies. This follows the strong efforts of other companies and investment banks to capitalise on the green trend.

All kinds of businesses are band wagoning onto alternative energy Business and Finance, 07
(Business and Finance, “EVERYTHING'S GONE GREEN,” 7/13, Lexis, date accessed: 7/2/08) Citigroup has an alternative energy task force within its energy investment banking group and Goldman Sachs is among the largest investors in environmentally friendly technologies. Credit Suisse formed a renewable energy banking group last year and recently dished out Eur 44m to acquire a 10% stake in Ecosecurities, a UK-based developer of greenhouse gas emission reduction projects. The writing is on the wall. Investment banks and finance companies are jostling to get a piece of the pie to generate business from the increasing number of "green" companies, those that produce wind-power turbines, hydro-electricity, biofuels and other related products.

Businesses are quickly seeing, alternative energy is the way to go. Business and Finance, 07
(Business and Finance, “EVERYTHING'S GONE GREEN,” 7/13, Lexis, date accessed: 7/2/08) The reasons for these large-scale investment decisions are many. Alternative energy is environmentally friendly and traditional energy sources are seeing a depletion in their supply. Climate change and global warming are also important, while the long-term political support for alternative energy cannot be understated. But the main reason for the popularity of alternative energy investment is the potential high returns. Jens Peers of KBC Asset Management, which has established global alternative energy funds in Ireland, explains, "As the cost of other fuels keeps increasing and the costs of renewables keeps decreasing, there is a lot of attraction towards alternative energy investment. But one of the main reasons of its popularity is the potential high returns that can be achieved. It is a very lucrative investment with a lot of demand emanating from investors - for information and investment into this sector." The $300m (Eur 220m) KBC alternative energy fund has posted average annual returns of 35.9% in the past three years.

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Renewable Shift Underway (3/6)
Popularity for alternative energy is high with businesses. Business and Finance, 07
(Business and Finance, “EVERYTHING'S GONE GREEN,” 7/13, Lexis, date accessed: 7/2/08) Paul Hilton, interim director of social investment strategy at Calvert, one of the US's largest socially responsible mutual fund firms, believes that with the prevailing high oil prices and with costs dropping for many types of alternative energy technologies, this will be an excellent market for some time. "Investors should look for good long-term investments that will benefit from a shift away from fossil fuels into solar, wind, biofuels, fuel cells, and other emerging alternative energy technologies." Peers adds: "There is also a lot of interest emerging from pension funds and venture capitalists - some technologies within the alternative energy sector are still at a nascent stage." All of this goes to show that many investment vehicles are seeing commercial returns in this sector.

Transition to alternative energy now – the key is to prevent interference. Linden, Professor of Energy and Power Engineering and Management at Illinois Institute of Technology, 97
(Henry, ENGINEERING COLLOQUIUM, “Pathways to a Sustainable Global Energy System,” 10/6, http://ecolloq.gsfc.nasa.gov/archive/1997-Fall/announce.linden.html, date accessed: 7/1/08) ABSTRACT -- Political forces are again mobilizing to interfere with the rational development of the U.S. and global energy systems. This time the nominal justification is anthropogenic climate change, but the ideological drivers are the same as those which generated the fictitious "energy crisis" of the 1970s and early 1980s. Poverty is the most pernicious environmental and social pollutant. Yet, energy abundance and the resulting economic, social, and environmental benefits and physical mobility seem to offend certain intellectual and political elites. In this presentation, it will be shown that the global energy system is moving steadily towards sustainability through electrification, decarbonization, and efficiency improvements, thanks to cost-effective technological advances driven by market forces. The outcome of these developments is now quite well defined -- electrification of most stationary energy uses with high-tech renewable or essentially inexhaustible primary energy sources and the use of nonfossil hydrogen as the dominant transportation fuel. During what is likely to be the 100-year transition, abundant global natural gas supplies and ever more efficient power generation and end-use technologies will play an important role in reducing the environmental impact of fossil fuel consumption. As a result of these parallel developments, atmospheric carbon dioxide and other greenhouse gas concentrations are unlikely to reach levels that even under the questionable climate sensitivity assumptions used by the Intergovernmental Panel on Climate Change (IPCC) will cause mean global surface temperature increases in excess of 1.5 degrees C. The major challenge will be to prevent interference by governments of the industrialized world or intergovernmental bodies with the technical and economic drivers that will ensure evolution to sustainability along least-cost pathways without impairment of human social and economic well-being so closely related to adequate and affordable energy services. Another challenge will be to assist the developing world, which is projected to be responsible for 66 percent of the increase in carbon dioxide emission between 1995 and 2015, in adopting the more advanced energy supply, conversion, and end-use technologies that often require larger hard-currency investments.

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Renewable Shift Underway (4/6)
Renewable energy investments are increasing Efstathiou, 08 (Jim, Bloomberg, “Global Clean Energy Investment Rose 60% in 2007,” 07-01-08, http://www.bloomberg.com/apps/news? pid=20601081&sid=apeyv.EIQQv4&refer=australia#, accessed 07-02-08)
July 1 (Bloomberg) -- Wind, solar and biofuel companies received a record $148 billion in new funding last year as rising oil prices and climate-change rules encouraged investment in renewable energy, the United Nations Environment Program said. Wind power attracted the most financing at $50 billion, according to a report today from the Nairobi-based UNEP. Overall, investment in clean-energy and energy-efficiency industries rose 60 percent from 2006. Carbon dioxide, the byproduct of burning coal, oil and natural gas, is the main pollutant blamed for global warming. Fossil-fuel burning power plants are the world's biggest source of CO2, according to the Parisbased International Energy Agency. ``We have a significant economic signal here that goes well beyond what even 10 years ago some of the mainstream energy think tanks or international finance institutions thought would happen,'' Achim Steiner, the director general of UNEP, said on a conference call. ``It reflects a clear understanding in the marketplace that environmental change scenarios are indeed driving public policy.'' Solar power attracted $28.6 billion in new capital in 2007, and the industry has more than tripled each year, on average, since 2004, according to the UNEP report. Investment in energy efficiency reached a record $1.8 billion, a 78 percent increase from 2006. 31 Gigawatts Overall, renewable energy accounted for 23 percent of all new generating capacity installed globally in 2007, according to Michael Liebreich, chairman of the London-based consulting firm New Energy Finance Ltd. The world added 31 gigawatts of renewable power last year, mostly from wind; 7 gigawatts of hydroelectric power; and 3 gigawatts of nuclear power. A megawatt is enough to power 800 average U.S. homes. A gigawatt is 1,000 megawatts. ``The technology can be improved, and the capital markets are ready to put their shoulder to the wheel in this great transition that the world is engaging in,'' Liebreich said on the conference call. Europe leads the world in renewable-energy investment because of ``supportive policies'' and a willing investor base, the UNEP said. Financing for projects that produce clean energy, such as windfarms, reached a record $49.5 billion, 62 percent of the worldwide total. In the U.S., clean-energy sources together now supply just 2.4 percent of national electricity demand, excluding hydroelectric power, according to the U.S. Energy Department. Coal-burning power plants supply about half the country's power. India and China Three countries, India, China and Brazil, saw total investment of $26 billion for renewable energy sources, 14 times the level in 2004, Liebreich said. U.S. investors are ``gearing up for a major shift in political attitude'' toward clean energy, according to the report. The next U.S. president ``is expected to make renewable energy and energy efficiency a political priority.'' Governments are negotiating a global agreement that would replace the 1997 Kyoto Protocol, which required developed nations to reduce emissions of greenhouse gases blamed for global warming. The Kyoto treaty, which the U.S. rejected, runs out in 2012. The new treaty is to be completed in Copenhagen next year. ``With world temperatures and fossil fuel prices climbing higher, it is increasingly obvious to the public and investors alike that the transition to a low-carbon society is both a global imperative and an inevitability,'' Steiner said. ``The findings should empower governments to reach a deep and meaningful new agreement.''

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Renewable Shift Underway (5/6)
Effectiveness, cost, and cleanliness make slow transition to renewables inevitable. IEA, Renewable Energy Working Party, 7-9-04
[Evolving Renewable Energy Market, http://library.iea.org/dbtw-wpd/textbase/nppdf/free/1990/binnenwe99.pdf] One might ask: why are renewables important? One reason is that they are the most environmentally benign technologies available for power generation. Most renewable technologies have proven their effectiveness and reliability. Major efforts are underway to further improve their technological performance and reduce their associated energy costs. In many applications around the world, renewables are already the least cost energy option, and in many others they are increasingly competitive.
It is also important to remember that in many parts of the world it is hard to put a price on electricity because there is no access to it. It is often stated that more than two billion people in the world today have no access to electricity. At least another half billion people have such limited or unreliable access that for all intents and purposes they do not have access. These numbers constitute a significant portion of the world’s population. And we must keep in mind that these two billion plus people live in regions of the world where population is growing most rapidly. If we are to make a difference in these people’s lives, and we must strive to do so, we have to provide them with a connection to the electricity grid or provide them with power sources suitable for off-grid applications - i.e. renewable electric technologies. When people have no access to electricity, even a small wind turbine or a low wattage photovoltaic panel combined with battery storage can make a very large difference in their lives. Many examples can be given. Light becomes available at night for children’s education. Electricity makes communication possible, and refrigeration available. Lives can be transformed, particularly those of women and children in developing countries, who carry most of the burden associated with fuel gathering and energy use. This can have a significant impact on family wealth, since women are also the main source of marginal revenue in the household. The use of renewable technologies can be cost effective where the alternative is to install fossil fuel-based systems such as diesel engines, or to extend expensive electrical transmission and distribution systems. In many cases, the price paid by individual energy users per kilowatt-hour is often higher than the cost of energy from photovoltaic or other renewable energy sources. In answering the question, why are renewables important, we would also suggest that there is no way to project today’s world energy system into the long-term future. Admittedly, we are going to be using large amounts of fossil fuel well into the next century. But we cannot continue indefinitely with today’s high dependency on such fuels. Just think about transportation issues. If large numbers of people in developing countries such as China, India, and the countries of Latin America, start driving cars as people in the developed nations currently do, demand and prices for petroleum resources will grow rapidly, international supply problems and resulting tensions will escalate dramatically, and the environmental consequences both locally and globally will be unacceptable. On this latter point, political leaders around the world have recognized the importance of cooperative efforts to address climate change and sustainable development issues, as exemplified by the Rio Earth Summit in 1992. We must also never forget that there is a limit to the earth’s fossil fuel resources. Although analysts disagree about the exact time frame in which supplies of fossil fuels will begin to decline, it is becoming increasingly clear that this will happen sometime in the next century. A number of recent analyses have put the beginning of this decline in the first half of the next century. For example, the head of a highly respected oil industry strategic planning organization has said: “There is clearly a limit to fossil fuels. Fossil fuel resources and supplies are likely to peak around 2030, before declining slowly. Far more important will be the contribution of alternative renewable energy supply.” And finally, a point not often made, is that renewables are localized energy sources. When most communities buy energy, they are buying it from somewhere else, they are importing either energy or fuel, and exporting dollars that are not invested in their communities. This is an important issue, because when communities export dollars, they are exporting jobs as well. If that money could be invested locally in renewable technologies, these communities would benefit economically. Of course, such a change from large-scale fossil-fuel energy production and distribution to a system with greater dependence on localized, smaller scale energy production implies significant changes in the way we do things. However, renewable-based energy carriers such as hydrogen can still be widely distributed in future energy systems, and more localized energy systems may be the most cost-effective options for many countries.

For the reasons given above, we believe that the world is in the early stages of an inevitable transition to a sustainable energy system that will be largely dependent on renewable resources. This transition, like other major energy transitions, is likely to take many years. The renewable energy programmes of the International Energy Agency are focused on getting us to that new world as quickly as possible.

Smooth global transition to renewables. IEA, Renewable Energy Working Party, 2001
[Renewable Energy, http://www.iea.org/techno/renew/index.htm] Through the next several decades, renewable energy technologies, thanks to their continually improving performance and cost, and growing recognition of their environmental, economic, and social values, will grow increasingly competitive with traditional energy technologies, so that by the middle of the 21st century, renewable energy, in its various forms, should be supplying half of the world’s energy needs.

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Renewable Shift Underway (6/6)
Hawaii proves renewables are coming now due to high oil prices Carlton, Staff reporter in the San Francisco Bureau of The Wall Street Journal, 08
(Jim, Wall Street Journal, “Producers Alternative State,” 06-30-08, http://online.wsj.com/article/SB121432274606000209.html?mod=googlenews_wsj, accessed 06-30-08) HONOLULU -- A state better known for sun and fun is quietly morphing into one of the world's leading incubators of alternative energy. Royal Dutch Shell PLC is heading up a test venture in Hawaii to turn oil-rich algae into fuel. If the process is found commercially viable, the Anglo-Dutch conglomerate could build algae-processing plants elsewhere. THE JOURNAL REPORT • See the complete Energy report.Ever-Green Energy LLC of St. Paul, Minn., plans to build a plant in Honolulu that uses seawater to cool office buildings; if successful, the project will be expanded to other states. A start-up company, meanwhile, is deploying miniature solar-thermal collectors on Oahu to help generate more power for the local electricity grid. This set-up, too, if successful, will be reproduced elsewhere. The reason for all the interest: location, location, location. "Hawaii is the only place in the world where you have access to every form of renewable energy, and you are on the dollar and the U.S. legal system," says Joelle Simonpietri, a former venture capitalist who now heads an algae-to-fuel firm called Kuehnle AgroSystems Inc. Hawaii is trying to convert to clean energy as fast as it can. Petroleum imports make up about 80% of the energy supply for Hawaii's main utility, leaving the state among those hardest hit by the run-up in oil prices. Electricity rates have gone through the roof. The average residential rate on Oahu, where most of Hawaii's 1.2 million residents live, had doubled to 25.50 cents a kilowatt hour -- the highest in the U.S. -from 12.74 cents in 1999, according to Hawaiian Electric Co., the state's major utility. So, in January, Gov. Linda Lingle announced plans under a state-federal partnership for Hawaii to derive 70% of its energy from renewable sources by 2030 -- one of the most ambitious targets in the world. The state has gotten a head start toward this goal in some places. On Maui, for example, wind farms power 11,000 homes, or about 10% of that island's energy, while on the Big Island, which is Hawaii itself, geothermal power from volcanic vents accounts for about a fifth of the energy there. And on Oahu, Hawaiian Electric is building a new power plant that will generate 110 megawatts -- enough power for about 30,000 homes -- and will run completely on biodiesel fuel. The $160 million plant, expected to open next year, will initially get its fuel from imported palm oil. "Everything is possible as oil prices rise," says Henry Montgomery, chief executive of MontPac Outsourcing, a finance and accounting consultancy in Honolulu.

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EU = Renewables now
France, Japan, Finland, and the UK all produce nearly all of their power by alternative sources Loris is a Research Assistant and Spencer is a research fellow in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation, 08 (Nicolas and Jack, Front Page Magazine, July 8, “Nuclear Energy:
What we can learn from other nations”, http://frontpagemagazine.com/Articles/Read.aspx?GUID=7048A616ECFB-49E9-86FC-D2EF8F0226D2, 7/11/08) France is an example of a country that developed nuclear energy to reduce foreign energy dependence after the oil shock of the 1970s. It now receives nearly 80 percent of its electricity from nuclear power and is a net exporter of electricity.[1] Germany, alternatively, decided to phase out nuclear energy for political reasons and now imports some of this energy.[2] Japan is another country that has looked to nuclear power as a clean, safe and reliable form of energy. Nuclear power already provides 30 percent of the country's electricity; however, Japan is working to increase this to 37 percent by 2009 and 41 percent by 2017.[3] Finland, ranking fifth in the world for per capita electricity consumption, has a significant incentive to secure long-term energy solutions. Embracing nuclear energy as part of an effort to decrease the nation's dependency on foreign energy sources, Finland has begun constructing a modern 1,600megawatt reactor, which will likely be a model used throughout the United States. Finland already gets 28 percent of its electricity from nuclear power, and a possible sixth reactor would increase that amount substantially. Presently, the U.K. has 19 reactors that provide about 18 percent of the nation's electricity. Because the U.K. is already a net importer of energy and all but one of its coal-fired and nuclear plants are scheduled to be decommissioned by 2023, building new reactors is a must for the U.K. if it is to avoid creating increased energy dependencies. The British government, while providing long-term politically stable support for nuclear power, has made it clear that it would not subsidize the industry. The U.S., on the other hand, continues to squabble politically about nuclear power but has offered some subsidies to the industry. As a result, the British model should provide a sustainable environment for nuclear power moving forward, while the U.S. model could create a politically tenuous dependency relationship between government and industry.

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Renewables Brink
Renewables are close to reaching critical mass worldwide Rodriguez, 2008 (Jasmine, June 18, “’Tipping Point’ for Renewable Energy”, OneWorld US, http://news.yahoo.com/s/oneworld/20080618/wl_oneworld/45361609141213830426, July 11, 2008)
Renewable energy is approaching a "tipping point" and should expand dramatically in the next decade, further narrowing the gap between alternative forms of energy and fossil fuel use, said environmental and economic experts at a forum here Monday. "Increasing market demand, policies, and investment trends are creating a perfect storm for the growth of renewable energy across the world," said Christopher Flavin, moderator of the forum and president of the Worldwatch Institute. "We are at a point where all of these factors will allow renewable energy to move into the mainstream." Sixty-six countries have set policy targets to increase their investment in renewable energy, including 22 developing countries and all 27 EU countries, said Martinot, lead author of Worldwatch's "Renewables 2007 Global Status Report." "Growth [in renewables] is driven by policy rather than efficiency," added Liebrich, emphasizing that the market "[doesn't] need lots of new policies because the policies we've got are generating lots of growth already -- although we can't let those policies expire." Martinot, a visiting professor at Tsinghua University in Beijing, also praised China for having the most comprehensive energy targets of any country and exceeding its wind power targets for 2010. Developing nations, like China, hold 40 percent of the world's capacity for renewable energy in solar, wind, and other sources, he said.

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Businesses Going Green
California proves – businesses are going green. Debare, Chronicles Staff Writer, 08
(Ilana, SF gate, “It's becoming much easier to go green,” 6/8, http://www.sfgate.com/cgi-bin/article.cgi? f=/c/a/2008/06/08/BUTV10QASV.DTL, date accessed: 7/3/08) "Once I found out we had environmental alternatives, everyone got so excited by it," Oblinger said. Barkley Court Reporters - with eight employees and 200 court reporters on contract through its San Francisco office - is among a growing number of small businesses that are trying to become greener and more environmentally sensitive. These aren't just classic eco-focused businesses like organic food producers or solar power companies. They include everything from neighborhood delis and hardware stores to auto mechanics, law firms, bookkeepers and dentists. The Bay Area is at the forefront of this trend, thanks in part to a green business certification program coordinated by the Association of Bay Area Governments. One of the few such programs in the country, it has enrolled more than 1,300 small- and midsize businesses since its start in 1996. In San Francisco alone, applications rose from 136 businesses in 2006 to 312 in 2007. Other counties are seeing double-digit increases in applications, and cities such as Oakland and Berkeley now have long waiting lists of businesses seeking green certification. The green certification program helps companies figure out what steps to take, and how to do so affordably. But the initial impetus always comes from within the business - from owners or employees who made it their mission to find greener ways of doing things.

( ) Businesses and governments are solving the environmental problem now Mullen, Staff Writer, 06
(Ros, Caterer and Hotelkeeper, “Why go green?” 10/5, Lexis, date accessed: 7/3/08) Businesses which don't improve their environmental policies can look forward to continuing legislation and environmental taxes from Westminster and Brussels that will penalise those which don't get their act together. One such new law is the European Performance of Buildings directive, which will see "energy labelling" of buildings, rating them according to their energy efficiency. The Climate Change Levy, or carbon tax, on non-domestic buildings will be increased from April 2007, in line with inflation. It was introduced in April 2001, increasing energy costs in hospitality businesses by about 15%. According to Hospitable Climates, it's expected to lead to a reduction in production of at least 2.5 million tonnes of carbon a year by 2010. The oft-forgotten Landfill Levy will bite harder, too. Currently £21 per tonne, this tax is set to increase by £3 a year until it reaches £35. Figures from the Centre for Environmental Studies in the Hospitality Industry show that the average guest in the UK generates 1.1kg of waste per night, so the industry cannot afford to ignore the implications. The Government is also set to put more onus on recycling waste - bear in mind that food waste alone comprises 35%-50% of the total waste from the industry. Professor John Forte (see panel, right) says: "If businesses don't comply voluntarily, they'll pay through the nose. They're not asking people to make sacrifices; the big carrot is that it will increase operating profits. But take note that a big stick is being used." Small businesses may worry about the cost of new equipment, but the Carbon Trust suggests that simple policies such as switching machines off after use, turning the heating down in warm weather, or using sensors on heating and lighting to trip them off when not needed can make real savings in your energy bill. Reducing the total by just 20% could add as much to your profits as a 5% increase in sales. Going green, then, need not be onerous. There are plenty of industry organisations that offer free help and advice, such as the HCIMA, Hospitable Climates, WRAP and the Carbon Trust (see page 32 for full listing).

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Businesses Going Green – High Oil Prices
Rising energy prices are having businesses go green MSNBC, 06
(“Companies going green with energy alternatives,” 3/29, http://www.msnbc.msn.com/id/12040418/, date accessed: 7/3/08) With rising energy prices squeezing profits, corporate managers are looking for alternatives. And there are signs that conservation measures – even those that don’t cost a lot of money – are beginning to pay off. As CNBC reports this week, companies are finding new ways to save money and expand their markets by looking for ways to use less fossil fuel. The potential savings are huge. Industrial use accounts for about a third of energy consumed in the U.S., according to Energy Dept. estimates. And by cutting back on just 20 percent of that consumption, American businesses could save close to $19 billion a year at 2004 energy prices, according to a recent report by the National Association of Manufacturers. About 30 percent of those savings can be achieved with no capital investment, the report said.

Companies have huge incentives now to go green. MSNBC, 06
(“Companies going green with energy alternatives,” 3/29, http://www.msnbc.msn.com/id/12040418/, date accessed: 7/3/08) Company managers are apparently already looking hard for savings. Last fall, some 30 percent of those surveyed by the Alliance to Save Energy said they had made energy management a critical part of their business plan. A third said that were undertaking major capital projects to cut energy costs. And a quarter said they were at least working on low-cost, one-time fixes to try to cut energy bills. With energy prices trending higher, the threat to the bottom line continues to grow. That’s made the motivation for conserving fuel more compelling. Some 65 percent of U.S. companies think that escalating energy prices pose a potential roadblock to their company's growth over the next 12 months, according to a survey by PricewaterhouseCoopers in the fourth quarter of 2005.

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Businesses Going Green – Public Pressure
Not going green for businesses can be detrimental for it in terms of public perception and reputation among other businesses. Mullen, Staff Writer, 06
(Ros, Caterer and Hotelkeeper, “Why go green?” 10/5, Lexis, date accessed: 7/3/08) There are, however, still many which lag behind either through ignorance of the benefits of going green or through inertia. "Those businesses that continue to avoid or ignore the message to improve energy efficiency and reduce carbon emissions are likely to face a cold front in terms of business survival," warns Martin. "The eco-market is upon us and consumers are beginning to be more discerning." This sentiment is backed by Rebecca Hawkins of Oxford Brookes University, Considerate Hoteliers and Hospitable Climates. She says about 80% of tourists claim they would prefer to stay in accommodation that doesn't harm the environment or community. The Co-operative Bank's Ethical Consumerism Report of 2005 claims ethical consumerism - the desire to patronise goods and services whose production does least damage to the global environment - is worth about £25.8b a year. Certainly, a bonus of going green is good PR. With younger generations being educated in the need to preserve the environment, guests are increasingly happy to stay in a hotel that takes green issues seriously. The key, of course, is marketing that fact. Jones at the Carbon Trust agrees. "Being environmentally aware doesn't just work at a cost level, but at a reputation level, too," he says. "Consumers are starting to value businesses, from supermarkets to hotels, that are environmentally sound."

If companies don’t change to green, they are threatened by a damaged reputation from the public. Filman, Editor, 07
(Hugh, Direct Response, “Going green inevitable,” 7/25, Lexis, date accessed: 7/3/08 Arguably, there are a lot worse polluters than the direct mailers when it comes to paper refuse. But, as so often is the case, perception is more important than reality when it comes to what the public thinks and - more importantly - how the government might react. If the DM industry does not clean up its act of its own volition now - or at least very soon, with an action plan in place now - it will eventually be made to do so by the Government. With weather around the world getting warmer and more unpredictable with each coming year, this is not an issue that will fade out of the public consciousness. The media will keep looking for culprits and direct marketers will remain easy targets. Thankfully, some in the industry are not simply content to leave the issue simmering. Royal Mail has launched a carbon-neutral doordrop programme to encourage greener behaviour among companies doing unaddressed mailings, and the Direct Marketing Association has come out with the first in a series of quarterly environmental guides aimed at helping companies figure out how to be greener (page 8). In our cover feature, we offer guidance on how companies can make their printing and mailing more environmentally friendly - and how going green can actually make good business sense (page 43).

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Policy changes reduce the price of oil
Oil prices drop when new methods of getting energy are investigated Zuckerman, Editor-in-Chief of U.S. News & World Report, Publisher and Owner of the New York Daily News, and Co-founder of Boston Properties, Inc., 08 (Mortimer, U.S. News & World Report, "Stop the Energy Insanity: No combination of solar, wind, ethanol, biodiesel, or anything else will allow us independence in the foreseeable future," 7-10-8, http://www.usnews.com/articles/opinion/mzuckerman/2008/07/10/stop-the-energyinsanity.html, 7-10-8)
If this sounds like a remedy that's a long way off from fixing $4-a-gallon gas, it must be remembered that prices for crude and gasoline are set by future expectations. Any policy that pushes the future supply to increase or leads future demand to drop can cause today's prices to fall or to rise less than they otherwise would. That is why to open up new areas would cause the oil futures markets to respond relatively quickly. Oil out of the ground is only a start. For new crude to yield lower gasoline prices, we need to reduce the barriers to building or expanding our refineries. Refineries face multiple regulatory barriers in a world of NIMBY ("not in my backyard") and the inevitable litigation from the environmental lobbies. Here are five more energy imperatives we need to move on quickly: 1. Reallocate resources to concentrate funds on providing the necessary R&D support for energy efficiency. We must do this with the real menace of global warming in mind. James Hansen, the director of NASA's Goddard Institute for Space Studies, frames the issue this way: Our biggest worry is not what we put in our cars but what we put in our power plants. He believes that we should stop the use of coal by 2030, except with those power plants that can capture the carbon dioxide. 2. Fix our mass transit system for both freight and passengers. When you consider rail in terms of energy, steel wheels on steel rails are some 10 times as efficient as rubber on roads. A real rail program could probably have the single greatest impact on our oil consumption and on the release of carbon dioxide. A single locomotive run by two men can haul the same amount of freight as 70 modern semitrailer truck rigs with 70 drivers. One passenger train can take 1,000 cars off the road. 3. Raise fuel economy standards for new cars and trucks immediately. 4. Substantially increase the gas tax, offsetting it with other tax cuts to induce people to buy fuel-efficient vehicles. 5. Pursue alternative energy technologies within the limits of the market. Such measures as these would send a signal to the world that the United States is no longer putting its fate fully in the hands of foreign nations and that we are determined to reduce the financial drain costing us at least $300 billion a year. None of this will happen without a sensible compromise among liberals, conservatives, and environmentalists. We simply cannot afford a political system that is incapable of addressing such a critical national issue. In other words, we need real leadership in Washington.

Policy changes will affect the price of oil Feldstein, Chairman of the Council of Economic Advisers under President Reagan, Professor at Harvard and a member of The Wall Street Journal's board of contributors, 2008 (Martin, Wall Street Journal, “We Can Lower Oil Prices Now”, 07-01-08, http://online.wsj.com/article/SB121486800837317581.html?mod=googlenews_ws, accessed 0701-08)
Although most experts agree that financial speculation was not responsible for the surge in the global prices of food and energy, many people remain puzzled about the source of these remarkable price rises. Economics offers a simple supply-and-demand explanation and reason for optimism about the future of commodity prices. In the case of oil, economics also suggests how policy changes today that affect the future could quickly lower the current price of oil. We all know that rising incomes in China, India and the Gulf states have increased the demand for oil and many other commodities. But how could the modest, one-year rise of these demands lead to 100% increases in the prices of oil and other commodities? Let's take a look first at perishable agricultural commodities.

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Lacy/Symonds/Bowen

25 R&B (Oil)

US consumption key to global oil market
U.S. oil demand has a substantial effect on global oil prices, political events timeline proves Killian, University of Michigan and CEPR Professor, 06 (Lutz, University of Michigan, September 26, Not All
Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Global Market, http://www.vanderbilt.edu/econ/sempapers/Kilian.pdf, 7/2/08) There has always been a tendency to identify major movements in the price of oil with events that are presumably exogenous to the U.S. macro economy. Vertical lines in Figure 1 indicate major events of relevance to the oil market. For example, there are marked increases in the real price of oil following the Yom Kippur War and Arab oil embargo of 1973/74, the Iranian Revolution of 1978/79 and the outbreak of the Persian Gulf War in 1990. There are much smaller increases after the outbreak of the Iran-Iraq War in late 1980 and during the months leading up to 2003 Iraq War. While these events seem primarily relevant for the supply side of crude oil market, the sharp drop in the price of crude oil during the Asian crisis is a good example of an exogenous demand shock. For completeness, the plot also shows the date of Hurricanes Rita and Katrina at the very end of the sample. The latter exogenous events are best thought of as negative demand shocks for crude oil rather than crude oil supply shocks. The reduction in U.S. crude oil production in the Gulf of Mexico caused by the hurricanes was comparatively minor measured on a global scale. More important was the loss of U.S. refining capacity. As refineries shut down, U.S. demand for crude oil fell and the world price of crude oil dropped.

Massive consumption makes US the most important market force. Edward Morse and James Richard, Hess Energy Trading Company and Firebird Management, 2002
[Foreign Affairs, March-April, p.35] 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.

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26 R&B (Oil)

AE switch causes Oil Prices to drop (1/3)
Strong push by renewables could drop oil prices to $20-30 a barrel, masking resource scarcity Castillon et al Petroleum working group at the ‘French Academy of Technology’ ‘07 Pierre, Institut Francais Du Petrole, “Depletion of Petroleum Reserves and Oil Price Trends” November 2007 http://www.energypolicyblog.com/wpcontent/uploads/2008/03/at200711en.pdf Accessed: 7/2/08
Low-price scenarios or, more exactly, a return to low prices, seem unlikely today. They cannot be completely excluded, however. They could result from the implementation of very pro-active policies for reducing greenhouse gas emissions. They would entail very significant changes in behavior and considerable investment in all energy sectors: energy efficiency, oil production capacity, renewable and nuclear energy. Thus, the 2050 DGEMP-ENERDATA 27 (2005) “Factor 4” scenario (where greenhouse gases in France would be reduced by a factor of four by 2050) results in crude oil prices of $20–30 a barrel, the essential reduction in the consumption of fossil fuel pushing the problem of resource scarcity into the background. Other factors leading to a long-term price drop would include a generalized slowdown in growth worldwide (for example, associated with an economic crisis caused by U.S. deficits). In the most optimistic assumptions, unanticipated benefits could arise from geology (such as significant reserves of deeply buried hydrocarbons) or major technological advances that are now hard to imagine (such as significant improvements in rates of recovery).

A shift to renewable energy would cause a price collapse of oil Friedman, Author at the Naval Institute Guide to World Naval Systems, 08
(Norman, U.S. Naval Institute Proceedings, Vol. 134 Iss. 1, Jan 2008, pg. 90-91) The other effect of very expensive oil may be to shift us away from oil itself. It seems unlikely that the structure of the United States will change, but we will probably see a shift toward an energy economy based more on electricity provided mainly by nuclear plants. In the past, that was unlikely not only because of the sheer money involved, but also because of fears about the safety and longevity of such an energy source. These problems will be resolved as the price of oil rises and environmentalists continue to attack the oilbased economy. Some of them have already pointed out that none of the alternative sources of energy, other than nuclear, is likely to produce what the world currently needs. It is of course possible that the threat of such a shift would force down the price of oil. In the past, the Saudis in particular have often pointed out to their OPEC partners that raising the price might be counterproductive. Their argument was generally that triggering a world depression would so cut energy demand in the West that oil income would actually fall. Whether the Saudis or others would look beyond the possibility of economic disaster to the possibility that oil itself might be displaced as the key world commodity is far less certain.

Cheap fossil fuels fixes prevent use of alternative energy HardAssetsInvestor.com 11-5-07 “Alternative Energy: Can it Compete” http://www.hardassetsinvestor.com/component/content/article/552.html Accessed: 7/6/08
It's no secret that alternative energy is an emerging market with enormous potential for growth; fossil fuel depletion, political volatility in oil producing nations, and the effects of greenhouse gasses have become pressing issues for many in recent years. But for all the hype, the question remains: Can it compete? The dig against alternative energy has always been costs. Yes, solar power is nice, but if it costs 10X more than burning oil, we'll stick with our dinosaur fuels.

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AE switch causes Oil Prices to drop (2/3)
A move away from oil dependence leads to a flood of cheap oil Maugeri PhD in international political economy. ENI SPA's group senior vice-president (director) of
corporate strategies and international relations ‘03 Leonardo, Oil and Gas Journal “Time to debunk mythical links between oil and politics” December 15 2003. Proquest.com Accessed 7/2/08 Western countries have been historically unable to sustain a long-term foreign policy designed around energy objectives, which vanish once prices drop and often conflict with broader diplomatic goals. Moreover, history has proven -- even without taking ethics into account -- that it is impossible to exert longlasting control over Middle Eastern oil countries because of the unmanageable chain reactions set in motion by exerting foreign influence in such a sensitive environment. Yet history has also shown major oil-producing countries that they are vulnerable to future price drops if alternative energy sources are developed in response to fears of rising energy prices. Given the full range of contrasting forces at play in any oil scenario, the wisest approach is simply to allow it to find its own equilibrium.

Successful alternative energy policies actually lower the price of crude. Reuters, 07
(Alert Net, “ANALYSIS-Success derails biofuels bandwagon,” 3/7, http://www.alertnet.org/thenews/newsdesk/L0664154.htm, date accessed: 7/5/08) A global, government policy-fuelled rush to produce biofuels is backfiring as it pushes up costs and makes the environmentally-friendly alternative fuel far less competitive. Made from plants, bioethanol and biodiesel emit fewer greenhouse gases than fossil fuels and have been hailed as an answer to both climate change and energy security. U.S. and European backing look to have secured their long-term future. But in the near term a looming biofuels glut plus falling rival crude oil prices, down a fifth on last summer's highs, mean producers can less easily pass on their spiralling costs. The present dip will last until demand rebounds, perhaps as far off as the end of the decade.

Alternative energies can never compete in the marketplace if fossil fuels are cheaper HardAssetsInvestor.com 11-5-07
“Alternative Energy: Can it Compete” http://www.hardassetsinvestor.com/component/content/article/552.html Accessed: 7/6/08 Advancements in technology and fossil fuel market conditions have made growth and capital gains in the alternative energy sector possible, and show signs of continuing to do so. Wind and solar energy have seen rapid growth in recent years, and tidal energy is an emerging sector across the globe. Until recently, large scale alternative energy production hasn't been an option mainline energy companies were willing to explore, but because production costs have lowered and fossil fuel prices have climbed, even the oil majors are starting to look. We're not on par yet for all alternative energy prices yet, but the trend is in the right direction.

Greater use of alternative fuels lessens demand for oil Wyant Staff Writer ‘05
High Planes Journal “Biofuel lessons from Brazil” 5/26/05 http://www.hpj.com/archives/2005/may05/may30/BiofuellessonsfromBrazil.CFM Accessed: 7/5/08 I've never been to Brazil. But I'm told that everyone who visits there is struck by two things relative to energy production: the major progress they've made in building their alternative fuels industry and
secondly, how the U.S. appears to be so far behind in comparison. Israel Klabin, who serves as president of the Brazilian Foundation for Sustainable Development, drove that point home recently during the World Agricultural Forum, held in St. Louis, Mo. Klabin explained how, in the aftermath of the 1970s oil crisis, his

country launched a national initiative on agricultural based fuels and remains committed to energy selfsufficiency. Brazil's reliance on foreign oil imports plummeted from 85 percent of its energy consumption in 1978 to about 10 percent in 2002, according to that country's National Petroleum Agency. By the end of this decade, the country is expected to be a net exporter of crude oil. That's right: net exporter.

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AE switch causes Oil Prices to drop (3/3)
Decreased demand leads to lower oil prices Frei staff writer 07
The Oil Marketer “Demand Concerns Send Crude Oil Prices Lowe” 12/20/07 http://www.oilmarketer.co.uk/2007/12/20/demand-concerns-send-crude-oil-prices-lower/ Accessed: 7/5/08 Crude oil prices dropped before the close of floor trade in New York as traders worried about a report that seemed to predict a slowdown in the US economy that could mean decreased demand for oil and products made from it. In addition, a prediction from the National Oceanic and Atmospheric Administration that the first part of the winter will be warmer than normal in the eastern two-thirds of the US also foretold a drop in demand. West Texas Intermediate crude for February delivery dropped 18 cents to $91.06 per barrel on the New York Mercantile Exchange while February contracts for Brent crude was down 60 cents to $90.88 per barrel. Nymex January gasoline traded even at $2.33 per gallon while February heating oil was down almost a cent to $2.5895 per gallon. March natural gas dropped 4 cents to $7.31 per million British thermal units after the Energy Information Administration reported that stockpiles were down by 131 billion cubic feet last week, less of a decline than had been anticipated. At-the-pump prices for gasoline in the United States dropped another half cent overnight to $2.985 per gallon on average nationwide.

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29 R&B (Oil)

Cheap Oil halts Renewable Transition (1/3)
Empirically, cheap oil has caused consumption to soar, deterring alternative energies. The Gazette, 08
(“We need to establish a floor on oil prices now,” 6/24, http://www.canada.com/montrealgazette/features/viewpoints/story.html?id=7c4e4d81-1e5b-462f-b8a52978049a5739, date accessed: 7/12/08) And the velvet trap was set: Cheap oil from 1985 to 2005 caused consumption to soar, conservation to stagnate, and alternative energy to go nowhere. And now, as production struggles to keep up with soaring demand, we are once again facing an energy crisis. Soaring gas prices. Looming recession. And warnings of worse to come as experts agree that the era of cheap oil is gone forever. It's 1980 all over again. So what happens now? Rising prices will inevitably stimulate conservation gains and advances in alternative energy. And if the experts are right and prices keep going up and up, those gains and advances will continue. It will be a long struggle, but eventually we will kick our addiction to oil. Necessity really is the mother of invention.

High oil prices are the only thing driving alternative’s development, falling below a certain threshold risk a reversal of policy Hyun-cheol, staff writer ‘08 The Korea Times “Big 3 Lead Alternative Energy Development” 6/9/08 http://www.koreatimes.co.kr/www/news/biz/2008/06/123_25567.html Accessed: 7/4/08
In spite of its availability, solar energy has long been estimated to be of low efficiency due to its high power-generating cost. However, recent predictions that oil prices will jump to over $200 per barrel cast new light on its prospects as it takes only $160-180 to produce the same amount of energy as petroleum.

Cheap oil would increase consumption, deterring alternative energy The Gazette, 08
(“We need to establish a floor on oil prices now,” 6/24, http://www.canada.com/montrealgazette/features/viewpoints/story.html?id=7c4e4d81-1e5b-462f-b8a52978049a5739, date accessed: 7/12/08) Experts then started worrying about what the chairman of Chevron called the "Velvet Trap" scenario: Cheap oil would increase consumption, wipe out conservation gains, marginalize alternative energy, and halt exploration and development. Then the glut would end and the mother of all oil shocks would hit in the 1990s. Glut. Shortage. Glut. Shortage. The western world was bouncing up and down like a bull-rider. The only solution, many experts believed, was to get off the bull. With oil prices falling, they suggested a counter-intuitive way to do that: Slap a tax on oil that would set a price "floor." This way, falling market prices wouldn't cause consumption to soar. Conservation gains wouldn't be lost. Alternative energy would remain a realistic possibility and continue to attract venture capital. And the West would be much better able to withstanding future shortages. Conservative columnist Charles Krauthammer further suggested that revenues raised by this new tax could be used to cut income taxes. He didn't call it a "green tax shift" because his concern was security, not the environment. But in today's policy terms, that's what it was.

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Cheap Oil halts Renewable Transition (2/3)
Oil price drops risks reverting back to oil and destroying the alternative energy market. St. Petersburg Times, 07
(“Why lower crude prices aren't a gas,” 1/27, lexis, date accessed: 7/3/08) The price of regular unleaded gasoline is suddenly back below $2 a gallon around the Motor City, and that has General Motors Corp. CEO Rick Wagoner worried. "We run the risk of reverting back to our traditional energy policy," the Wall Street Journal quoted Wagoner as saying in a speech at the Automotive News World Congress in Dearborn, Mich., this month. "That is, relying on the lowest-cost energy available on world markets (including imported oil), without providing adequate support for developing alternative sources." When the head of the world's largest carmaker - and the leading marketer of large sport-utility vehicles in America - complains that oil is too cheap, you know the U.S. energy debate is headed in a new direction. Indeed, even President Bush, in last week's State of the Union, called for gas consumption to decrease by 20 percent by 2017. He proposed increasing fuel efficiency and promoting alternative fuels. But the reduction Bush spoke of is off projected usage, not today's levels.

Lower petrol prices puts back development of alternatives – 1986 proves Meyer and Swartz Writers for the Dow Jones newswire ‘08
Gregory and Spencer, CattleNetwork, “Energy Matters: Saudi Fears Of High Oil Prices Fade With Demand”5/5/08. http://www.cattlenetwork.com/Content.asp?contentid=218898 Accessed: 7/2/08 The 1986 oil price crash ushered in more than 15 years of mostly-lower crude prices, instilling a memory of economic hardship on the western oil industry that continues to be reflected in Big Oil's caution during these heady times. The shift to lower petroleum prices also impeded the development of renewable energy for about two decades. In his book, The Prize, Daniel Yergin compared the Saudi tactic in the 1980s to power plays by John Rockefeller and other heavyweights in the history of oil who have used a "good sweating" to drive out competitors.

Alternative energy will be curtailed as a result of low oil prices Oil and Gas Journal, 07
(“Analyst predicts oil-price decline next year,” Lexis, 11/19, pg. 5) The consequences of a price collapse will be that US onshore drilling stagnates, exploration and production in the shallow Gulf of Mexico declines, and a possible pause in oil sands development, Lynch said. High-cost producers will be most affected by a drop in prices, especially those with sunk costs. Also, alternative energies such as biofuels and hydrogen will feel a pinch from lower oil prices, as will exporting nations and refiners. The entities that thrive despite lower prices will be producers with large cash reserves and governments friendly to foreign investment. But companies spending most of their cash flow now will suffer and become takeover targets. Lynch also sees a near-term drop in US natural gas prices. A combination of record amounts of gas in storage, a predicted warm 2007-08 winter in the US, a slower economy, and new supplies coming online will depress prices over the next few months, he said.

Transfer to alternative energy short circuited by cheap oil Bryce managing editor of Energy Tribune. He is the author of Cronies: Oil, the Bushes, and the Rise of Texas, America's Superstate ‘07
Robert, Petroleum World “The Politics of Cheap Oil” 1/28/07 http://www.petroleumworld.com/SF07012801.htm Accessed: 7/3/08 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.

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31 R&B (Oil)

Cheap Oil halts Renewable Transition (3/3)
Development of alternative energy impossible in an era of cheap oil Maugeri PhD in international political economy. ENI SPA's group senior vice-president (director) of
corporate strategies and international relations ‘03 Leonardo, Oil and Gas Journal “Time to debunk mythical links between oil and politics” December 15 2003. Proquest.com Accessed 7/2/08 Indeed, when the second oil shock (1979-81) hit and panic once again spread, many forces 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.

Turns case – low oil prices harm the environment and prevent switch to alt energy Coy, Economics editor for BusinessWeek, 97
(Peter, Business Week, “COMMENTARY: CLEAN AIR IN AN ERA OF CHEAP OIL,” 11/3, http://www.businessweek.com/1997/44/b3551008.htm, date accessed: 7/2/08) The expensive oil of the 1970s and early 1980s had one virtue: By discouraging consumption, it lessened the pollution caused by the burning of gasoline, diesel, and other petroleum products. Environmentalists hoped rising oil prices would promote a switch to cleaner energy sources, such as solar power. If oil instead remains cheap for decades to come, the harm to the environment from sulfur dioxide, carbon monoxide, particulates, and other poisons could be enormous. Combustion of oil, coal, and other carbon-based fuels may also overheat the planet by creating an insulating layer of carbon dioxide. Indeed, cheap oil is bound to complicate efforts to achieve a treaty on global warming in Kyoto, Japan, this December (page 158).

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Cheap Oil boosts Consumption and Warming (1/2)
Cheap Oil increases warming, turning case Bryce managing editor of Energy Tribune. He is the author of Cronies: Oil, the Bushes, and the Rise of Texas, America's Superstate ‘07
Robert, Petroleum World “The Politics of Cheap Oil” 1/28/07 http://www.petroleumworld.com/SF07012801.htm Accessed: 7/3/08 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.

Increased consumption of fossil fuels increases emissions and seeps toxic waste into the environment Shahrtash, Ministry of Energy employee ‘07
F.M, Ministry of Energy – Tehran “Assessment of Trace Element Released in Tehran, Norway and Austria, dealing with Transportation and Sustainable Development” 10/30/07 http://www.isesco.org.ma/ISESCO_Technology_Vision/NUM04/Num4/Shahrtash%20Iran.pdf Accessed: 7/12/08 The high deposition of heavy metals of Pb, Cd in soil of Tehran is due to the high consumption of fossil fuels and from the exhaust of automobils which is discussed in terms of heavy traffic load and the rise up of population, which seems higher in south and center area of Tehran rather than the north of Tehran. The variation of concentration of hevy metals of Pb and Cd are considerable due to the seasons, where it seems to be higher in autumn than the spring because of the accumulation of heavy metal released into the atmosphere. The high concentration of heavy metals in plant species is due to the high concentration of the soil contents corresponding to the measurements made in spring-autumn in the range of 17.5- 66.6 (ppm) and 24-41.8 (ppm) respectively.

Warming varies directly to consumption rates Powell, writer for the Harvard university gazette ‘06
Alvin, Harvard News Office “Fossil Fuels, Conservation in Energy Future” 4/16/06 http://www.news.harvard.edu/gazette/2006/03.16/06-energy.html Accessed: 7/12/08 Even if that is the case, however, it won't be business as usual, Conn said. Conservation will have to be emphasized in high-consumption nations such as the United States. The crisis of global warming will force a change in the way fossil fuels are used, increasing the importance of technologies such as carbon sequestration, which extracts carbon dioxide from fossil fuels and pumps it into the earth instead of releasing it up a smokestack into the atmosphere.

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Cheap Oil boosts Consumption and Warming (2/2)
US conservation causes increased consumption in other nations, spiking CO2 Gary Marchant, Environmental Law, 1992 [lexis]
In fact, unilateral action by a single major country such as the United States or a group of nations such as the Organization for Economic Cooperation and Development could result in an increase in greenhouse gas emissions in other nations. Action to reduce CO[2] emissions by only some countries would cause a substantial decrease in world demand for fossil fuels, which would cause the price of these fuels to drop and encourage greater fuel consumption by nonparticipating countries.

Price decreases increase global consumption Hillard Huntington, Energy Modeling Forum at Stanford, 1994
[Contemporary Economic Policy , p. 42-3] US oil conservation policy might unintentionally stimulate gains in oil consumption outside of the United States. Reduced US oil consumption lowers world oil prices and triggers offsetting gains in world oil consumption. As a consequence, net world oil conservation is somewhat less than gross US conservation. In concert, countries' international agreements to reduce oil consumption can close the gap between gross and net conservation. However, free riding and uneven costs of participation seem to prevent such agreements.

Declines in oil prices will increase consumption and Greenhouse Gases Michael Hoel, et al. Professor of Economics, University of Oslo, 1995
[Resource and Energy Economics, p. 26] With limited participation in a climate agreement, reduced emissions from the participating countries may to some extent be counteracted by increased emissions from other countries. The reason for this so called "carbon leakage" is that international prices of fossil fuels and other goods may depend on the actions taken by cooperating countries in order to reduce their carbon emissions. In particular, if the cooperating countries reduce their demand for fossil fuels, international fuel prices will decline. This reduction of fuel prices will lead to an increase in fuel demand in non-cooperating countries, and thus, their C02 emissions.

Price drops increase global oil consumption meaning the plan’s solvency is limited at best. Catherine Hagem, Center for Climate and Energy research, 1994
[Energy Journal p. 119] Emission of carbon dioxide (C02) is an international problem. It is the total global amount of emissions that is significant, not the geographical location of the sources. The benefit of unilateral action to curb C02 emissions depends on the contribution to the changes in the global discharge. A unilateral action taken by a single country will have only a limited effect on the global emissions. The reason for this is partly that no single country's discharge counts for more than 25% of global emissions. Furthermore, reduced consumption can cause the international fuel prices to fall. The reduction in prices has the undesirable effect of giving other countries an incentive to increase their use of fossil fuels and partly offset the initial reduction. This effect of unilateral actions is often measured by the so called "leakage rate," which is the percentage by which resulting global reduction fall short of initial cutbacks.

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SUV/Trucks Add-on
Use of petrol in large trucks and SUV’s are the largest contributor to warming EcoBridge Non-profit environmental organization ‘08 “Causes of Global Warming” February 3rd 2008 http://www.ecobridge.org/content/g_cse.htm Accessed:
7/3/08 About 33% of U.S carbon dioxide emissions comes from the burning of gasoline in internalcombustion engines of cars and light trucks (minivans, sport utility vehicles, pick-up trucks, and jeeps).US Emissions Inventory 2006 page 8 Vehicles with poor gas mileage contribute the most to global warming. For example, according to the E.P.A's 2000 Fuel Economy Guide, a new Dodge Durango sports utility vehicle (with a 5.9 liter engine) that gets 12 miles per gallon in the city will emit an estimated 800 pounds of carbon dioxide over a distance of 500 city miles. In other words for each gallon of gas a vehicle consumes, 19.6 pounds of carbon dioxide are emitted into the air. [21] A new Honda Insight that gets 61 miles to the gallon will only emit about 161 pounds of carbon dioxide over the same distance of 500 city miles. Sports utility vehicles were built for rough terrain, off road driving in mountains and deserts. When they are used for city driving, they are so much overkill to the environment. If one has to have a large vehicle for their family, station wagons are an intelligent choice for city driving, especially since their price is about half that of a sports utility. Inasmuch as SUV's have a narrow wheel base in respect to their higher silhouette, they are four times as likely as cars to rollover in an accident. [33] The United States is the largest consumer of oil, using 20.4 million barrels per day. In his debate with former Defense Secretary Dick Cheney, during the 2000 Presidential campaign, Senator Joseph Lieberman said, "If we can get 3 miles more per gallon from our cars, we'll save 1 million barrels of oil a day, which is exactly what the (Arctic National Wildlife) Refuge at its best in Alaska would produce." If car manufacturers were to increase their fleets' average gas mileage about 3 miles per gallon, this country could save a million barrels of oil every day, while US drivers would save $25 billion in fuel costs annually.

And high gas prices are the lone driving force behind the abandonment of SUV’s and trucks, reversing this trend will inevitably lead to their resurgence FOX News ‘08 “High Gas Prices Driving SUV’s to Extinction” June 11th 2008 http://www.foxnews.com/story/0,2933,365714,00.html Accessed: 7/3/08
DETROIT — Even in northern Wisconsin, where midsize sport utility vehicles are as common as deer, people are starting to abandon them because of high gasoline prices. It's one of the last places to back away from the class of SUVs, which includes the once-popular Ford Explorer and Chevrolet TrailBlazer. Some industry analysts are already declaring the midsize SUV extinct. "They're dinosaurs. Put a fork in them," Erich Merkle, vice president of auto industry forecasting for the consulting company IRN Inc. in Grand Rapids, Mich., said in an interview. It's no secret that drivers are flocking to smaller, more fuel-efficient cars as the cost of gas marches higher. And midsize SUVs are built on the same frames as trucks, which add extra weight and drink more fuel.

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Oil prices declines = war
Economic benefits of low prices outweighed by Mid East wars. Lombard Street Research Monthly Economic Review, 5-15-2003 [lexis]
Whatever the timing of the economic benefit should oil prices decline a lot further, it is unlikely to be lasting. The combination of strongly contradictory strands in US policy-making and defensiveaggressive backwardness in Middle Eastern politics is highly likely to mean military flare-ups over the medium term that will make the recent Iraq war seem relatively harmless. Oil may not be as important as it was. But its importance to rapid-growth Emerging Eurasia and the dependence of recent US growth upon the SUV are good illustrations of why it will continue to be a major factor in world politics and economics for the foreseeable future. Loss of the peace dividend is a cost to the economy, but only in the medium term - military demand helps in the short-term. The late-20th century policy of the House of Saud may quite soon seem a relatively desirable option.

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36 R&B (Oil)

***Backstopping DA***

Gonzaga Debate Institute 2008
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Backstopping 1NC Shell (1/2)
A. Experts agree – high oil prices are here to stay Associated Press ‘08
International Herald Tribune “Global oil prices to remain high in the long term experts say” June 4th 2008. http://www.iht.com/articles/ap/2008/06/04/business/AS-FIN-Asia-Oil-Crunch.php Accessed: 7/2/08 MANILA, Philippines: Oil prices are expected to remain high over the long term amid signs that crude supplies are just barely keeping up with growing global demand, experts said Wednesday. Prices are expected to remain high and volatile mainly due to market fundamentals and not due to speculation, said Robert Weiner, a professor at George Washington University in Washington, D.C., in the U.S. "The expectations people have are that the dramatic increases in oil prices will be permanent," he told a video conference on oil price volatility in Asia. Crude oil futures prices on the New York Mercantile Exchange have nearly doubled in the last year, with the front-month contract hitting an all-time high of US$135.09 a barrel on May 22.

B. Any policy that attempts reduce demand for oil causes prices to lower which increases consumption Feldstein, Chairman of the Council of Economic Advisers under President Reagan, Professor at Harvard and a member of The Wall Street Journal's board of contributors, 2008 (Martin, Wall Street Journal, “We Can Lower Oil Prices Now”, 07-01-08, http://online.wsj.com/article/SB121486800837317581.html?mod=googlenews_ws, accessed 0701-08)
The relationship between future and current oil prices implies that an expected change in the future price of oil will have an immediate impact on the current price of oil.
Thus, when oil producers concluded that the demand for oil in China and some other countries will grow more rapidly in future years than they had previously expected, they inferred that the future price of oil would be higher than they had previously believed. They responded by reducing supply and raising the spot price enough to bring the expected price rise back to its initial rate. Hence, with no change in the current demand for oil, the expectation of a greater future demand and a higher future price caused the current price to rise. Similarly, credible reports about the future decline of oil production in Russia and in Mexico implied a higher future global price of oil – and that also required an increase in the current oil price to maintain the initial expected rate of increase in the price of oil. Once this relation is understood, it is easy to see how news stories, rumors and industry reports can cause substantial fluctuations in current prices – all without anything happening to current demand or supply. Of course, a rise in the spot price of oil triggered by a change in expectations about future prices will cause a decline in the current quantity of oil that consumers demand. If current supply and demand were initially in balance, the OPEC countries and other oil producers would respond by reducing sales to bring supply into line with the temporary reduction in demand. A rise in the expected future demand for oil thus causes a current decline in the amount of oil being supplied. This is what happened as the Saudis and others cut supply in 2007.

Now here is the good news. Any policy that causes the expected future oil price to fall can cause the current price to fall, or to rise less than it would otherwise do. In other words, it is possible to bring down today's price of oil with policies that will have their physical impact on oil demand or supply only in the future. For example, increases in government subsidies to develop technology that will make future cars more efficient, or tighter standards that gradually improve the gas mileage of the stock of cars, would lower the future demand for oil and therefore the price of oil today. Similarly, increasing the expected future supply of oil would also reduce today's price. That fall in the current price would induce an immediate rise in oil consumption that would be matched by an increase in supply from the OPEC producers and others with some current excess capacity or available inventories. Any steps that can be taken now to increase the future supply of oil, or reduce the future demand for oil in the U.S. or elsewhere, can therefore lead both to lower prices and increased consumption today.

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Backstopping 1NC Shell (2/2)
C. Turns the Case – An abundance of cheap oil leads to an increase in consumption CNN ‘08
“US Gas: So cheap it hurts” 5/6/08 http://money.cnn.com/2008/05/01/news/international/usgas_price/? postversion=2008050109 Accessed: 7/4/08 Gas consumption Europe vs. U.S. There is some evidence Europe's high gas taxes have capped its oil consumption. Oil use in the United Kingdom has basically stayed flat from 1980 to now, while in France it's dropped 17%, according to figures from the Energy Information Administration. In the U.S., meanwhile, oil use is up 21% over the same period, although the country has added more people and seen its economy grow slightly faster. Americans have taken advantage of cheap gas prices to do other things - like buy bigger cars and bigger houses further away from city centers, said Schipper.

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Oil Prices are Stable (1/2)
Rises in foreign currency are stabilizing oil prices CNN ‘08
“Oil Prices Stable After Record High” May 12th 2008 http://edition.cnn.com/2008/BUSINESS/05/12/oil.prices.asia.ap/index.html Accessed: 7/6/08 BANGKOK, Thailand (AP) -- Oil prices retreated Monday in Asia from last week's record close near $126 a barrel as the dollar strengthened against the euro and yen. Investors often buy commodities such as oil as a hedge against inflation when the greenback falls, but that effect can reverse when the dollar gains against other currencies, as it has in Tokyo currency markets on Monday. The euro was trading at $1.5407, down from $1.5480 last Friday in New York. The dollar also strengthened against the yen, rising back above the 103 mark and nearing 104 yen. "That would seem to be the major reason why the oil price has lost a little of ground in U.S. dollar terms," said David Moore, commodity strategist with the Commonwealth Bank of Australia in Sydney. Light, sweet crude for June delivery dropped 63 cents to $125.33 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. On Friday, the contract broke above $126 for the first time and settled at a record close of $125.96 a barrel, up $2.27. The advance at the end of last week came after Colombia said it recovered documents from a slain guerrilla that indicate Venezuelan President Hugo Chavez has offered assistance to Colombian rebels. Some U.S. lawmakers have cited the documents to argue that the White House should add Venezuela to a list of state terror sponsors that includes North Korea, Iran, Syria, Sudan and Cuba. Such a move would most likely spur Venezuela to cut off oil exports to the U.S., but analysts believe such a provocative diplomatic step is unlikely. "That would be self-defeating," said Michael Shifter of the Washington think tank Inter-American Dialogue. "It might give Chavez a boost when he is in serious political trouble at home -- and it would risk a further jump in oil prices in the U.S. in an election year." Moore said earlier in Sydney that China's trade data for April could provide another boost for oil. "China's imports of oil and oil products were very high in March, and if that was strong again that would signal that that part of the market remains fundamentally strong and supportive of the oil price," he said. However, according to preliminary data from China's General Administration of Customs, the country's crude oil imports for April totaled 14.24 million metric tons (104 million barrels), lower than the 17.3 million metric tons (126.3 million barrels) imported in March. Many analysts believe the dollar's protracted decline over the past year has much to do with the doubling in oil prices since May of last year. Another school of thought thinks growing demand in rapidly developing countries such as China, Brazil and India, is the primary factor driving oil higher. In other Nymex trading, heating oil futures fell 0.95 cent to $3.6265 a gallon while gasoline prices fell 1 cent to $3.1912 a gallon. Natural gas futures rose 5.5 cents to $11.592 per 1,000 cubic feet. June Brent crude dropped 55 cents to $124.85 a barrel on the ICE Futures exchange in London.

Multiple factors – Oil prices have stabilized Incantalupo, staff writer, ‘08
Tom, Newsday, “Experts: Gas prices stabilizing; may drop a little” http://www.newsday.com/business/nybzgas265741805jun26,0,5161071.story Accessed: 7/6/08 Andy Lipow, president of Houston consulting company Lipow Oil Associates Llc, says prices are stable because of approximately equal upward and downward pressure by traders, some of whom are concerned about crude oil supplies from producing nations - especially violence-plagued Nigeria - and others who are focused more on declines in U.S. and European demand for gas, diesel and jet fuel and on the potential for less demand in China from recent reductions in price subsidies that were keeping retail prices low.

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Oil Prices are Stable (2/2)
Oil prices will fully stabilize in November Ordinario, staff writer, ‘08
Cai, ABS-CBN News “Food prices stabilizing by Aug., oil by Oct., expert says” 6/9/08 http://www.abscbnnews.com/storypage.aspx?StoryId=121102 Accessed: 7/6/08 An economist from the University of Asia and the Pacific (UA&P) projects that Filipinos may have already seen the worst of high food and oil prices and would see stable price tags by August and October. Dr. Victor Abola, director of the UA&P Strategic Business Economics Program, said based on rice-price cycles for 1995 to 1996 and 1998 to 1999, he believes food prices would stabilize in the next two months. State-owned think tank Philippine Institute of Development Studies (PIDS) in a 2000 study stated that total rice usage in the Philippines began to regularly outstrip domestic rice production in the 1990s, where rapid price increases were noted, particularly in 1995 to 1996 and 1998 to 1999. “The pickup in the pace of inflation is actually sowing the seeds for self-adjustment, as aggregate demand slows down, in the face of lower consumer purchasing power,” Abola said in a statement. “Based on the pattern of extraordinary rice-price cycles for 1995-96 and 1998-99, it is likely that food prices will stabilize by August,” he added. Further, Abola said that oil prices in general are also seen to continue to rise by October this year. However, the UA&P economist said that by around November, oil prices may temper but will not exhibit a dramatic slide.

The oil market is more stable than it’s been in 20 years Investors Chronicle, 08 (Investors Chronicle, June 24, “Oil’s Worrying Stability”,
http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do? docLinkInd=true&risb=21_T4147072465&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=2 9_T4147072472&cisb=22_T4147072471&treeMax=true&treeWidth=0&csi=234036&docNo=1, 7/11/08) Oil prices are more stable now than in previous years - just at a higher level The widespread belief that oil prices have become more volatile is wrong. According to one reasonable measure, the market has recently been more stable than usual. In the last six months, the annualised volatility of weekly changes in Brent crude has been 27 percentage points - less than the 36.2 per cent average volatility we have had since 1988*. The notion that oil prices are volatile is a statistical illusion caused by the high price. People forget that a $5 per barrel price move today is, in percentage terms, equivalent to only a 75 cent move in the 1990s. And no one worried much about moves of that size. This stability implies that speculation in the commodity has not had a significant destabilising influence upon the market; it might have raised prices, but not volatility. It also implies that strong demand has been a bigger force behind high prices than supply restrictions. Traditionally, the latter have been associated with high volatility; the most volatile prices in the last 20 years come around the time of the supply disruptions in 1990 as a result of Iraq's invasion of Kuwait. Demand growth, being more stable, is associated with lower volatility. A third implication is that high prices might be here to stay, as producers have little incentive to boost supply. To sell oil is to convert reserves into cash. But with expected returns on safe financial assets so low inflation-proofed bonds yield less than 1 per cent - producers have little incentive to do this. Ordinarily, one counterweight to this is that cash is at least a safe asset while reserves, because of the volatile oil price, are a risky one. But with oil prices now less unstable than usual, this argument for pumping more carries less weight than usual. Until oil price volatility or interest rates rise, hopes of a big rise in supply are ill-founded.

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41 R&B (Oil)

Natural Gas Prices High Now
Natural gas prices highest in history Newkirk staff writer ‘08 Margaret, “The Atlanta-Journal Constitution” “Natural Gas Prices at an All-Time High” 6/9/08
http://www.ajc.com/business/content/business/stories/2008/06/09/natural_gas_prices.html Accessed: 7/6/08 Natural gas prices posted for June are not only the highest of the year, they're the highest in history — higher even than in the record-breaking months that followed Hurricane Katrina in 2005. Katrina, followed by Hurricane Rita, battered Gulf Coast gas supplies that September. The next month, the per therm price charged by marketers jumped to between $2.20 and $2.55 per therm — figures so high that the state Public Service Commission rushed to allocate aid to the poor and elderly. This month, gas marketers variable prices ranged from $2.88 to $3.33 per therm. Fixed prices are also up over the post-Katrina months, although not as dramatically. The figures are the apples-to-apples prices that the PSC uses, and include all fees. The retail prices are based on much higher wholesale prices for natural gas. The steep climb in wholesale price coincided with the soaring price of oil and gasoline and is likely partly linked to it.

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A2: Renewables in the SQ should cause the DA
Status quo politics ensure that any gains made in alterantive energy will also increase oil incentives. Mufson and Weisman, Washington Post Staff Writers, 2007
(December 8, The Washington Post, “Senate To Rework Ambitious Energy Bill; Vehicle Fuel Efficiency Expected to Be the Focus” Lexis 7/11/08) The Senate voted 53 to 42 yesterday to close debate, falling short of the 60 votes needed to permit a vote on passage even though four Democratic presidential candidates rushed back from the campaign trail to bolster the measure's chances. All but three of senators who blocked a vote on the bill were Republicans; five Republicans joined with Democrats in favor of closing debate. The failure to close debate was a victory for the major oil companies, Southeastern utilities and coal-mining firms that had opposed the legislation. But amid growing public concern about climate change and with oil prices hovering around $90 a barrel, there was still widespread support among lawmakers for an ambitious energy bill with higher automobile fuel-efficiency standards as the centerpiece. "We have to figure out how to pass a bill in the Senate that will accomplish the same general objectives the House is trying to accomplish," said Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.). On Thursday, the House had brushed aside a veto threat from the White House and approved an energy bill that would raise vehicle mileage standards for the first time in 32 years, set a quota of 36 billion gallons a year for the use of ethanol and other biofuels, and require increased use of renewable energy sources to generate electricity. The bill would also raise $21 billion in revenue over 10 years, largely through ending tax breaks for the nation's biggest oil companies, while extending tax incentives for wind, solar and other renewable energy sources. House Speaker Nancy Pelosi (Calif.) issued a statement saying that she was "disappointed" but hoped that the two chambers could still agree on a "strong energy bill and send it to the President's desk for his signature." Anticipating the Senate vote early yesterday morning, House Majority Leader Steny H. Hoyer (D-Md.) conceded that the final deal would have to drop the renewable-energy quotas, but he said a stripped-down version of the House legislation "is still a good bill." House Democratic leaders were criticized even by some members of their own party for including measures that were likely to doom the package in the Senate. But Hoyer defended the strategy, saying it is not the House's job to simply bow to the demands of the White House and Senate Republicans. "If you shoot low, you hit low," Hoyer said. The idea of forcing electric utilities to add renewable energy to their mix of power generation is not unusual. More than half the states in the nation have renewable-electricity mandates, most of them tougher than the House version of the bill. The House bill excluded rural electric cooperatives and government utilities, and it allowed energy-efficiency gains to count toward four percentage points of the 15 percent standard.

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43 R&B (Oil)

Boosting Alternative Energy causes Backstopping (1/3)
A drop in oil prices would cause OPEC to flood the market Tait, Staff Writer for Financial Post, 08
(Carrie, Financial Post, “Only recession will cut oil prices; Oil Industry Experts,” 4/15, Lexis, date accessed: 7/12/08) A drop in demand would translate into less money in OPEC government coffers. To make up the shortfall, OPEC would produce and sell even more oil to keep up demand and at reduced prices to ensure it pocketed the same amount of money as when prices were high, Mr. Lee said. "I don't believe that [OPEC's production] is driven by high prices," he said. "I believe that is driven by low prices, particularly if that low price starts to effect an increase in demand again." For example, he estimates that Iran spends $30-billion a year on oil subsidies, a luxury the country can afford thanks to oil revenue. But should global demand wane, the country would have to come up with the cash; increasing supply at a lower price would do the trick. High oil prices prompt some Western states to temper oil consumption. But another expert noted oil use rises in the Middle East as prices climb. Kang Wu, a senior director at FACTS Global Energy USA, said higher oil prices mean governments have more money to support and invest in their countries, which leads to higher energy consumption in the region.

When the US adopts alternative energy as a response to high prices, OPEC will flood the mrket with cheap oil Maugeri PhD in international political economy. ENI SPA's group senior vice-president (director) of
corporate strategies and international relations ‘03 Leonardo, Oil and Gas Journal “Time to debunk mythical links between oil and politics” December 15 2003. Proquest.com Accessed 7/2/08 When the second oil shock (1979-81) hit and panic once again spread, many forces were already in motion to dramatically reduce OPEC power. Basically, it sufficed to adopt policies to encourage energy efficiency, exploit new oil fields worldwide (with higher costs but more political security), and promote other sources of energy (nuclear and natural gas) in order to provoke a fall in Western oil demand (about 4-5 million b/d during 1980-83), a dramatic drop in oil prices, and the birth of a competitive oil market.

OPEC will drop its prices if anything threatens their total market control Castillon et al Petroleum working group at the ‘French Academy of Technology’ ‘07 Pierre, Institut Francais Du Petrole, “Depletion of Petroleum Reserves and Oil Price Trends” November 2007 http://www.energypolicyblog.com/wpcontent/uploads/2008/03/at200711en.pdf Accessed: 7/2/08
The situation has changed since then. The belief, up until 1985, in an ineluctable growth in prices stimulated significant research and development efforts. The resulting technological progress has led to the discovery of hard-to-find deposits, to noticeable improvements in rates of recovery, and to the development of “non-OPEC” oil, especially offshore. After the 1986 price drop, these efforts were continued and led to a sharp decrease in exploration and production costs in non-OPEC countries, especially for deep-sea oil. The frontier between conventional and non-conventional oil (deep-sea oil, extra-heavy oil, tar sand) is regularly being pushed back. Producers can now access offshore deposits at increasingly greater depths using technologies that are constantly being improved. Figure 5 illustrates the progress made in this field. The difference between the production costs of offshore and on-shore oil is decreasing. As indicated above, the extra-heavy oil in the Orinoco Basin in Venezuela was, until the 1990s, considered to be practical to produce only at a relatively high price per barrel of crude (at the time, $40 or more). The production cost of this type of oil is now around $20 a barrel of crude, and large-scale production has begun. We’ll discuss the technological costs in the following section.

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Boosting Alternative Energy causes Backstopping (2/3)
OPEC will flood the market to maintain its market viability Maugeri PhD in international political economy. ENI SPA's group senior vice-president (director) of corporate strategies and international relations ‘03
Leonardo, Oil and Gas Journal “Time to debunk mythical links between oil and politics” December 15 2003. Proquest.com Accessed 7/2/08 The day of reckoning came in 1986, triggered by the Saudi decision not to sustain the burden of OPEC indiscipline anymore and to flood the world with its own oil to regain market share. Oil prices plummeted to below $10/bbl, and OPEC suddenly awakened from its illusion of endless power and learned its lesson: that the medium to long-term effects of using the oil weapon always would be devastating for the oil producers, not just for the Western countries. Since 1986, the oil market has functioned smoothly, and OPEC has constantly tried to ensure oil price stability, promptly intervening to supply more oil in times of temporary disruption. More than political issues, it has been market factors (quality of crude oil, rigidity of the US refining system, the proliferation of quality requirements for oil products, stock levels, etc.) that have spurred price hikes and volatility in recent years.

Cutting consumption causes OPEC overreaction, flooding the market or spiking prices Noreng professor of petroleum economics and management at the Norwegian School of Management, ‘02
Oystein, “Crude Power: Politics and the Oil Market”, 2002, p. 186 A major problem in implementing additional taxes on oil consumption is the risk of OPEC retaliation combined with the impossibility of stabilizing crude oil prices in the longer run. New taxes on oil products could invite OPEC to raise crude oil prices to compensate for the rising share of economic rent captured by the oil consumer governments, reasoning that the oil price rise would not cause a corresponding volume loss so that there would be a net revenue gain. The alternative could be to flood the market with cheap oil to make up in volumes for a perceived loss in world market crude oil prices. The risk is that either option would overshoot and enhance instability.

Cutting fossil fuel consumption causes OPEC to flood the market, increasing consumption worldwide Noreng professor of petroleum economics and management at the Norwegian School of Management, ‘02
Oystein, “Crude Power: Politics and the Oil Market”, 2002, p. 204 Comprehensive measures aimed at curbing the use of fossil fuels could cause OPEC or the key Middle Eastern oil exporters to raise output to compensate for the price loss, aiming at market share. The temptation could be to flood the market with cheap oil, giving a strong competitive advantage to countries that do not impose high consumer taxes on crude or oil products. OPEC would lose economic rent, but some low-cost OPEC countries would gain in volume. Nevertheless, the outcome would be a transfer of income from the oil exporters to the oil importers. The effect could be a more strongly rising oil demand in developing countries.

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45 R&B (Oil)

Boosting Alternative Energy causes Backstopping (3/3)
OPEC will respond to the plan by flooding the market with cheap oil causing a price collapse. Bob Williams, Executive Editor Oil & Gas Journal, 3-30-2004
[Saudi oil minister Al-Naimi sees kingdom's continued role as key supplier of last resort, 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." 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." "Actually, in the next 30 years at least, there is not really a substitute for [oil use in] transportation. . .that's where the bulk of oil is going. "Now if we are concerned about [carbon dioxide], I believe there is enough technology to sequester CO2 and to take CO2 out of the atmosphere. It doesn't make any sense to compare consumption of crude oil and pay subsidies to coal. To us, that is inconsistent with the objective of eliminating CO2. Now I think there may have been a political dimension to this." Nevertheless, given concerns about climate, working together to combat a perceived threat does not mean reducing or eliminating oil use, he said. "I think we should find a better ameliorating method than just shunting aside oil." Al-Naimi also recalled the lesson learned about market share competition in the oil price collapse of 1998-99. *Ali Ibrahim al-Naimi is minister of petroleum and mineral resources for Saudi-Arabia.

France proves – a switch towards alternative energy prompts price drops Castillon et al Petroleum working group at the ‘French Academy of Technology’ ‘07 Pierre, Institut Francais Du Petrole, “Depletion of Petroleum Reserves and Oil Price Trends” November 2007 http://www.energypolicyblog.com/wpcontent/uploads/2008/03/at200711en.pdf Accessed: 7/2/08
Investment decisions are naturally based on assumptions about demand and medium- and long-term prices. But price forecasts are always difficult and, it is worth pointing out, in the petroleum market, often selfdestructive. One especially relevant example relates to the 1985 price drop. Until then, all oil price forecasts pointed upward, as shown in figure 8? and this was true for several different scenarios. For example, in 1980 the French Planning Administration (Commissariat général du Plan) had defined three scenarios that revealed increases, in constant money units, of 2, 7 and 14% annually. Naturally, political decisions, such as those involving the French nuclear program, were made for reasons of energy independence, these immediately followed the first oil crisis. But significant energy savings, the use of alternative energy sources, research and development, and investments in the exploration and production of “difficult” oil in non-OPEC regions occurred not simply because the price of crude was high but because it was considered unlikely that prices would not continue their rise.

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Saudis will flood the market if Oil Prices drop
Low oil prices will likely knock out alternative energy and lead to more consumption Alkadiri, director in the markets and countries group, and Mohamedi, is chief economist at PFC in Washington, DC, 08
(Raad, Fareed, “World Oil Markets and the Invasion of Iraq, 4/10, http://www.merip.org/mer/mer227/227_alkadiri_mohamedi.html, date accessed: 7/12/08) Will Saudi Arabia accommodate its fellow OPEC members or will a price war ensue? There are a number of compelling arguments for a new price war. Lower oil prices will likely knock out more expensive nonOPEC oil in the US, Canada and the North Sea. Moreover, it will discourage new investment in costly projects such the tar sands development in Canada, deep offshore high-tech production and remote areas of Russia. Lower prices could also lead to another round of mergers among private companies in the West, thereby diverting capital from new development to buying existing oil assets. These losses in non-OPEC production would then provide extra room for OPEC output. This extra room could be allocated to the countries demanding disproportionately higher quotas. For a country like Saudi Arabia, lower prices are a stick with which to beat OPEC's quota cheaters, given the damage their budgets and balance of payments would sustain while they wait for a larger chunk of world demand.

Investment in renewable energy will cause the Saudis to flood the market Norris, Chief financial correspondent of The New York Times, 2000 (Floyd, New York Times, “Crude Error: How we grew vulnerable to high oil prices,” 0623-00, http://query.nytimes.com/gst/fullpage.html? res=9C04E7DB1F31F930A15755C0A9669C8B63&sec=&spon=&pagewanted=print, access 07-02-08)
WHY are gasoline prices so high? It's the demand, stupid. For those who remember the 1970's, there is something very familiar about oil ministers meeting in Vienna to decide whether to open the production taps a bit further as analysts debate whether 700,000 barrels a day of additional production will make much difference. The answer is, it won't. Because if that extra supply would change things very much, that supply would vanish. The oil crisis, circa 2000, is not a supply-side phenomenon. That is because the oil market is nothing like a normal market. In a normal market, the marginal producer, the one who provides the last bit of supply, is the high-cost producer. If prices rise a lot, that producer can finally make a profit and he starts to increase supply. That supply meets rising demand and helps to hold down prices. In oil, however, that situation is turned on its head. The marginal suppliers in that market are the gulf states, principally Saudi Arabia and Kuwait. They are also the lowest- cost producers, and the ones with reserves that will last for decades. The high-cost producers, including many wells in this country, are pumping all out and will not add production anytime soon no matter how high the price goes. When demand is weak, oil prices can collapse because many oil producers need revenue and will pump all they can. That happened most recently in 1998, when Asian economies went in the tank. But when demand is strong, as it is now, it is futile to rely on oil producers to start cheating and driving the price down, or to hope that diplomacy can have much of an effect.

What would lead the Saudis to start pumping enough oil to lower prices? In a word, fear. If they feared that a worldwide recession was imminent and knew that would cause demand to plummet, they might act. There is no such fear now. But the other fear is a longer-range one. A trend away from oil would be a scary phenomenon to the oilrich Saudis, and they would hate to see a renewal of the 1970's trends toward better fuel economy and alternative energy sources. They are no doubt thrilled that the American law mandating high fuel economy for cars has a huge
loophole classifying gas-guzzling sport utility vehicles as trucks. Gas prices have entered the political debate this year, but not in any way that should scare the Saudis. Republicans blast pollution rules for driving up the cost of gasoline in the Midwest. Democrats suspect oil companies are seizing an opportunity to increase profit margins. Both are right, at least to some extent, but both are beside the point. The real mistake in Washington came in the years after the last oil crisis, when oil prices were weak and Americans lost interest in energy conservation. Higher gas taxes and less loophole-laden fuel-economy rules would have helped avert the current problem. Such actions were not taken because no effective lobbying groups were backing them and because they didn't sound like vote winners. The last president to really push energy conservation was Jimmy Carter -- remember the sweaters he wore as he urged us to turn down the heat in our homes -- and everyone knows what happened to him. So now oil prices are high, and they are likely to remain above $25 a barrel until growth slows significantly in an important region of the world -- or until the Saudis grow worried that this country will again get serious about energy conservation and research into alternative energy sources. It's the demand that counts.

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Multiplier: Saudi capacity would devastate the market
Saudi backstopping would hit the market like a nuclear warhead Edward Morse and James Richard, Hess Energy Trading Company and Firebird Management, 2002
[Foreign Affairs, March-April, p.33] Saudi spare capacity is the energy equivalent of nuclear weapons, a powerful deterrent against those who try to challenge Saudi leadership and Saudi goals. It is also the centerpiece of the U.S.-Saudi relationship. The United State relies on that capacity as the cornerstone of its oil policy. That arrangement was fine as long as U.S. protection meant Riyadh would not "blackmail" Washington -- an assumption that is more difficult to accept after September 11. Saudi Arabia's OPEC partners must also cooperate with the kingdom in part to prevent Riyadh from producing a glut and having prices collapse; spare capacity also serves to pressure key non-OPEC producers to cooperate with Saudi Arabia when necessary. But unlike the nuclear deterrent, the Saudi weapon is actively used when required.

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Saudis are watching alternative energy closely to enforce prices
The first decade of the new century is uniquely key – the Saudi’s are looking to our political situations in America – any signs of moving toward alternatives will result in lowering of prices Dorraj, teacher of polysci at at Texas Christian University. ‘93
Manochehr, Arab Studies Quarterly “Will OPEC Survive” Fall 1993 http://findarticles.com/p/articles/mi_m2501/is_n4_v15/ai_16075108/pg_9?tag=artBody;col1 Accessed: 7/4/08 Saudi Arabia has long been the moderator in pricing oil. They have increased or cut back oil production in order to stabilize oil prices. One explanation for this action is that the Saudis are net wealth maximizers and recognize that higher prices in the short run will lead to incentives for conservation and development of alternative sources of energy in oil importing countries. This would
induce shrinkage of the market. Since the Saudis have the highest reserves, they have the most to lose by such shrinkage.(14) But the Saudis do not have a good estimate of the critical price range which will cause the substitution to become a real threat. The decision

to develop alternate sources and explore new oil fields depends on political and economic conditions in the industrialized countries of the West, namely the United States and her allies. Alternative sources of energy, such as nuclear power or coal, have not proven to be either cheap or free of danger and hazardous environmental effects. Such repercussions give credence to the belief that oil will continue to be the main source of energy into the year 2000.

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49 R&B (Oil)

OPEC has Spare Capacity (1/4)
OPEC has spare capacity McQuaile and Swann, 08 (Platt’s Oilgram Price Report, Feb 7, “OPEC's spare capacity 3.39 million b/d in
2011: IEA”, Pg. 12 Vol. 85 No. 26) OPEC's effective spare capacity will grow by just 820,000 b/d in the five-year period to 2011, the International Energy Agency said February 6 in an update to its Medium-Term Oil Market Report. Total OPEC capacity is seen at 33.07 million b/d in 2007 and at 36.21 million b/d in 2011. With an estimated call on OPEC crude of 28.69 million b/d in 2007, spare capacity is pegged at 4.37 million b/d this year. However, what the IEA calls "effective" spare capacity?the volume of usable spare capacity?is estimated to be much lower, at 2.57 million b/d in 2007. Similarly, in 2011, total OPEC capacity is seen at 36.21 million b/d while demand for OPEC crude is seen averaging 31.01 million b/d. This suggests surplus OPEC capacity of 5.2 million b/d. However, effective spare capacity is seen at 3.39 million b/d.

Saudi Arabia along with other OPEC nations have plenty spare capacity Reuters ‘08
Boston Globe “ OPEC Nations Considering Increase in Oil Production” 6/22/08 http://www.boston.com/news/world/articles/2008/06/22/opec_nations_consider_increase_in_oil_production/ Accessed: 7/12/08 Saudi Arabia, the world's biggest oil exporter, has a policy of keeping a cushion of spare capacity and has said other OPEC members that can bring on extra production quickly would also discuss boosting output to try to tame the oil rally. "The short-term policies to be discussed include the proposal that those OPEC countries that have spare capacity should boost supply, just like Saudi Arabia has announced it will do in July," a senior OPEC official said. Looking to the longer term, the source also said Saudi Arabia would consider increasing its capacity beyond an existing goal of 12.5 million barrels per day by the end of next year. The two other OPEC members with some extra capacity are the United Arab Emirates and Kuwait. Another OPEC delegate said it was not yet clear whether they would join in any output rise. Mohammad al-Olaim, Kuwait's oil minister, said he had no plans to raise output ahead of the talks, but would consider options afterward.

Gross capacity for oil production has increased in 2008 The Economics Times, 08
(“OPEC's tight spare capacity to ease this year: IEA,” 2/13, http://economictimes.indiatimes.com/News/News_By_Industry/Energy/Oil__Gas/OPECs_tight_spare_capacity_to_ ease_this_year_IEA/articleshow/2779608.cms, date accessed: 7/11/08) LONDON: OPEC's tight spare capacity will ease this year with new facility start ups, the International Energy Agency said on Wednesday. Gross new liquid capacity for the Organization of the Petroleum Exporting Countries will be 3.1 million barrels per day in 2008 with new start ups and increments from the existing fields, compared with 1.25 million bpd last year. About 42 per cent of the increment would come from condensate and natural gas liquid, the IEA said in its monthly oil market report. "The proliferation of potential additional liquids volumes in 2008 holds forth the prospect that tight OPEC spare capacity could temporarily ease, even if not everything comes to fruition on schedule," said the IEA, the energy policy adviser of the world's most industrialised countries.

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50 R&B (Oil)

OPEC has Spare Capacity (2/4)
Despite several factors, OPEC oil production is on the rise Petroleum Intelligence Weekly, Reports on the international oil and gas business, 07
(“Opec Spare Capacity Keeps On Rising,” 9/3, http://www.energyintel.com/DocumentDetail.asp? document_id=210901, date accessed: 7/11/08) One key barometer of potential turbulence in oil markets is Opec's spare crude oil production capacity. As with hurricanes, low readings point to stormy weather ahead. But Opec spare capacity is on the rise, suggesting at least a lull in the price squalls that have beset the market over the past few years. There are still serious issues surrounding the measurement and adequacy of spare capacity -- the degree of geopolitical risk and the location and quality of the available Opec spare, along with the levels of global commercial and strategic stocks, continue to interact in a complicated dance. But a few trends seem to be firmly in place. Firstly, Opec production cuts over the last year have created a 1 million-1.5 million barrel per day cushion of current spare capacity -- with, importantly, a large component of lighter crudes. Secondly, growth in the "other liquids" category, for both Opec and non-Opec, is compensating for slowing non-Opec growth. And lastly, new Opec light crude production is being brought on stream to bolster spare capacity even further.

OPEC has spare capacity from medium to long term forecasts Abu Al-Soof, Industry Analyst, Secretariat, to OPEC-organized session ‘07
Nimat, OPEC “The Role of OPEC spare capacity” 5/1/07 http://www.opec.org/opecna/Speeches/2007/OPECSpareCapacity.htm Accessed: 7/11/08 To conclude, there are challenges and uncertainties, but we believe the overall picture for the industry is positive. During the next few years we expect to see a strong increase in non-OPEC supply and OPEC capacity. OPEC spare capacity is expected to continue to rise in the medium term and the required OPEC crude is likely to drop or remain flat at best until 2009. In order to ensure market stability, however, players in OPEC and non-OPEC countries must collaborate strongly. This is all the more important given the challenges that the industry is currently facing and the uncertainties driven by factors like the growth of the world economy, consuming country energy policies (substantial downside risk to demand) and technological developments.

2008 forecasts show a rebound in spare capacity for oil IEA, Paris-based intergovernmental organization founded by the Organisation for Economic Co-operation and Development, 07
(“2008: STARTING TO IMPROVE FLEXIBILITY, 7/13, http://omrpublic.iea.org/omrarchive/13jul07over.pdf, date accessed: 7/11/08) The Medium-Term Oil Market Report (MTOMR), released earlier this week, looked at the evolving pressures on the oil market for the next five years. Understandably, the focus was on the tail end of the forecast, but it is easy to forget that the market will not evolve in a uniform way. This month’s Oil Market Report (OMR), with the roll over of our short-term forecasts to 2008 provides an opportunity to examine some of the possible near-term shifts in fundamentals and what implications they may have for the market. Projected world demand continues the 2007 rebound, rising 2.2 mb/d in 2008, but it will likely be outpaced by rising supplies of biofuels (+350 kb/d), other non-OPEC (650 kb/d), OPEC NGL (0.7 mb/d) and rising OPEC capacity (1 mb/d). Demand growth of 2.5% is driven by non-OECD countries, but OECD growth of 1.6% is inflated by the assumption of a return to normal weather conditions. The net result is that the ‘call on OPEC crude and stock change’ rises to a range of 31.7-32.3 mb/d.

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51 R&B (Oil)

OPEC has Spare Capacity (3/4)
OPEC spare capacity will rise from 2.5 million barrels a day in 2008 to more 4 million barrels a day in 2010 Habiby, 2008
(Margot, Bloomberg, “Oil Rises on IEA Supply Warning, Concern Israel May Attack Iran,” 07-01-08, http://www.bloomberg.com/apps/news?pid=20601087&sid=aq4YqZ.XKV.E&refer=home, accessed 07-12-08) July 1 (Bloomberg) -- Oil rose, extending this year's 48 percent gain, as the International Energy Agency said supplies may not keep up with demand through 2013 and ABC News reported Israel is increasingly likely to attack Iran this year. The IEA said in a report that spare OPEC capacity will shrink by 2013, keeping the market ``tight.'' Israel may bomb Iran if OPEC's second-largest producer acquires enough enriched uranium to build a weapon, potentially threatening Mideast supplies, ABC said, citing an unidentified Pentagon official. ``The long-term supply outlook continues to face very real constraints,'' Brad Samples, commodity analyst for Summit Energy Inc. in Louisville, Kentucky, said in an interview. Crude oil for August delivery rose 97 cents, or 0.7 percent, to settle at $140.97 a barrel at 2:58 p.m. on the New York Mercantile Exchange. Futures have almost doubled from a year ago. Yesterday, oil touched a record $143.67. The price gained 38 percent between April and June, the biggest quarterly increase in nine years. ``The Iranian situation looked like it was cooling down, and now the temperature has been turned up very high,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. U.S. State Department spokesman Tom Casey said he had ``no information that would substantiate'' the ABC report and criticized the official for not speaking publicly. Pentagon spokesman Bryan Whitman declined to address the report. Manufacturing Expands Manufacturing in the U.S. unexpectedly expanded in June for the first time in five months, signaling exports and the government rebate checks are helping companies weather the housing slump and jump in costs. OPEC spare capacity will rise from 2.5 million barrels a day in 2008 to more than 4 million a day in 2010 before fading to ``negligible levels'' of around 1 million barrels a day by 2013, the IEA said in its Medium-Term Oil Market Report today. ``This IEA report is more bad news,'' said Phil Flynn, a senior trader with Alaron Trading Corp. in Chicago. ``No matter what we do on the demand side, we don't cut back enough to get caught up on supply.'' Saudi Arabia, the world's largest oil exporter, is not willing to sell crude oil at a discount to the normal market price for its crude grades, Oil Minister Ali al-Naimi said today. Analysts including the London-based Centre for Global Energy Studies have said the kingdom may need to lower its prices to find sufficient buyers. Saudi Arabia plans to raise crude production to 9.7 million barrels a day in July. Forecast Cut The IEA, the Paris-based adviser to 27 oil-consuming nations, cut more than 3 million barrels a day from its 2012 global demand forecast.

OPEC spare capacity up now IEA, Paris-based intergovernmental organization founded by the Organisation for Economic Co-operation and Development, 07
(“2008: STARTING TO IMPROVE FLEXIBILITY, 7/13, http://omrpublic.iea.org/omrarchive/13jul07over.pdf, date accessed: 7/11/08) As we stressed in the MTOMR, OPEC spare capacity is only one factor among many in determining the oil price. In 2004, OPEC spare capacity was more than 2 mb/d below current levels, but oil prices were $30/barrel lower. A large part of that $30, we have argued, has been caused by product supply tightness. Over the next five years, investment in upgrading capacity should increase the flexibility of the refining industry to meet demand-side and crude-quality challenges - and may therefore reduce some of these upside price pressures. This increased flexibility starts to kick in from 2008, with modest improvements in global light/middle distillate supply capabilities and the greater potential to upgrade more fuel oil.

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52 R&B (Oil)

OPEC has Spare Capacity (4/4)
2008 will be even more flexible in terms of excess oil capacity than past years. IEA, Paris-based intergovernmental organization founded by the Organisation for Economic Co-operation and Development, 07
(“2008: STARTING TO IMPROVE FLEXIBILITY, 7/13, http://omrpublic.iea.org/omrarchive/13jul07over.pdf, date accessed: 7/11/08) In 2008, improved Atlantic Basin light distillate supply potential is more due to the structural decline in European gasoline demand than refinery-level changes, but the introduction of additional hydrocrackers in Asia should improve middle distillate supply potential and in turn could tighten local fuel oil balances. For fuel oil, strong demand from bunkering and industrial/power generation needs in the Middle East, removes almost the entire traditional regional surplus in 2008. However, it will not be until 2009 and beyond that installed Middle East upgrading capacity rises to the point where local refiners will have to choose between producing more gasoline or meeting rapidly growing regional demand for fuel oil. Overall, both in terms of spare upstream capacity and refinery flexibility, 2008 looks at this stage to be slightly more comfortable than 2006 and 2007. While product specification differences will continue to restrict product trade, there is the potential for light and middle distillate supply tightness to ease slightly and for the fuel oil market to partially rebalance. However, these are just two components of the myriad influences (including weather, OPEC policy, geopolitics and GDP growth) that will determine the direction of oil prices in the coming months

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53 R&B (Oil)

Saudis have Spare Capacity (1/2)
Saudi Arabia has spare capacity Oxford Analytica, 08
(Forbes, “Saudis’ Oil Meeting Produces Few Results,” 07-02-08, http://www.forbes.com/2008/06/23/saudi-arabiaoil-cx_0624oxford_print.html, access 06-24-08) --Consuming nations stuck to their argument that the main cause is a fundamental lack of supply, not least the result of restricted access to resources. Saudi Arabia did announce that it would raise its crude oil production to 9.7 million barrels per day and also said that it was ready to produce more crude beyond 9.7 million per day should consumers require it. This promise should serve to calm oil markets, but Saudi Arabia has maintained the stance for some time that it would deliver more crude if asked by customers. A more significant outcome of the meeting was the indication that Saudi Arabia believes oil prices have climbed too far. Yet no indication was given as to how far crude might have to fall for Saudi Arabia to reverse its current accommodating stance. There can be little doubt that Riyadh and OPEC's evaluation of what constitutes a fair price for oil has risen dramatically in line with rising prices. By calling the meeting, Saudi Arabia demonstrated its preparedness to act independently of OPEC, the other members of which have little or no spare capacity. Both Iran and Venezuela expressed criticism of Saudi Arabia's unilateralism, and Riyadh's decision will have repercussions for OPEC cohesion down the line.

OPEC nation Saudi Arabia has the capability to flood the oil market if deemed necessary Landers, Business Correspondent for the Dallas Morning News, 08
(Jim, Ottawa Citizen, "Saudis to supply oil to meet world demand: Unclear whether price will drop, analysts say," 623-8, http://www.canada.com/ottawacitizen/news/story.html?id=a4e38a75-ef0c-49eb-b843-f16dbb93dda0, 7-10-8) Saudi Arabia yesterday said it would supply enough oil to meet global demand for the rest of the year, but differed sharply with the U.S. government by blaming speculators for the sharp increase in oil prices. King Abdullah, the Saudi monarch, hosted yesterday's emergency meeting of producers, consumers and global oil companies to find a way to curb price spikes that have carried oil near $140 US a barrel and pushed U.S. gasoline prices past $4 a gallon. The king, in gruff remarks at the opening of the meeting, blamed "the frivolity of the speculators in the market for selfish interests," rising consumption in developing countries and high energy taxes in the West and said it was wrong to blame OPEC. "Your mission is to rule out biased rumours and to reach the real causes for the increase in price," the king urged the delegates. But U.S. Energy Secretary Samuel Bodman blamed oil producers. "While increases in near-term oil production like the one Saudi Arabia offered today are welcome and necessary, fundamentally the market needs to see investments in increased long-term production capability and spare capacity," Mr. Bodman said in a prepared statement e-mailed to reporters. A grim-faced Mr. Bodman left the meeting striding so rapidly through the lobby of the Jeddah Hilton Hotel that some of his staff had to run to catch up. Analysts were divided on whether the meeting would lead to lower oil prices. "What I've heard so far are basically all good ideas, but it will probably not change the price tomorrow morning," Royal Dutch Shell CEO Jeroen van der Veer told Reuters in Jeddah. Houston oil analyst Amy Jaffe said speculative buying had pushed oil prices into a bubble that could burst and drop the price back to $100 a barrel. "They (Saudi Arabia) have extra capacity and they know how to flood the market by changing their pricing system, should they decide to," she said.

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54 R&B (Oil)

Saudis have Spare Capacity (2/2)
Saudi Arabia has a huge surplus of oil and has the ability to multiply that spare capacity Dourian is Middle East editor of Platts, energy information division, 08
(Kate, Platts Oilgram Price Report, “Saudi Arabia to keep new oil 'in the ground'; Points to lack of commitment to boost crude capacity,” 4/15, Lexis, date accessed: 7/11/08) The King's remarks put into perspective the lack of commitment by state-owned Saudi Aramco, which has a monopoly on upstream operations in the kingdom, to boost crude production capacity beyond a planned 12.5 million b/d in the immediate future. Saudi Oil Minister Ali Naimi, speaking at a conference last week organized by Paris-based consultancy Petrostrategies, said that volume was enough to meet anticipated demand in the foreseeable future. "As you all know, Saudi Arabia has 264 billion barrels of crude oil reserves, with the potential to increase those resources by at least 200 billion barrels.... As for natural gas, we have reserves of 258 trillion cubic feet, with a high likelihood of doubling that figure in the future," Naimi said in a carefully crafted presentation. "Currently our total petroleum production, including crude oil, liquids and natural gas, exceeds 11 million b/d of oil equivalent. Equally important, we are increasing our petroleum production capacity, year after year, in keeping with forecast future global needs. For this reason, the kingdom is spending over $90 billion in the next five years to increase its production capacity in both the upstream and downstream segments of the industry," he explained to an audience of senior oil executives from multinational companies including French Total and Shell. "As part of these efforts, Saudi Arabia's crude oil production capacity will rise next year to 12.5 million b/d, which is enough to meet the expected call on Saudi oil for the foreseeable future, even as we maintain spare capacity of 1.5 million to 2 million b/d, to be used if there is sudden disruption of supplies from other sources," the Saudi minister said.

Saudi’s are rapidly increasing production MSNBC ‘08
“Saudis signal boost in production capacity” 6/21/08 http://www.msnbc.msn.com/id/25305036/ Accessed: 7/12/08 JIDDAH, Saudi Arabia - Saudi Arabia will increase oil production capacity gradually over the next year, a senior adviser to the country's petroleum minister told CNBC as delegates gathered for an energy summit in the Saudi port city of Jiddah. Ibrahim Al-Muhanna said production would increase significantly "by the middle of next year." The kingdom's current total capacity of 11.3 million barrels per day is expected to increase to 12.5 million barrels per day, Al-Muhanna said. Previous estimates by the International Energy Agency put current Saudi capacity at about 10.8 million barrels per day. The kingdom currently produces about 9.5 million barrels per day.

Lack of spare capacity is a myth – the Saudis have massive oil reserves MSNBC ‘08
“Saudis signal boost in production capacity” 6/21/08 http://www.msnbc.msn.com/id/25305036/ Accessed: 7/12/08 "This rise allows them to raise current output, while at the same time maintain a cushion of spare capacity," said CNBC contributor John Kilduff, a senior vice president at MF Global Ltd. "There was a concern in the market that any output rise would leave us with no room for error in terms of any other outages. This should relieve some of those concerns."

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55 R&B (Oil)

Oil production can pace demand
Current oil price-hike not the result of limited supply – OPEC can keep pace with demand CNN ‘08 “OPEC: World Energy Needs will grow over 50%” 7/11/08 http://www.cnn.com/2008/WORLD/meast/07/10/opec.oil.supplies.ap/ Accessed: 7/12/08
VIENNA, Austria – World energy needs will spike by more than 50 per cent by 2030 but adequate oil reserves, conservation and new methods of recovery mean supply will keep pace with demand, the Organization of Petroleum Exporting Countries said Thursday. In its "World Look Outlook for 2008," OPEC also took issue with critics blaming present skyrocketing prices on the refusal of the organization to increase output, asserting that the weak U.S. dollar and market speculators were at least partly to blame.

Oil supply is easily keeping pace with demand Associated Press ‘08
“Plenty of Oil, OPEC Says” 7/10/08 http://www.thestar.com/Business/article/457795 Accessed: 7/12/08 "Today, what is apparent is that oil supply and demand fundamentals are healthy," he wrote. "There is, and has been, more than enough supply to meet demand, and oil stocks in major consuming countries are at comfortable levels. This should point away from the direction of current price levels." The report projected oil demand to rise by 29 million barrels a day from 2006 through 2030 to reach a daily 113 million barrels a day – a drop of four million barrels a day over its predictions last year, "due in part to the higher oil price assumption" – expectations that pricey petroleum is here to stay. A large part of that projected demand will be met by new recovery and production procedures, meaning total demand for "conventional crude" – oil pumped from wells and other methods using present day technology – will not exceed 82 million barrels a day by 2030, said OPEC.

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56 R&B (Oil)

OPEC perceives biofuel investment
In the face of biofuels, OPEC investment is on the decline. Blas and Crooks, Staff Writers, 07
(Javier and Ed, Financial Times, Drive on biofuels risks oil price surge, 6/5, http://www.ft.com/cms/s/0/aeb9a650136e-11dc-9866-000b5df10621.html?nclick_check=1, date accessed: 6/29/08 Opec has previously expressed scepticism about alternative energy but Mr El-Badri’s comments mark the first clear threat that the cartel might act to safeguard its interests in the face of a shift towards biofuels. “They are really concerned,” said Julian Lee of the Centre for Global Energy Studies in London. “Opec will continue investing, but with biofuels on the horizon, they may not invest enough.” “It is a difficult situation for Opec. On one hand they are asked to produce more, on the other one, Washington and Brussels are telling the cartel ‘we are betting on biofuels and we don’t want to rely on you [Opec]’.”

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57 R&B (Oil)

Backstopping Crushes Renewables (1/2)
Turns case – back stopping curtails alternative energy. Lazzaro, ABD/Ph.D. in American Government and International Economics, 08
(Joseph, Blogging Stocks, “Oil surges past $90 on talk OPEC will defend $80 oil in spring”,” 2/8, http://www.bloggingstocks.com/2008/02/08/oil-surges-past-90-on-talk-opec-will-defend-80-oil-in-spring/, date accessed: 6/29/08) "OPEC is making a serious strategic error, in my view. The world is not the same place that it was in 1979 and 1990. Technology has advanced and the longer the price of oil stays high, the more attractive alternate energy sources become," Wang said. "If oil stays above $80 for a decade it is entirely possible that nations, even whole regions, will have shifted to an oil substitute." Conversely, a sustained drop in oil's price to $60 or $50 would invariably delay - - or even curtail - - development of some of those new technologies, particularly in the gasoline-car-fuel-oriented United States, he said. The west, Wang said, an in particular the United States, "has shown a remarkable ability to drop any new energy technology" at the first sign of a return of cheap, available gasoline and oil. An OPEC defense of $80 per barrel oil would prevent that from happening, he said. "OPEC may once again receive a brief revenue gain from its tactic, but this time in doing so they may be hastening the cartel's demise," Wang said.

OPEC will keep oil prices at such a level as to prevent switch to alternative fuels Castillon et al Petroleum working group at the ‘French Academy of Technology’ ‘07 Pierre, Institut Francais Du Petrole, “Depletion of Petroleum Reserves and Oil Price Trends” November 2007 http://www.energypolicyblog.com/wpcontent/uploads/2008/03/at200711en.pdf Accessed: 7/2/08
We mentioned restraints on investment and the low elasticity of demand to price. Except for a major global economic crisis, it is hard to imagine a rapid restoration of significant excess production capacity. Consequently, it is not impossible that prices will remain high in the coming years, and may even be subject to new tensions as a result of geopolitical events. If excess capacity does appear, as indicated above (CERA, IFP and other studies), these will most likely be limited to values that can be managed by OPEC. Prices should be able to be maintained at a level considered desirable by Saudi Arabia and its partners. They have learned the lesson of the 1986 price drop and are likely to define a price, or range of prices, that do not lead to a collapse of demand for OPEC oil through the use of alternative fuels and energy savings. It is hard to estimate that level. It will most likely be less than the price reached during the summer of 2006, but will certainly be greater than that of the 1990s. Indeed, the growth in demand and the next occurrence of a leveling-off of non-OPEC production make it unlikely we will see any substantial erosion of OPEC market share at prices of $40, or even $50 a barrel. In the medium term, such levels could form a lower limit for declining prices. Inthe longer term, there are a variety of possible scenarios.

Its happened once and it can happen again, flooding the market with cheap oil ensures US dependence on oil Dorraj, teacher of polysci at at Texas Christian University. ‘93
Manochehr, Arab Studies Quarterly “Will OPEC Survive” Fall 1993 http://findarticles.com/p/articles/mi_m2501/is_n4_v15/ai_16075108/pg_9?tag=artBody;col1 Accessed: 7/4/08 Frustrated by these developments and extensive cheating on production quotas among OPEC members and resolved to drain Iran's financial resources and hamper her ability to continue the war with Iraq, the Saudis began to flood the market by increasing their share of production. The result was an oil glut and the collapse of prices to as low as $10 per barrel in 1986. The Saudis also hoped that the lower prices would reduce the non-OPEC share of the market and discourage research and development in alternative sources of energy, thus ensuring long-term Western dependence on OPEC oil.(1)

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58 R&B (Oil)

Backstopping Crushes Renewables (2/2)
Dropping prices allows OPEC to maintain a competitive edge over renewable resources Dorraj, teacher of polysci at at Texas Christian University. ‘93
Manochehr, Arab Studies Quarterly “Will OPEC Survive” Fall 1993 http://findarticles.com/p/articles/mi_m2501/is_n4_v15/ai_16075108/pg_9?tag=artBody;col1 Accessed: 7/4/08 The second important factor was a considerable drop in the consumption of oil in the non-communist world. A combination of conservation and alternative sources such as nuclear and solar energy engendered a drop of 13% between 1979 and 1983.(10) A third significant factor was the destabilizing impact of the emergent spot and futures markets. From a low of 5% in 1979, by 1984 close to 45-50% of the oil sold on the world market was sold on the spot market.(11) The activities of the spot and the future markets put tremendous pressure on OPEC producers to bring their prices down in order to maintain a competitive edge.

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59 R&B (Oil)

Perceived Backstopping Causes Oil Price Drop (1/2)
Hint of production increase drops price, and drives off speculators, dropping price further. Patrice Hall, Washington Times, 5-28-04
[OPEC plan spurs drop in oil prices, http://www.washtimes.com/business/20040527-110406-8642r.htm]
Signs that OPEC may move next week to aggressively increase oil production caused a plunge in oil prices yesterday, raising hopes that prices at the pump will follow.
The easing of oil prices comes amid evidence that record-high fuel costs have had little impact on the U.S. economy. Growth picked up to a strong 4.4 percent in the first quarter despite climbing fuel prices, the Commerce Department reported. World leaders, in urging producers to pump more oil, have warned that high oil prices could start to hurt growth. But in the United States, the world's largest market for oil, the main impact so far has been to stoke inflation, which nearly tripled to a 3 percent rate from the fourth quarter of last year, Commerce said. Crude oil prices dropped 3 percent to $39.44 per barrel in New

York trading yesterday after the president of the Organization of Petroleum Exporting Countries said the cartel is eyeing a "significant" increase in production to try to break the market psychology that has driven oil prices up to records near $42 per barrel this year. An "option" at the cartel's June 3 meeting in Beirut "is to
increase the quota significantly so it will bring a significant psychological impact to lower prices," Purnomo Yusgiantoro told reporters in Jakarta, Indonesia, where he is oil minister. Energy Secretary Spencer Abraham, who is traveling in Europe, predicted that OPEC would adopt the 2 million-barrel-a-day output increase recommended by Saudi Arabia last week. Mr. Abraham said major non-OPEC producers like Mexico and Russia are scrambling to increase production to meet growing global demand for oil. Their efforts are expected to start paying off with substantial increases in oil supplies in 2005 and 2006. But in the short run, only OPEC — primarily Saudi Arabia — is in a position to flood the market with oil. Polls show the public does not blame OPEC or President Bush for high oil prices so much as "price gouging" by oil companies and the Iraq war. A Gallup poll this week found that 22 percent of people interviewed blamed profiteering by big oil companies, and 19 percent blamed the war in Iraq. Only 9 percent held OPEC responsible, by contrast, while 5 percent blamed President Bush. Analysts say prices could drop

dramatically if OPEC — which produces about a third of the world's oil — were to succeed in breaking market psychology and forcing out speculators who have been betting on climbing oil prices.
Sung Won Sohn, chief economist at Wells Fargo & Co., said speculation centered on potential supply disruptions in the Middle East has driven up the price of oil by as much as one-third, or $10 to $15 a barrel. Proof that hedge funds and other speculators are having a powerful influence on oil prices is seen in the trading patterns of oil futures contracts on the New York Mercantile Exchange. Recently, contracts betting on further increases in oil prices outnumbered contracts betting on price decreases by four to one, Mr. Sohn noted.

That may be changing, however, as the number of contracts betting on price increases dropped by 15 percent in the week ended May 18, according to figures kept by the Commodity Futures Trading Commission. Doug Leggate, an analyst at Citigroup Inc., said oil prices would be $10 lower, and could fall precipitously, if speculators dropped out of the market. "Speculators have been driving the market since the end of the Iraq war," he said. Price drops could accelerate because speculators "follow momentum" and will quickly exit the market once upward price momentum fades, he said.

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60 R&B (Oil)

Perceived Backstopping Causes Oil Price Drop (2/2)
Even perception that OPEC might lower prices lowered the price of oil. Washington Post, 04
(Washington Post, “OPEC plan spurs drop in oil prices; Record-high fuel costs not hurting economy,” 5/28, Lexis, date accessed: 7/1/08) Signs that OPEC may move next week to aggressively increase oil production caused a plunge in oil prices yesterday, raising hopes that prices at the pump will follow. The easing of oil prices comes amid evidence that record-high fuel costs have had little impact on the U.S. economy. Growth picked up to a strong 4.4 percent in the first quarter despite climbing fuel prices, the Commerce Department reported. World leaders, in urging producers to pump more oil, have warned that high oil prices could start to hurt growth. But in the United States, the world's largest market for oil, the main impact so far has been to stoke inflation, which nearly tripled to a 3 percent rate from the fourth quarter of last year, Commerce said. Crude oil prices dropped 3 percent to $39.44 per barrel in New York trading yesterday after the president of the Organization of Petroleum Exporting Countries said the cartel is eyeing a "significant" increase in production to try to break the market psychology that has driven oil prices up to records near $42 per barrel this year. An "option" at the cartel's June 3 meeting in Beirut "is to increase the quota significantly so it will bring a significant psychological impact to lower prices," Purnomo Yusgiantoro told reporters in Jakarta, Indonesia, where he is oil minister. Energy Secretary Spencer Abraham, who is traveling in Europe, predicted that OPEC would adopt the 2 million-barrel-a-day output increase recommended by Saudi Arabia last week. Mr. Abraham said major non-OPEC producers like Mexico and Russia are scrambling to increase production to meet growing global demand for oil. Their efforts are expected to start paying off with substantial increases in oil supplies in 2005 and 2006. But in the short run, only OPEC - primarily Saudi Arabia - is in a position to flood the market with oil.

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61 R&B (Oil)

Backstopping will lower Oil Prices
Production increases will lower oil prices across the board Walid Khadduri Al-Hayat - 26/05/08// The Consequences of Rising Oil Prices for Producing Countries
http://english.daralhayat.com/business/05-2008/Article-20080526-23e4f324-c0a8-10ed-01e25c73e3239d15/story.html What can possibly return oil prices to their previous behavior where they are influenced by market fundamentals to stabilize at sensible levels, perhaps to reach half the current price levels? Evidently, there is the issue of the dollar value. Once the US dollar rests at more sensible values vis-à-vis other hard currencies, speculations in oil markets are likely to decline. There is also the issue of global economic growth, especially in major industrial countries, both old and more recent ones. It is impossible not to witness a negative impact on demand as the growth rates of the global economic decline as the case has been over the past few months. However, it may be months before this process takes is course and results are not likely to be seen immediately. Finally, there is the issue of political stability in oil-producing and exporting countries. Here is where the disaster truly lies with the expanding map of turbulences in these countries beyond the scope of the Gulf region as was previously feared to reach Nigeria, Venezuela and even Mexico, not to mention the gradual decline in the production levels of several significant regions outside OPEC. These two factors will continue to push prices upwards, but not as high as the current record levels. What can oil producing countries do under these conditions? How can prices be pulled downwards? These two questions were answered by a senior oil executive from a major American oil company during a heated session in front of a congressional committee. According to the Vice President of Chevron, Peter Robertson, what is needed is to have oil exporting countries to express their willingness to increase production for a long time. Exxon Mobil's Vice President also agreed with this conclusion and added that if oil markets were flooded with an additional one million barrels, prices would decline despite the availability of sufficient supplies today. In other words, the corporations want oil producing nations to flood the market with unneeded oil on the assumption that this flooding could pull prices downwards. Just as a reminder, this was the exact same logic that led prices to drop below $10 in 1998, but of course taking into consideration the difference in international economic factors between today and the past.

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Cheap Oil increases Consumption (1/3)
The high oil prices have decreased consumption, especially in the US. Backstopping effectively rolls that back, increasing consumption Rhein, Senior Analyst, European Policy Centre, Advisor for European Policy Center, 08
(Eberhard, Blog Active EU “The High Oil Price is a Blessing in Disguise,” 7/7, date accessed: 7/12/08) Finally, the oil price of $ 140/barrel does what 10 years of international climate policy have failed to achieve. Citizens across the planet are becoming aware that oil is an increasingly scarce resource that must not to be wasted. They finally realise that high oil prices are there to stay and that the time of cheap fossil energy is definitely over. We should rejoice at this sea change. It will lead to a more economic use of fossil energy, induce us to invest more in energy efficiency and make alternative energies more competitive. These effects start being visible, but their full potential will only be realised after several years when the adjustment process will be running at full speed. The impact will be highest in the USA, which accounts for one quarter of global oil consumption and where gasoline taxes have been ridiculously low. And it will most affect three sectors where fuel accounts for a major share of costs: transport, heating and power generation.

High oil prices promote energy conservation while low prices increase consumption China Org, 08
(“Fuel prices increase positive for energy saving,” 6/25, http://www.china.org.cn/environment/opinions/200806/25/content_15886710.htm, date accessed: 7/12/08) The action has caused wide concern, as some economists worry that the price increase might fuel inflationary pressure. However, an editorial in the Beijing News pointed out that the price rise is a good chance to promote energy conservation. The paper says in the past, the central government has always provided financial subsidies to maintain relatively low oil price. Furthermore, the low oil price has to some extent encouraged energy consumption. This is also why sales of fuel-inefficient cars like SUVs have increased greatly in China in the past three years.

Price drops from $130 to $65 results in a 1.5 million barrel change in demand IHT Global edition on the NYT ‘08
International Herald Tribune “Asia’s Oil subsidies” 5/30/08 http://www.iht.com/articles/2008/05/30/opinion/edbowring.php Accessed: 7/12/08 There is no accurate way to measure how sensitive demand is to rising oil prices across this diverse group of countries. But the difference between oil at $65 a barrel and oil at $130 a barrel could well limit demand by at least 1.5 million barrels a day. Sudden rises in oil prices could depress consumption in countries like China and Malaysia, where additional domestic demand may be needed to compensate for slowing export growth. There is merit in some subsidies, at least in the short term. Many lower income people cook with kerosene or get to work on motor bikes. Related fertilizer subsidies may also be necessary to sustain food output.

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Cheap Oil increases Consumption (2/3)
China proves that cheap oil increases consumption The Telegraph ‘08
“Oil Price Shock Means China is at Risk of Blowing Up” 7/8/08 http://www.telegraph.co.uk/money/main.jhtml? xml=/money/2008/07/07/ccview107.xml&CMP=ILC-mostviewedbox Accessed: 7/12/08 The manufacturing revolution of China and her satellites has been built on cheap transport over the past decade. At a stroke, the trade model looks obsolete. No surprise that Shanghai's bourse is down 56pc since October, one of the world's most spectacular bear markets in half a century. Asia's intra-trade model is a Ricardian network where goods are shipped in a criss-cross pattern to exploit comparative advantage. Profit margins are wafer-thin. Products are sent to China for final assembly, then shipped again to Western markets. The snag is obvious. The cost of a 40ft container from Shanghai to Rotterdam has risen threefold since the price of oil exploded. "The monumental energy price increases will be a 'game-changer' for Asia," said Stephen Jen, currency chief at Morgan Stanley. The region's trade model is about to be "stress-tested". Energy subsidies have disguised the damage. China has held down electricity prices, though global coal costs have tripled since early 2007. Loss-making industries are being propped up. This merely delays trouble. "The true impact of the shock will only be revealed over time, as subsidies are gradually rolled back," he said. Last week, China raised internal rail freight rates by 17pc. BP 's Statistical Review says China's use of energy per unit of gross domestic product is three times that of the US, five times Japan's, and eight times Britain's. China's factories "were not built with current energy levels in mind", said Mr Jen. The outcome will be "nonlinear". My translation: China is at risk of blowing up.

Lower oil prices increase demand – Asia proves IHT Global edition on the NYT ‘08
International Herald Tribune “Asia’s Oil subsidies” 5/30/08 http://www.iht.com/articles/2008/05/30/opinion/edbowring.php Accessed: 7/12/08 China may in principle be able to afford its subsidies for oil and energy consumption, but they are distorting the economy and disrupting the finances of state-owned power, smelting and energy companies. All this is widely known. What is not talked about is the impact that these subsidies are having on demand for oil. As it is, developing Asia accounts for only about 20 percent of global oil consumption. But the more important statistic is that Asian countries account for about two thirds of the annual increase in global oil demand and an even higher percentage of the increase in imports. Most of the rest of the increase comes from oil exporters like Russia and the Middle East, where prices are low and economies booming. Oil consumption in the developed world is declining slowly. With developing Asia now consuming about 17 million barrels a day - and that figure rising by about 1 million ever year - the key question is: How much additional demand has been created by these oil subsidies?

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Cheap Oil increases Consumption (3/3)
TURN – Cheap oil destroys any quest for oil security – it prevents any shift to alternative energy and increases consumption Maugeri PhD in international political economy. ENI SPA's group senior vice-president (director) of
corporate strategies and international relations ‘03 Leonardo, Oil and Gas Journal “Time to debunk mythical links between oil and politics” December 15 2003. Proquest.com Accessed 7/2/08 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 oilwhich 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.

Empirically proven that lower prices will lead to more consumption NEAL ST. ANTHONY, Star Tribune Last update: April 24, 2008 - 8:58 PM
http://www.startribune.com/business/18148539.html Oil consumption in the United States dropped nearly 2 percent in the first quarter of 2008. If that trend holds, it would be the biggest percentage decline since the 1991-92 recession. The U.S. Energy Information Administration (EIA) this month predicted that U.S. consumption will drop by 1 percent this year, to 20.6 million barrels of oil per day. In 2007, consumption was basically flat. Typically demand has risen by 1 to 2 percent annually during good economic times. The statistics have some folks wondering whether the country has hit a consumption tipping point, amid $3.50-per-gallon gasoline and historically high crude oil prices. "We're seeing a price high enough so that consumers are responding with practical alternatives such as more conservation, more mass transit," said J. Drake Hamilton, science policy director at St. Paul-based Fresh Energy. "I was just at an Earth Day celebration at Boston Scientific in Arden Hills, and the most popular display was about biking to work." In 1981-82 and in 1990, dips in U.S. consumption were followed by supply surges that lowered prices. As a result, demand at the pump grew again, and consumers continued to drive more every year.

Even small decrease in prices increases consumption enough to turn the case. Catherine Hagem, Center for Climate and Energy research, 1994
[Energy Journal p. 120] Reduced consumption of fossil fuels in a small country will have only a small effect on international fossil fuel prices. However, even a minimal decrease in international fuel prices will have a positive impact on consumption in the rest of the world. Although the increase in consumption in the rest of the world is negligible in relation to total global consumption, it can be significant in relation to the initial national reduction. The final impact on global emission reduction can thus be significantly less that the initial reduction in national emissions.

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A2: OPEC can’t flood the market – they’ll create the perception
OPEC cannot flood the market but will do everything it can to make the public perceive it can Campbell, Trustee of the Oil Depletion Analysis Centre, 2000
(C.J, Oil Crisis, “Myth of Spare Capacity Setting the Stage for Another Oil Shock,” 3/20, http://www.oilcrisis.com/campbell/mythcap.htm, date accessed: 7/11/08 A combination of circumstances led to a dramatic fall in the price of oil in 1998. They included unseasonably warm weather; an Asian recession that reduced the demand for swing Middle East production; the collapse of the ruble, encouraging exports; and further turns in the UN-Iraq imbroglio. The market itself, which now included hedge funds and derivative merchants, had no alternative but to over-react because of its transparent short-term nature. The major companies, plainly seeing that exploration could not underpin their future, took the opportunity of the price crisis to merge, successfully concealing their real predicament from the stockmarket. Budgets were slashed, and a climate of uncertainty led to an improvident draw on stocks. Everyone hung on the pronouncements of OPEC, imagining that it held the key. Norway and Mexico offered to cut production to help support price. The OPEC countries themselves did everything possible to foster the notion that they could flood the world with cheap oil at the flick of a switch. It was a strategy aimed to inhibit investments in gas, non-conventional oil, renewable energy or energy saving that they feared might undermine the market for their oil, on which they utterly depend.

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66 R&B (Oil)

***Renewables DA Answers***

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No transition to Renewables now (1/2)
There is no transition to alternative energy in the status quo
National Post, 6-26-08. [“The green barrier to innovation,” The National Post, June 26, 2008, pA16. Accessed 7/11/08 from Lexis] If only it were as simple as all that. But, of course, to decide when to apply the brake and when the accelerator the driver has to know exactly where his car is headed. And the direction of the West's path to an alternative energy tomorrow is both unknown and unknowable, at least at this point. "The possibilities of renewable energy are limitless," Mr. Obama told an audience in Las Vegas earlier this week. That's true, in a way. But it is true largely because renewable possibilities are not constrained by the need to be practical. The world consumes about 85 million barrels of oil a day. No one is expecting renewable sources to replace that consumption anytime soon, so no politician is worried about the "how," only the "what."

Government intervention will stall alternative energy action National Post, 2008 (“The green barrier to innovation,” National Post (f/k/a The Financial Post) (Canada),
June 26) More than likely, government intervention will delay the alternative energy future, since politicians and bureaucrats are typically lousy at picking winners and losers. Hoping legislators, rather than entrepreneurs, will lead us to a new economy is. Despite the bluster of green-seduced leaders, the end of fossil fuels use will be market driven like putting the cart before the horse and expecting our little rig will roar off at a gallop. Still, both the Liberals' "Green Shift" proposal and Barack Obama's alternative energy plan -- which he announced on Tuesday -- presume that government will direct the transition through an enlightened blend of rewards for those who embrace the new energy regime and punishments for those who do not.

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No transition to Renewables now (2/4)
The US' ongoing inaction concerning energy gives no indication of imminent policy change and has driven up prices Seacoast, 08 (Seacoast, "NH: John Stephan blasts Congress' inaction on energy independence," 7-8-8, http://www.seacoastonline.com/apps/pbcs.dll/article?AID=/20080708/NEWS/80708043/1/NEWS20, 7-11-8)
1st District Congressional Candidate John Stephen today said that America needs a plan for energy independence, but must have action to make that a reality. At a "Middle-class Forum" in Raymond last week, Rep. Shea-Porter said "we need an energy policy." According to the July 4 edition of the Rockingham News, "[Shea-]Porter's message was that times are tough for now, but a mix of new energy sources and conservation measures can mean an eventual easing of the ‘gas crunch' in the years ahead." "Americans can't wait years to see relief from high gas and oil prices," said Stephen. "If we had expanded energy exploration here in the United States years ago, we would see lower costs now at the pump. Unfortunately, representatives from this district have consistently voted against opportunities to increase domestic supply over the past six years, whether in Alaska, off our shores, for oil shale mining and tar sands. We need action, not hopes that the problem will solve itself, because inaction is how we got into this situation." Stephen noted that former Congressman Jeb Bradley repeatedly voted against new energy exploration in
Alaska (Roll Call #135, 2003; Roll Call #122, 2005; Roll Call #209, 2006), against lifting the moratorium on offshore oil and natural gas production (Roll Call #192, 2005; Roll Call #356, 2006) and against streamlining and reducing fuel additive requirements (Roll Call #247, 2004). Rep. Shea-Porter voted to ban coal-to-liquid and tar sands petroleum purchases (Roll Call #40, 2007) and to put a moratorium on oil shale development (Roll Call #1186, 2007). "We need more energy, not more waiting," added

Stephen. "If we lift the barriers for oil and gas exploration now, we will see a drop in prices, as the futures will begin to reflect the supply that will be ramping up. Rep. Shea-Porter is right that we need an energy plan, but it has to be one that involves more energy to meet the demands of a growing economy, not one that simply says ‘no' to our domestic reserves. That means more oil, gas and nuclear power, as well as renewable energy, like biofuels." John Stephen is the former Commissioner of Health and Human Services. Prior to that position, he served as the Assistant Commissioner of Safety, where he also worked as the state's first Homeland Security Coordinator. Stephen also served as a prosecutor for 10 years, in Hillsborough County and as an Assistant Attorney General. He is a Manchester resident.

Environmental initiatives are still being struck down, effectively delaying them at least until the next president takes office New York Times, 08
(New York Times, "Court Rejects Clean Air Rules," 7-11-8, http://www.nytimes.com/2008/07/12/washington/11CLEANcnd.html?_r=1&oref=slogin, 7-11-8) A federal appeals court unanimously struck down a major component of President Bush’s clean air policies on Friday, effectively delaying further action on reducing smog and soot-producing emissions until the next administration takes office. North Carolina and some electric power producers opposed aspects of the
regulation, known as the Clean Air Interstate Rule, creating a rare instance in which President Bush found himself allied with environmental advocates. The act required 28 states, largely on the East Coast, to reduce the pollutants

that can travel long distances in the wind, which the Environmental Protection Agency predicted it would prevent about 17,000 premature deaths a year. ”This the rare case where environmental groups went to court alongside
the Bush administration,” said Frank O’Donnell, president of Clean Air Watch, a group that has criticized other Bush administration policies. The United States Court of Appeals for the District of Columbia Circuit ruled that the environmental agency overstepped its authority by instituting the rule. It said the Clean Air Act did not give the E.P.A. the authority to change pollution standards the way it did. Citing "more than several fatal flaws,” the court scrapped the entire regulation. ”This is without a doubt the worst news

of the year when it comes to air pollution,” Mr. O’Donnell said. The environmental agency said the rule would have drastically reduced sulfur dioxide and nitrogen oxide emissions, saving up to $100 billion in health benefits by preventing tens of thousands of heart attacks millions as well as lost work and school days. While the Bush administration could appeal the decision, environmental groups called for Congress and the
E.P.A. to quickly begin working on a new law or a replacement regulation. The ruling was somewhat of a surprise, even to industry groups that had challenged aspects of the law. William M. Bumpers, a lawyer representing Entergy Corp., said a few electric companies flatly opposed the regulation but most generally favored it because it included cap-and-trade provisions that allow them to exceed emissions caps to buy credits from those who do. “The power-generating industry had already invested billions and billions of dollars in anticipation of the trading market,” Mr. Bumpers said. ”They’re not happy with this development.”

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No transition to Renewables now (3/4)
Congress and environmentalists are rejecting a $10 billion effort for cleaner energy Zabarenko, Reuters Environment Correspondent, 08 (Deborah, Reuters, "$10 billion clean tech fund gets skeptical response," 6-5-8, http://www.reuters.com/article/politicsNews/idUSWAT00960820080605, 7-4-8)
A planned $10 billion global fund for cleaner emissions technology backed by the Bush administration drew a skeptical bipartisan response from members of Congress and environmentalists on Thursday. David McCormick, the U.S. Treasury undersecretary for international affairs, explained the plan to a U.S. House of Representatives panel, noting the Bush administration has asked Congress to commit $2 billion to the fund over three years. The commitment for fiscal 2009 would be $400 million. "What about the money?" asked U.S. Rep. Ron Paul, a Texas Republican and presidential candidate. "Has anybody considered how we're going to pay for this?" The fund would be administered by the World Bank, a fact that drew criticism from some lawmakers and other witnesses before a House panel on monetary policy, trade and technology. "The World Bank has not compiled a record that most environmentalists approve of in its general operation," said Rep. Barney Frank, a Massachusetts Democrat. "It's like they do their environmental work one day a month and then they undo it. ... The World Bank should not be funding projects that would go counter to a concern for clean technology." The fund aims to bridge the cost gap in developing countries between using the newest and cleanest commercially available power and industrial technologies as opposed to older and cheaper, but dirtier, technologies. "We are aiming, along with our donor partners in the G8 and beyond, at a global effort of up to $10 billion over the next three years with the U.S. as the lead donor," McCormick said in prepared testimony. The fund will use a mix of concessional loans, grants, equity investments and credit guarantees to make cleaner technology more affordable in developing countries, McCormick said. It will focus on countries "with high expected emissions growth," he said, and projects with significant emissions reduction potential. "For example, if the difference between building a traditional fossil fuel power plant and a wind farm in a recipient country were $10 million, the Clean Technology Fund could help the recipient country finance the additional cost associated with the wind farm," McCormick said. Brent Blackwelder of the environmental group Friends of the Earth was dubious about the World Bank's commitment to clean energy technologies, noting the bank has recently made loans for coal plants that are only marginally less dirty than the dirtiest. "Having looked at and tried to convince the World Bank to shift the energy lending over 25 years into newer (energy) technologies that countries actually wanted, they have refused and continue to this day to fund very damaging projects," Blackwelder said. Britain and Japan have pledged unspecified amounts to the fund and along with the United States, were working with donors in the Group of Eight major economies and others to launch the fund this summer, with the first projects funded by year-end. The fund is expected to be a major topic of discussion at the G8 finance ministers' meeting in Osaka, Japan, on June 13-14. McCormick and U.S. Treasury Secretary Henry Paulson solicited donations from officials in Gulf nations over the weekend and said they received strong interest. Paulson also said he believes it is "morally wrong" to build new facilities using older, dirtier technologies when newer, cleaner technologies are commercially available. The World Bank has estimated that in the power generation sector alone, the incremental cost of deploying clean energy technologies in developing economies would be $30 billion a year. "If we take no action to provide developing countries with the right incentives, their investments today could lock in a legacy of highly polluting, less efficient technologies for which we would all eventually pay through the accelerated effects of climate change," McCormick added.

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No transition to Renewables now (4/4)
Despite Bush’s attempts to switch to alternative energy, America will remain addicted to oil in 2025 Ministry of Oil- Kuwait, 08 (Oil Magazine, March, http://www.moo.gov.kw/magazine/en/index.asp?
More=yes&NewsID=398&mode=0&day=18&page=3, 7/3/08) President Bush’s statement indicates that Middle Ease oil dependence reduction will be achieved through reinforcing US national security economy, hence economically weakening other parties. However, this plan ignores the reality of international oil market. The Minister pointed out that most of US oil purchases are carried out by the private sector. He also stressed that since oil is a replaceable item in the capitalist system, America for sure will end up buying the cheapest petrol from unknown sources. Moreover, since oil economy is a free market with an international nature, oil prices in Middle East and other places will affect rates everywhere. Therefore, the “problem” with the President’s plan is that given the oil imports projections in 2025 that are estimated to reduce 18%, US oil consumption will reduce in the percentage of 14% as a whole and that twenty years from now, America will remain oil addict with 58% oil imports, even after the new technology innovations. In short, several American national interests can not be solved by Mr. Bush’s alternative energy initiative!!

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SQ Renewables DO NOT solve the case
Alternative energy still decades away Schoen, Senior Producer MSNBC, 2005 (John W., July 28, “Alternative Energy Slow to Take Hold”, MSNBC,
http://www.msnbc.msn.com/id/7549530/, July 11, 2008) With oil and gasoline prices pushing to new highs and global demand projected to grow faster than production capacity, consumers are understandably puzzled by an ongoing energy enigma. Simply put: Why haven’t alternative energy sources — from renewables like solar and wind power to alternative fossil fuels like coal — kicked in to take up the slack? And how long before these non-oil energy sources begin to make a difference? Thirty years after the “oil shocks” of the 1970s signaled the end of cheap, reliable supplies of oil, the global economy is still dependant on petroleum. And despite billions of dollars in research grants and government subsidies, no alternative energy source has yet been developed to replace it. Now, with oil prices at $60 a barrel and supplies tighter than they were 30 years ago, analysts, scientists and businesses working to develop alternatives say it will be decades — at least —before the global economy’s reliance on oil can be broken.

No alternatives are coming in the status quo—the United States are on path of destruction due to the fact Freeman, Writer specializing in economics, 2004
(Robert, Common Dreams.org, “Will The End of Oil Mean The End of America?”, 3-1-2004, http://www.commondreams.org/views04/0301-12.htm, Date accessed: July 1, 2008) As with Pirsig’s monkey, the alternative consequences of each choice could not be more dramatic. Weaning ourselves off of cheap oil, while not easy, will help ensure the vitality of the American economy and the survival of its political system. Choosing the route of force will almost certainly destroy the economy and doom America’s short experiment in democracy. To date, we have chosen the second alternative: to secure oil by force. The evidence of its consequences are all around us. They include the titanic US budget and trade deficits funding a gargantuan, globally-deployed military and the Patriot Act and its starkly anti-democratic rescissions of civil liberties. There is little time left to change this choice before its consequences become irreversible.

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SQ Biofuels investments are way small/slow
The increased investments in biofuels are not enough to replace declining oil production Mouawad, Journalist for the New York Times, 2008
(Jad, New York Times, “Amid High Oil Prices, Danger Signs in Production,” April 28th, http://www.nytimes.com/2008/04/28/business/worldbusiness/28oil-WEB.html?pagewanted=1&_r=1&hp Accessed on 7/11/08) To make up the shortfall, the world is increasingly turning to fuels made from unconventional sources, like biofuels or heavy oil. Canadian tar sands, for example, have attracted large investments, and biofuels have accounted for much of the growth in fuel supplies in the last two years. The International Energy Agency estimates that current investments will be insufficient to replace declining oil production, let alone increase overall output. The energy agency said it would take $5.4 trillion by 2030 to increase global output, a level of investment that is unlikely to be met. It said a crisis “involving an abrupt run-up in prices” could not be ruled out before 2015.

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No Price Drop – Chinese Demand will fill in (1/5)
China and the Middle East will offset any decrease in US Oil consumption AND keep oil prices high Orgill, Staff Writer for Reuters, 2008
(Margaret, University of Alberta, “Middle East Energy Demand Soaring Matching China”, April 21st, http://www.uofaweb.ualberta.ca/chinainstitute/nav03.cfm?nav03=76728&nav02=57598&nav01=57272, July 11, 2008) Energy demand in the Middle East is growing as fast as in industrial powerhouse China and will help to offset any decline in the United States, the world's top fuel burner, as well as keep prices high. Although it has only a fraction of the population, huge fuel subsidies and an economic boom fuelled by record oil prices have driven a rapid increase in Middle Eastern energy consumption. "Middle East energy demand looks as if it will grow at the same rate as China but with 10 percent of the population," said Jeff Brown, managing director of Singapore-based FACTS Global Energy consultancy. Crude consumption in Asia and the Middle East is forecast to grow by almost 900,000 barrels a day this year, whereas U.S. demand could fall by 400,000 bpd in a pessimistic scenario, said Eduardo Lopez, senior oil demand analyst at the International Energy Agency, energy adviser to developed consumer nations. "The countries driving demand growth are relatively isolated at this point from any financial crisis the United States may face," said Lopez. Record oil prices, rather than denting demand in the Middle East, will encourage greater consumption as the flow of petrodollars to the region will continue to stimulate rapid economic growth.

China fills in with Africa in oil supplies French, New York Times Staff Writer, 08
(Howard, NYT, “China, Filling a Void, Drills for Riches in Chad,” http://www.nytimes.com/2007/08/13/world/africa/13chinaafrica.html, 7/10/08, date accessed: 7/10/08) Chad is as geographically isolated as places come in Africa. It is also among the continent’s poorest and least stable countries, the scene of recurrent civil wars and foreign invasions since it gained independence from France in 1960. None of that has put off the Chinese, though. In January, they bought the rights to a vast exploration zone that surrounds this rural village, making the baked wilderness here, without roads, electricity or telephones, the latest frontier for their thirsty oil industry and increasingly global ambitions. The same is happening in one African country after another. In large oil-exporting countries like Angola and Nigeria, China is building or fixing railroads, and landing giant exploration contracts in Congo and Guinea. In mineral-rich countries that had been all but abandoned by foreign investors because of unrest and corruption, Chinese companies are reviving output of cobalt and bauxite. China has even become the new mover and shaker in agricultural countries like Ivory Coast, once the crown jewel in France’s postcolonial African empire, where Chinese companies are building a new capital, in Yamoussoukro, paid for by Chinese loans.

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74 R&B (Oil)

No Price Drop – Chinese Demand will fill in (2/5)
China’s growing oil dependency fills gap Brookes, 2004 (Peter, “China’s Oil Obsession”, New York Post, November 28, http://www.energybulletin.net/node/3410, July 11, 2008)
China's energy use is already growing by leaps and bounds. It now ranks No. 2 in world energy consumption (behind the United States, ahead of Japan), and is a major cause of rising energy prices. Beijing's growing needs will have significant ramifications on everything from international security to global pollution. As major powers scramble to secure limited world energy resources, conflict is certain — and armed conflict isn't out of the question. Look at oil: Within 20 years, China is expected to burn as much as America. But the Asian giant's oil reserves will be depleted in as few as 14 years. Once a net exporter of oil, China now imports 60 percent of its needs. It's oil imports: a) have doubled over the past five years; b) surged nearly 40 percent in the first half of 2004 alone; c) account for one-third of the growth in world demand and; d) grow by 7.5 percent per year — seven times faster than the U.S. Small wonder that China is scouring the earth's four corners for energy. Chinese oil comes from the Middle East (Saudi Arabia and Iran), Africa (Sudan and Angola), Southeast Asia (Vietnam and Indonesia) and Russia. In the future, it'll come from Latin America (Venezuela, Argentina and Brazil) and Central Asia (Uzbekistan and Kazakhstan) as well.

Chinese demand will rise and fill in AFX News Limited, Forbes.com, 07.09.07,
(7:15 AM ET, accessed 7-11 http://www.forbes.com/afxnewslimited/feeds/afx/2007/07/09/afx3893219.html) BEIJING (XFN-ASIA) - The International Energy Agency (IEA) said it expects China's oil demand this year to remain flat compared to its previous forecast at 7.59 mln barrels per day (bpd), before rising to 8.05 mln in 2008 and further to 9.96 mln bpd in 2012. In its medium-term oil market report, the agency said that Chinese demand will mainly be driven by transport fuels and naphtha, noting that transport demand will increase as income per capita rises while national plans for petrochemical expansion will require naphtha as a feedstock. The IEA said China will be the main driver of demand across the Asia region, accounting for 48.9 pct of non-Organization for Economic Co-operation and Development Asian demand by 2012. 'Given the country's booming economy, oil product demand is projected to increase by 5.6 pct per year on average to almost 10 mln bpd by 2012, consolidating its position as the second largest oil consumer after the US,' it said. The IEA also said the increase is roughly equivalent to adding around 474,000 bpd each year over the period, or roughly one quarter of the world's annual demand increase.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

75 R&B (Oil)

No Price Drop – Chinese Demand will fill in (3/5)
China’s oil consumption is high now, increasing China View 08 (4-29 http://news.xinhuanet.com/english/2008-04/29/content_8075648.htm, 7-11-08)
BEIJING, April 29 (Xinhua) -- Soaring oil prices have not slowed China's consumption of oil as statistics show that China's apparent consumption of crude oil and refined oil products both hit record highs in the first quarter of the year. According to statistics released Tuesday by the China Petroleum and Chemical Industry Association (CPCIA), China's apparent consumption of oil products composed of gasoline, diesel and kerosene rose by 16.5 percent year on year to 52.73 million tonnes in the first three months, and crude oil, rose by eight percent to91.8 million tonnes. The "apparent consumption" represents the sum of net imports and output and could be taken as an index for the real oil consumption excluding inventory. The growth of oil products consumption was a record high and much higher than the same period of last year, which was only 3.6 percent, said Shu Zhaoxia, professor of the Economics and Development Research Institute of China Petrochemical Corporation (Sinopec Group). Sinopec Group is China's top oil refiner. The growth of crude oil consumption was 2.5 percentage points higher than a year ago. State ceilings on prices of domestic oil products was the major reason contributing to China's surging oil consumption in the first quarter. Below-cost fuel prices did not restrain China's demand for oil but rather boosted it, said Shu. China's gross domestic product (GDP) rose by 10.6 percent in the first quarter, 1.1 percentage points down from a year ago but still at a high level. Deng Yusong, a researcher with the Development Research Center of the State Council, said that abnormal needs boosted by below-cost prices of refined oil products controlled by the central government over concerns of the country's rising CPI is another major reason contributing to the country's surging oil consumption. State ceiling on domestic oil products prices has led to both smuggling and cornering of oil products, said Shu. According to Shu, reconstruction of the country's snow-hit south also increased the real demand for oil products. China's crude oil output rose by 2.2 percent to 46.85 million tonnes in the first quarter. The output of gasoline went up 7.0 percent from a year ago to 15.7 million tonnes, diesel, up 11.2 percent to 32.4 million tonnes, and kerosene, up 17.5 percent to 3.03 million tonnes, according to the National Bureau of Statistics. China processed 84.6 million tonnes of crude oil in the first quarter, up 7.6 percent from a year ago. The growth rate was two percentage points higher than the first three months of last year. China's net imports of crude oil was 44.95 million tonnes in the first quarter, up 14.9 percent, and net imports of oil products rose by 31.8 percent from a year ago to 5.47 million tonnes, according to General Administration of Customs. China's imports of diesel in the first quarter surged over 600 percent to 1.66 million tonnes and the imports of gasoline, rose by nearly twice to 76,654 tonnes.

Even if OPEC floods the market, China will suck it all up WSJ ‘08
Wall Street Journal, “Oil Turns on China Decision” 6/19/08 http://blogs.wsj.com/marketbeat/2008/06/19/oil-turnson-china-decision/ Accessed: 7/10/08 For ages the assumption among the oil bulls has been that the rapid industrial growth in China would more-than-fill the void of demand declines in the U.S. and Europe, and that’s in part what’s kept oil prices surging while gasoline consumption declines here.

Chinese oil consumption will double in 10 years – ensuring that they will buy any extra oil Business Week ‘05
“Napolean of China’s Oil Patch” 6/20/05 http://www.businessweek.com/magazine/content/05_25/b3938063.htm Accessed: 7/10/08 There's good reason to believe that bullish prediction. China is sucking up energy faster than any country on earth, and that's not likely to change anytime soon as foreign investment continues to pour in and Chinese consumers boost their spending by 10% or more annually. Beijing expects energy consumption to double by 2020, which gives CNOOC "a very good outlook," says Hernan Ladeuix, head of oil and gas research at CLSA Asia-Pacific Markets. "The Chinese companies will all benefit."

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

76 R&B (Oil)

No Price Drop – Chinese Demand will fill in (4/5)
China increase growth causes increase consumption of oil. Lazzaro, 2008 (Joseph, July 10, IRA increases global 2008 oil demand forecast slightly on China’s growth)
In its monthly report, the IEA increased global oil demand forecast by 0.1% , or 80,000 barrels per day, to 86.85 million barrels per day. The IEA serves as an energy advisor to 27 industrialized nations, including the United States, United Kingdom, Germany, France, and Japan. Oil rose $1.03 to $137.08 per barrel in Thursday morning trading. Economist David H. Wang told BloggingStocks Thursday he expects China's oil demand increase in 2008 to be "roughly in-line with the IEA's 5.6% growth forecast." "China may end up registering oil demand growth less than 5.6%, if the Chinese Government continues to gradually increase the retail price of gasoline and diesel," Wang said. "My research indicates we are not seeing demand destruction yet in China, but this could change. Gasoline now costs about $3.30-$3.50 [per gallon] and if China approves another round of increases, demand could begin to be pinched, as it has in the United States."

Even if the US reduces demand oil prices will remain high – too many other factors TIME ‘08
“OPEC: Gas Prices Will Stay High” April 11th 2008 http://www.time.com/time/world/article/0,8599,1730117,00.html Accessed: 7/11/08 Naimi had no good news for those hoping for some relief from sky-high prices. He said it could take "at least 50 years" for the world to comprehensively adopt alternatives to the oil and gas that today account for about 90% of world energy consumption. Naimi castigated Western governments that have pushed biofuels as the major energy alternative, which has ravaged forests and agricultural land. Biofuels, he said, "will produce just 6% of energy consumption by 2010, and has not even reduced greenhouse gases." Instead, the world's most powerful oilman advocated "truly renewable sources of energy, like solar power." Saudi Arabia this year committed $300 million to researching alternative energies, even though they plan within the next year to boost their oil output from 11 million barrels a day to 12.5 million barrels a day. The major cause of current high oil prices, of course, is record demand, fueled first and foremost by China's booming economy. "China is the major factor in demand," says OPEC research director Hasan Qabazard. He predicts that world oil demand will increase about 30% to 118 million barrels a day by 2030. Then, there's the question of speculation and exchange rates: Investors have poured billions into oil futures, in part because oil is priced in dollars, meaning that its price soars as the dollar sinks. "There's only so much OPEC can do, because we have no influence over those factors," says Qabazard.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

77 R&B (Oil)

No Price Drop – Chinese Demand will fill in (5/5)
As the US reduces oil use, other countries like China fill in with increased demand Johnson, European and Energy Correspondent, Lead Writer for Environmental Capital, 08
(Keith, The Wall Street Journal, "Gas Pains: Falling U.S. Demand Doesn't Make a Difference," 7-10-8, http://blogs.wsj.com/environmentalcapital/2008/07/10/gas-pains-falling-us-demand-doesnt-make-a-difference/, 710-8) Now that Americans are finally curbing their oil addiction in the face of high prices—what if it doesn’t matter anymore? Ana Campoy in the WSJ reports that American drivers are getting even more skittish about getting behind the wheel: Gasoline demand fell more than 3% in early July compared to last year, after dips of 2% in June and 1% in April. Gasoline consumption over the Fourth of July weekend hadn’t been so low since 2003, all because average gasoline prices are now at $4.10 a gallon. Americans hope market economics will work—as demand falls, the hope is that crude oil and gasoline prices fall, too. Gasoline stocks are accumulating, even as refiners are moderating supply. Analysts have no worries there will be plenty of gasoline this summer. Some analysts see a light at the end of the crude-oil tunnel. From the paper: “We think oil is set for a significant correction,” says Michael Waldron, an energy research analyst at Lehman Brothers. “But it’s probably not going to occur until the end of this year or the beginning of next year.” The hitch? That math is predicated on fast-growing Asian economies also curbing demand, especially after countries like Indonesia, Malaysia, and China have rolled back fuel subsidies that led to lowish prices. It sounds good, in theory—if Chinese (and other developing-world) drivers have to pay something approaching market prices, they’ll think twice before getting in the car. But reality isn’t cooperating so far. Thursday, the Paris-based International Energy Agency upped its forecast of oil demand growth for the rest of 2008 and 2009—the first uptick in demand all year. And it’s all thanks to relentless growth in demand in Asian and Middle Eastern countries. Rich-country demand is expected to slip for the fourth year in a row in 2009, the IEA said. What about the rollback of fuel subsidies in Asia, then? They’re working in some countries, like Thailand and Indonesia, taking the edge off demand for more oil. But in China—the source of one-half the world’s increase in new oil demand—the “pricey fuel” policies appear to be boomeranging. Refiners who’ve been operating in the red thanks to cheap gasoline are opening the spigots. That’s ending gas and diesel shortages, and flooding the market with new supplies, feeding even more thirsty drivers. From Xinhua today: “Despite the (price) increases, continuing subsidies keep China’s fuel prices low by world standards and prevent the demand destruction necessary to foster more rational consumer behavior,” said Jing Ulrich, chairman of China equities at JPMorgan Securities, in an emailed note […]Because demand was being artificially restrained by shortages and rationing, especially in peak consumption periods, the price rises could now lead to an increase in consumption, said Kim Eng analyst Larry Grace […]So far, preliminary statistics from regional refiners and wholesalers suggest that demand has remained more or less constant since the NDRC announced the price hikes on June 19. High gasoline prices have finally reached the tipping point to change American driving behavior. The problem, it seems, is that change is too little and too late to trip up crude’s stubborn climb.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

78 R&B (Oil)

No Price Drop – China/India Demand will fill in (1/4)
China and India are keeping oil prices up Reuters, 2008 (Reuters UK, http://uk.reuters.com/article/paperTips/idUKPTIP30741420080704, 07-0408, access 07-06-08)
Now that the main culprits behind the sub-prime crisis have been named the banks, rating agencies, regulators and so on - a new scapegoat is needed for the latest economic woe, the rising oil price. Yesterday very politician with an audience of atleast onemade forecasts about what price oil will reach ($150 per barrel said the Russian president), told people to cut their addiction to oil (this from the British chancellor and US Treasury Secretary) or just stated the bleeding obvious (British PM). While the politicians were pontificating, the oil price was cruising to a new record $145 a barrel. You might be wondering why policy-makers don't stop throwing out warnings about the soaring oil price and actually do something about it. The answer it seems is that we are involved in a great global hunt for a fall-guy. Pinning the blame A group of British MPs think the fault might lie in traders speculating on oil markets. The Treasury Committeeyesterday announced it was going to investigate the regulation of oil markets. They haven't confirmed who will be questioned, but we can hope that some big hitters will be hauled before the panel. In the US a number of bills have been introduced to put paid to speculation pushing up crude oil prices. These include the 'End Oil Speculation Act'. And presidential hopeful Barack Obama has even been on the act; he says he can halve the price of oil with a set of proposals to clampdown on speculators. But as Reuters reported earlier this week, time is at a premium as US lawmakers are soon to head into the Summer recess. Plus politicians in the US have been accused of not understanding the way the oil markets work and for making traders scapegoats for the problem. Sois the weaker dollar reducing supply increasing demand the root of the problem? On a visit to the UK yesterday, US Treasury Secretary Hank Paulson said no, it can't be. Paulson said that while the dollar has onlydepreciated some 25 percent since February 2002, oil has gone up by more than over 500 percent, and in every currency. Rather Paulson and UK chancellor Alistair Darling chose to lay the blame rather generically at the doormats of the US and Britain, calling for the two countries to end their addiction to oil, reduce dependence on foreign energy imports and promote investment in renewablealternatives. Again, a lot of talk but what will come out of it? So perhaps OPEC, the 12 nation oil cartel,isat fault?OPEC has been criticised for cutting production too much as it hadover-estimated the amount being produced by non-members.Russian President Dmitry Medvedev yesterday forecast that oil prices will hit $150, but Bloomberg reportsthathe told reporters in Moscow that the influence of OPEC was exaggerated. So surely it must be the vast demand from China and India that is pushing up the price to record highs? Step in the Indian petroleum minister Murli Deora, who according to the India Economic Times told the World Petroleum Congress yesterday that blaming these two countries was 'completely devoid of merit'. Deora told delegates that while India and China accounted for one-third of the world's population, their combined oil consumption was less than one-eighth of global consumption. Back to Britain where our own prime minister Gordon Brown put the price rise down to an imbalance of supply and demand. Nice and simple, straight to the point, but what are you going to do about it Mr Brown?

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

79 R&B (Oil)

No Price Drop – China/India Demand will fill in (2/4)
Any excess oil supply will be consumed by China and India Schoen, Senior producer at MSNBC ‘08
John, MSNBC, “OPEC says it has lost control of oil prices” 4/16/08 http://www.msnbc.msn.com/id/7190109/ Acessed 7/10/08 And even as President Bush expressed concern Wednesday about rising oil prices, he cited tight global supplies -- not OPEC policies -- for the price surge. “I think if you look at all the statistics, demand is outracing supply and supplies are getting tight. And that’s why you’re seeing the price reflected,” Bush said. OPEC's admission that has lost control of oil prices hasn’t eased political pressure on the cartel. On Tuesday, several oil ministers said they had received calls from U.S. Energy Secretary Sam Bodman. Sen. Ron Wyden (D Ore.) said Tuesday he’s not convinced that OPEC’s hands are tied by global demand reaching the limits of production capacity. “This is their claim,” said Wyden. “But the fact of the matter is that nobody knows what their capacity is.” Though data on OPEC’s oil production capacity have always been hard to come by, there’s little disagreement on the rapid growth of global consumption -- especially in China and India. With worldwide demand this year rising by roughly 2 million barrels per day, whatever excess capacity is out there will be gone soon, according to Marshal Adkins, an oil industry analyst at Raymond James

Even if US consumption goes down, the rest of the world will fill the gap Mouawad, Journalist for the New York Times, 2008
(Jad, New York Times, “Amid High Oil Prices, Danger Signs in Production,” April 28th, http://www.nytimes.com/2008/04/28/business/worldbusiness/28oil-WEB.html?pagewanted=1&_r=1&hp Accessed on 7/11/08) At the same time, oil consumption keeps expanding at a faster clip than production. Demand is forecast to increase this year by 1.2 million barrels a day, to 87.2 million barrels a day. In the United States, the world’s most oil-thirsty nation, consumption has actually fallen a bit because of the economic slowdown. But that drop is being offset by growth in other countries. World consumption is projected to rise 35 percent, to around 115 million barrels a day, in the next two decades. Most of the growth will come from China, India and oil-producing countries in the Middle East, where retail fuel prices are subsidized, encouraging wasteful consumption. “What is disturbing here is that things seem to get worse, not better,” an analyst at Goldman Sachs, David Greely, said. “These high prices are not attracting meaningful new supplies.” Oil rose 23 cents Monday to $118.75 on the New York Mercantile Exchange. Longer-term oil futures, dated for 2013, now trade at $108 a barrel, a strong indication that investors see little cause for prices to drop in the next five years — partly because of low expectations about production growth.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

80 R&B (Oil)

No Price Drop – China/India Demand will fill in (3/4)
China and India demand will keep oil prices soaring for years to come The Japan Times, 2008
(“Energy Use Stands to Soar” June 26th, lexis) When the crude oil price surged to almost Dollars 140 a barrel recently, it marked a 40 percent gain this year alone. Most analysts agree that a mainspring of the oil price rise is voracious demand from China and India. Some say that if this demand continues unchecked the oil price could reach Dollars 200 a barrel or go even higher within the next few years. Last November, the International Energy Agency warned in its annual energy survey that if governments around the world stick with existing policies, global energy needs would be well over 50 percent higher in 2030 than today and China and India together would account for 45 percent of this increase. China surpassed Japan several years ago to become the second largest oil user after the United States. Accommodating the energy needs of China and India, even if they adopt more sustainable policies, will be difficult in a world that is already straining oil supply. There will also have to be some painful compromises and trade-offs made between developed and developing countries in negotiations to curb global warming. Can China and India ever emulate Western lifestyles? The IEA thinks not. "Quite simply, the resource-intensive economic model currently being pursued throughout the world cannot be sustained indefinitely," it says in its most recent annual energy survey. "A level of per capita income in China and India comparable with that of the industrialized countries would, on today's model, require a level of energy use beyond the world's energy resource endowment and the absorptive capacity of the planet's ecosystem." The U.S., with no more than 5 percent of the world's population, consumes 25 percent of the world's oil. The U.S. uses around 14 times as much oil as China on a per capita basis, and over 28 times as much as India per person. If per capita oil use in China and India were to increase to the current level in the U.S., their oil demand would rise by a combined 160 million barrels a day - almost twice the present level of world oil consumption of around 87 million barrels a day. Moreover, this does not allow for future increases in population, which would intensify demand for energy. The IEA has calculated that this level of demand for oil from China, India and the rest of the world - close to 240 million barrels a day - would deplete remaining proven world reserves of conventional oil in less than 15 years. It would drain the ultimately recoverable oil and natural gas liquids that are estimated to lie under the ground and the seabed in under 26 years.

Oil shocks will be off-set by Asian demand. Platts Oilgram Price Report, 2007
(May 22, “World energy consumption to climb 57% by 2030: EIA” Lexis 7/11/08) The Energy Information Administration's International Energy Outlook released May 21 said world energy consumption should rise 57% between 2004 and 2030. The report said total energy consumption is projected to increase from 447 quadrillion Btu in 2004 to 559 quadrillion in 2015 and to 702 quadrillion 2030. Most of the growth will take place in nations outside the Organization for the Economic Cooperation and Development, especially in non-OECD Asia. Total non-OECD energy demand is expected to increase by 95%, from 206.9 Btu in 2004 to 403.5 quadrillion Btu in 2030, as compared to an increase of 24% in OECD energy use, from 239.8 Btu to 298 quadrillion Btu, largely as a result of strong projected economic growth.For the industrial sector, energy intensive industries will continue to expand more rapidly in non-OECD countries where investors are attracted by lower costs and fewer environmental constraints than in OECD countries, the report said. In 2004, the OECD accounted for 52% of the world's industrial sector energy use and it is projected to decline to 33% in 2030. Global energy demand will grow despite relatively high world oil and natural gas prices, the report said. However rising oil prices will dampen demand for petroleum and other liquid fuels after 2015. As a result, oil's share of overall energy use will decline from 38% to a projected 34% in 2030.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

81 R&B (Oil)

No Price Drop – China/India Demand will fill in (4/4)
A drop in US demand would not significantly lower oil prices- India/ China offset and instability in OPEC countries would keep the price high
Mouawad, staff writer at The New York Times, 08. [Jad, “OPEC Is Expected to Keep Oil Production Unchanged,” New York Times, February 1, 2008, pC3. Accessed 7/11/08 from Lexis] But the picture for the oil market is markedly different from the late 1990s. Thanks mostly to growth in China and the Middle East, oil demand is expected to increase by 1.2 million to 1.4 million barrels a day this year. Last year, global demand rose by 1 million barrels a day, or 1.2 percent, to 85.8 million barrels a day. Current growth in oil supplies remains sluggish. The combination of a tight market and geopolitical tensions in many of the world's top producers is keeping prices high. Lately, some analysts have started to think that if the economy were to slow down, oil prices might not necessarily fall much. In the last six recessions, oil demand in the United States has dropped by an average of 2.3 percent, according to Merrill Lynch. But the bank's energy analysts say they believe that ''the resilience of oil demand to a sharp downturn in the economy has increased over time.'' ''This time around, any oil demand drop should be moderate,'' Merrill Lynch analysts wrote in a recent report. That is partly because the economy has become more efficient in its energy consumption, and partly because more than half the oil used in the United States goes to the transportation sector, where it is hard for consumers to cut back.

The Asian market’s demand will continue to increase over 30% a year Paavo Suni, Researcher ETLA, and Anthony de Carvalho, 2006 (“Oil Prices Have Risen Permanently, But
Remain Unstable,” http://www.etla.fi/files/1490_FES_05_4_oil_prices_have_risen_permanently.pdf, March 24, accessed online 7-11-08) Thanks to two decades of strong economic expansion, China has become a major player in the world economy. China’s share in world oil consumption was nevertheless only 8.2 percent in 2004. That same year, however, China’s share of world demand growth was as much as 29 percent. Asia as a whole explained 40 percent of the increase in world demand. For purposes of comparison, the U.S. share of growth was slightly smaller than China’s, even though America’s share of consumption is around 25 percent. The strength of demand for crude oil came as a surprise to the markets, which is visible in the increase in crude oil futures price curves. Markets interpreted the change as being permanent, since the quotations declined only slightly over time. This reflects the IEA’s projections that, given current trends, significant oil-sector investments particularly in the Middle East and northern Africa will have to be made in order to raise crude oil supply. Earlier, futures prices tended to converge towards much lower levels.

China and India are increasing consumption enough to make up US decline Shenk, Journalist for Bloomberg News, 2008
(Mark, Bloomberg, “Emerging Market Oil Use Exceeds U.S. as Prices Rise,” April 21st, http://www.bloomberg.com/apps/news?pid=20601109&sid=a_YCEx7do3LQ&refer=home, Accessed on 7/11/08) April 21 (Bloomberg) -- Traffic jams in Beijing and humming air conditioners in Dubai are replacing U.S. highways and suburbs as the driver of global oil prices. China, India, Russia and the Middle East for the first time will consume more crude oil than the U.S., burning 20.67 million barrels a day this year, an increase of 4.4 percent, according to the International Energy Agency in Paris. U.S. demand will contract 2 percent to 20.38 million barrels daily, the IEA says. Economic growth of more than 8 percent in China and India, coupled with increasing car ownership among the countries' combined populations of 2.45 billion people, will more than compensate for falling U.S. demand. Oil use worldwide will increase 2 percent this year because of growth in emerging markets, the Paris-based IEA says. ``Does the U.S. matter anymore?'' said Mike Wittner, head of oil research at Societe Generale SA in London. ``Has the U.S. mattered for the last few years? It is debatable. As far as the oil market is concerned, demand growth is going to be continued to be driven by China and the Middle East.''

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

82 R&B (Oil)

No Price Drop – General Fill In (1/2)
Any decrease in US oil consumption will be immediately offset by European and Asian markets Karey, et. Al, 08 (Gerald, Platts Oilgram Price Report, May 7, “US EIA sees higher prices, weaker demand;
Hikes 2008 crude price forecast to over $109.50/g”, Pg. 1 Vol 86 No. 88) West Texas Intermediate crude will average $109.53/barrel this year, the US Energy Information Administration reported May 6, almost $9 higher than the agency's projection of $100.61/b made just one month ago. Commensurate with higher crude and product prices, the agency is forecasting a sharp drop in US consumption in 2008, according to its latest Short-Term Energy Outlook.
The report was released as New York Mercantile Exchange front-month crude prices surged past $122/b for the first time. EIA's new price projection for WTI for the second quarter is $112.19/b, compared to $103.67 in last month's outlook. The agency's WTI price projection for both the third and fourth quarters is $114/b, compared to the $102 and $98.83 projected last month. WTI averaged $72.32/b in 2007. EIA noted that WTI spot prices inChina/India creased from $101 to $120/b over the first three weeks of April as supply disruptions in Nigeria and the North Sea and continuing strong demand growth in the emerging market economies pressured oil markets. Regular grade gasoline prices in the US in the third quarter are projected to average $3.71/gal, the EIA reported, a 20 cents/gal increase over the price projected last month. EIA's Q4 projected gasoline price is $3.61/gal, compared $3.25 last month. For the year, EIA is projecting an average price of $3.52/gal, compared to $3.36 last month. In 2007, the average price for regular gasoline in the US was $2.81. Highway diesel prices are projected to soar to $4.12/gal in the Q3 and Q4, up 29 cents and 49 cents, respectively, compared to the forecast last month. For the year, highway diesel prices are projected to average $3.94/gal, compared to the April forecast of $3.62. Last year, US highway diesel prices averaged $2.88/gal. Heating oil prices in Q3 are projected to increase sharply to $3.81/gal, up from the $3.37 EIA projected in April. For the year, EIA jumped its projected heating oil price to $3.67 from the $3.46 forecast last month. In 2007, US heating oil averaged $2.72/gal. "The projected prices for crude oil in 2008 will result in higher

prices for all petroleum products," EIA said. The agency is now projecting that US consumption of liquid fuels and other petroleum products will decline 190,000 b/d in 2008 to 20.51 million b/d compared to 2007, a sharper drop than the 90,000 b/d the agency projected last month. As recently as early March, EIA was projecting a 40,000 b/d increase in US fuel use. Total average liquid fuel and product consumption in 2007 was 20.7 million b/d, essentially unchanged from 2006. Motor gasoline consumption is projected to be 9.46 million b/d in Q3, compared to EIA's April projection of 9.42 million b/d. For the year, EIA is projecting gasoline consumption of 9.23 million b/d, down from the 9.26 million projected last month. In 2007, gasoline consumption was 9.29 million b/d. The consumption estimates are based on projections of weak economic growth and record high crude and product prices, the agency said. EIA May 6 projected global oil demand to average 86.61 million b/d in 2008 and 87.95 million b/d in 2009, upward revisions of 30,000 b/d and 60,000 b/d, respectively, from the April report. "Almost all of the growth in 2008 is expected to come from non-OECD countries, led by China, Middle East oil producing countries, and Russia, as well as Brazil and India," the EIA said. The agency is projecting Chinese oil consumption to rise by 400,000 b/d in 2008 to 8 million b/d. European oil consumption growth is expected to offset the declines in the US.

US is not key to the global oil markets Shenk, 2008 (Mark, April 21, Emerging Market Oil Use Exceeds US as Price Rises,
http://www.bloomberg.com/apps/news?pid=20601109&sid=a_YCEx7do3LQ&refer=home, accessed July 11, 2008) China, India, Russia and the Middle East for the first time will consume more crude oil than the U.S., burning 20.67 million barrels a day this year, an increase of 4.4 percent, according to the International Energy Agency in Paris. U.S. demand will contract 2 percent to 20.38 million barrels daily, the IEA says. Economic growth of more than 8 percent in China and India, coupled with increasing car ownership among the countries' combined populations of 2.45 billion people, will more than compensate for falling .U.S. demand. Oil use worldwide will increase 2 percent this year because of growth in emerging markets, the Paris-based IEA says.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

83 R&B (Oil)

No Price Drop – General Fill In (2/2)
Non-OECD demand is set to increase sharply in the next five years. Platts Oilgram News, 2007.
(July 10, 2007 Tuesday, “IEA warns of increasingly tight oil market; Sees oil supply crunch amid speeding demand growth” Lexis Accessed on July 10, 2008) The projected annual 1.9 million b/d or 2.2% growth in world demand over the next five years is driven by strong demand growth in non-OECD countries, particularly in Asia and the Middle East, where demand is seen growing more than three times faster than in OECD countries. OECD demand is expected to rise from 49.6 million b/d this year to 52.1 million b/d in 2012, the increase driven by transportation fuel demand growth in North America. European demand is forecast to grow by just 500,000 b/d over the five years, from 15.4 million b/d to 15.9 million b/d in 2012. Non-OECD demand, however, is projected to grow by 7.1 million b/d over the next five years, from 36.6 million b/d in 2007 to 43.7 million b/d in 2012. Chinese demand is seen gaining by 2.4 million b/d over the period, from 7.6 million b/d in 2007 to 10 million b/d in 2012, while Middle East demand is seen increasing from 6.6 million b/d to 8.2 million b/d, a jump of 1.6 million b/d.

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84 R&B (Oil)

Alternative Incentives don’t reduce Oil Prices
Switch to alternative energy does not create a trend back towards cheap oil- Germany proves and low oil prices would cause oil producers to create new industry, not flood the market
Yedlin, staff writer for The Globe and Mail, 06. [Deborah, “Europe walks the talk on oil use - and so should U.S.” The Globe and Mail, August 29, 2006, Pg. B2. Accessed 7/11/08 from Lexis] Finally, people in Europe walk. A lot. (The added benefit to this, of course, is that obesity on the scale that it exists in North America is virtually unknown.) The net effect is that per capita oil consumption is flat to declining in Western Europe, while it continues to rise in the United States. Thanks to the increased use of alternative fuels, oil consumption in Germany (which has fallen 7 per cent since 1994) is expected to drop a further 14 per cent by 2020. One of the ways all this is accomplished is the level of taxation on the gasoline sales, not just in Europe, but also Japan. It costs almost double the U.S. price for a litre of gasoline in Europe and Japan, and the monies received go toward bolstering public transportation. "Our solution," Mr. Tertzakian says, "is to build bigger freeways instead of looking at other public transportation options because we think the party will go on forever." But it won't. Curbing the U.S. addiction to oil would not only extend the life of a depleting resource and be good for the environment, it would also blunt the power of some oil-rich nations to make trouble for the United States. If oil prices were sitting at $20 (U.S.) a barrel, these autocratic regimes would be forced to develop secondary industries instead of simply relying on the petro dollars for income. It's time to look at long-term solutions that offer both economic and political benefits. A good place to start would be getting America on a reduced-energy diet.

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85 R&B (Oil)

Price Drop doesn’t Crush Renewables
Prices can’t drop far enough because we are very near peak oil- this fear keeps prices high no matter what
Elliott, Economics editor for The Guardian, 08. [Larry, “Special report: $135 and rising ... has cheap oil gone for ever?: Consumers feel the pinch as analysts predict crude may reach $150 a barrel,” The Guardian, May 24, 2008, Pg. 18. Accessed 7/11/08 from Lexis] Economic theory suggests that rising prices encourage rising supplies, but investment in the oil industry is expensive and takes a long time to bear fruit. In the past, oil companies have had their fingers badly burned when prices have crashed and they are wary of over-committing. The International Monetary Fund said the boom has led to higher investment but much of it has been soaked up by shortages of equipment and skilled personnel. "Oil will increasingly come from unconventional sources, because output has declined from peak levels at conventional fields in many countries, and the size of oilfields is getting smaller on average. This does not mean that the world is about to run out of oil, but it suggests that higher oil prices are needed to induce the additional investment required to balance the market over the medium term." Turner said it was worrying that the markets ignored the Saudis' announcement that they would pump an additional 300,000 barrels per day. "Saudi Arabia is struggling to stem a long term reversal in production, and any offer to boost output raised the prospect of a steeper drop from 2009, when the decline in global supplies is expected to accelerate. It is perhaps telling that futures prices have climbed even more quickly than the spot market, underlining the very real fears of peak oil." If the peak oil theories are right, the market frenzy seen this week is likely to return even if prices drop back temporarily when the bubble bursts. "Because the price of oil is particularly vulnerable to global events, it will always be volatile, displaying peaks and troughs like a hospital monitor tracking an irregular heartbeat," said Andrew Simms of the New Economics Foundation. "What's different today is that there is no way back compared to the price hikes of the 1970s. There are no 'swing producers' to fill the gap. Even the more conservative estimates for the global peak of oil production give us little more than a decade before supplies plateau and begin a long decline."

The demand for oil by rising economies means that there is no correlation between oil price and development of alternative energy Meyer and Swartz Writers for the Dow Jones newswire ‘08
Gregory and Spencer, CattleNetwork, “Energy Matters: Saudi Fears Of High Oil Prices Fade With Demand”5/5/08. http://www.cattlenetwork.com/Content.asp?contentid=218898 Accessed: 7/2/08 Still, some leading energy and Middle East experts perceive a Saudi shift towards greater acceptance of high prices amid surging demand from China and other developing economies. Next to these new sources of demand there is diminished concern about high prices creating greater incentives for competing sources of energy. "Many years ago, before the demand side of the equation became so dominant, the view that if prices were lower, alternatives could not survive was accepted," said James Oberwetter, former U.S. ambassador to Saudi Arabia. "But the dawning of these huge new markets has really dimmed the prospect for lower prices."

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86 R&B (Oil)

Turn – Alternatives Increase Energy Prices
Turn- Alternatives raise the price of energy
Maggs, economic editor for National Journal, 06. [John, “The Myth of Energy Independence,” National Journal 5/20/2006, Vol. 38 Issue 20, p57-58. Accessed 7/11/08 from EBSCOhost] Many economists disagree. Oil is a globally traded commodity, they point out, and thus is as fungible as an ounce of gold, or a dollar. An additional barrel of oil produced in Alaska or Oklahoma has the same impact on oil prices in the United States as does a barrel produced in Dubai. If the U.S. could produce an additional million barrels a day, or could provide the same amount in alternative fuels such as ethanol, that would increase the world's supply of oil by about 1 percent. If the United States replaced all imports from Persian Gulf countries (about 2 million barrels a day), it would increase the world's supply by about 2 percent. Here's one energy economist's view: "Energy independence has a kind of simple, popular appeal, but it isn't a practical solution. In fact, it would probably raise prices, because the alternatives [new U.S. crude supplies, ethanol] are more expensive to produce." Who is this contrarian? John Felmy, chief economist for the American Petroleum Institute. Despite what O'Reilly argues, much of the U.S. oil industry is wary of the idea of energy independence, because American companies are heavily invested in producing oil outside the United States.

Turn- Not only does demand in other countries maintain high oil prices, but the development of alternatives in the US would actually increase prices
Maggs, economic editor for National Journal, 06. [John, “The Myth of Energy Independence,” National Journal 5/20/2006, Vol. 38 Issue 20, p57-58. Accessed 7/11/08 from EBSCOhost] Bush and other presidents have said that energy independence will protect America from a cutoff in Middle East oil supplies that would otherwise drive prices sky-high. But the history of supply cutoffs is limited--the 1973 oil embargo lasted only five months. Today, despite threats from anti-American regimes in the region, few Mideast governments could afford to cut off their oil revenue. And that is what they would have to do, since selling oil elsewhere would have the same effect as selling it to the United States. Beyond this, America is less dependent on Middle Eastern oil than people think. Only about 10 percent of U.S. petroleum consumption comes from the Middle East. Canada, Mexico, and other suppliers in the Western Hemisphere supply three times as much. The U.S. Strategic Petroleum Reserve holds enough to replace about two years' worth of Middle East oil imports. And just as replacing oil from the Mideast with U.S. production would raise prices, so would replacing it with alternative sources, at least for the foreseeable future, according to Felmy. Ethanol is commercially viable only because of a federal mandate that it be added to gasoline, and because of a 51 cent per gallon federal subsidy. To discourage imports and fatten farmers' wallets, the U.S. has tariffs on ethanol of about 60 cents a gallon. Fourteen percent of the U.S. corn crop now goes to ethanol. Even at production costs that Felmy estimated at the equivalent of $4 a gallon, America would have to use all of its corn crop to supply the 30 percent of gasoline needs that Bush has cited as a goal.

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87 R&B (Oil)

A2: If you solve, you link
Oil consmuption is increasing too fast to be affected by renewables.

Wald, Staff Writer for the New York Times, 2007
(Matthew, The New York Times, January 28, “The Long Road to Energy Independence.” Lexis 7/11/08) President Bush never used the phrase ''energy independence'' in his State of the Union address last week, and it is just as well. His program for cutting gasoline demand is ambitious in scope, but modest in effect, according to experts. The reason is that the United States has fallen down a very deep well, and it's hard to get out. Last year, the United States imported 60 percent of the oil it consumed. If, as Mr. Bush proposes, we cut gasoline consumption 20 percent by 2017 -- about 2.1 million barrels a day -- then the share of oil imported will fall only by 4 or 5 percentage points. In fact, the government expects the share of imported oil to fall anyway, to less than 56 percent, because of a rise in domestic production, mostly from the Gulf Coast. Domestic production has fallen sharply since the mid-1970s, but the Energy Information Administration, which is part of the Energy Department, expects production to rise to almost six million barrels a day by 2017, up from a little over five million barrels a day now. Mr. Bush is also proposing an increase in fuel-economy standards and an increase in the production of ethanol and other gasoline substitutes, hoping to keep oil consumption relatively steady. Without such intervention, oil consumption is forecast to rise to just over 23 million barrels a day in 2017, from nearly 21 million barrels a day today.

Gonzaga Debate Institute 2008
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88 R&B (Oil)

***Backstopping DA Answers***

Gonzaga Debate Institute 2008
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89 R&B (Oil)

High Oil Prices Inevitable (1/2)
Rising oil prices inevitable- production bottlenecks, lower than expected capacity and demand offsets from India and China Foroohar et al, staff writer for Newsweek magazine, 08. [Rana, “The Coming Energy Wars,” Newsweek, June
9, 2008 pgonline. Accessed 7/11/08 from Lexis] A year ago no one was talking about $200 oil, and now everyone in the markets is, for scary reasons. Oil prices climbed from $10 in 1999 to $95 last year without slowing the surging world economy, in large part because the markets believed the spike was at core driven by rising demand, particularly from India and China, which feeds growth. There was concern over supply, too, but nothing like the tumult prompted by the stranglehold OPEC imposed on the world in the 1970s, at least not until recent months. As the per-barrel price climbed over the last few months, with futures reaching $135 last week, the consensus began shifting to a new more gloomy view: that not only would long-term demand, led by China and India, continue to grow, but that the supply threats, including increasing conflict, falling investment, industry bottlenecks and downward estimates of big field reserves in major oil states--aren't going away any time soon. Now many (though not all) serious people take $200 oil--and the prospect of another '70s-style oil shock--seriously. Goldman Sachs warned that the $200 barrier could be hit within the next six to 24 months.

Global oil consumption on the rise while oil production levels off Roberts, Journalist for National Geographic Magazine, 2008 (Paul, June 26, “World Oil: World oil demand is
surging as supplies approach their limits”, National Geographic Magazine, http://thinkglobe.blogspot.com/2008/06/world-oil-world-oil-demand-is-surging.html, July 11, 2008) The price surge that followed the Iran-Iraq war in the 1980s, for example, eventually unleashed so much new oil that markets were glutted. But for the past few years, despite a sustained rise in price, global conventional oil output has hovered around 85 million barrels a day, which happens to be just where Husseini's calculations suggested output would begin to level off. The change is so stark that the oil industry itself has lost some of its cockiness. Last fall, after the International Energy Agency released a forecast showing global oil demand rising more than a third by 2030, to 116 million barrels a day, several oil-company executives voiced doubts that production could ever keep pace. Speaking to an industry conference in London, Christophe de Margerie, head of the French oil giant Total, flatly declared that the "optimistic case" for maximum daily output was 100 million barrels

Even with declining US oil consumption, world consumption is growing Carretta, Online News Editor, 08 (Justin, FleetOwner, July 10, “Do Lower Oil Prices Mean Lower Diesel
Prices?”, http://fleetowner.com/management/lower_oil_prices_diesel_prices_0710/, 7/11/08) Even though oil consumption in the United States is starting to slow--according to the Wall Street Journal, U.S. drivers are traveling at the lowest rate in five years, and gasoline consumption on the Fourth of July weekend fell 3.3% from last year-- worldwide oil consumption continues to grow, with EIA estimating an extra 900,000 barrels per day (bbl/d) consumed in 2008 and 1.4 million bbl/d in 2009, even with U.S. consumption expected to decline by about 400,000 bbl/d in 2008. At the current time, there simply isn’t enough supply to easily satisfy demand, even with Saudi Arabia planning to raise production from 9.4 million bbl/d in June to 9.7 bbl/d in July.

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90 R&B (Oil)

High Oil Prices Inevitable (2/2)
Oil prices are higher than ever before; conflict and the weak economy will keep them rising Kebede, Policy analyst and freelance journalist, 08
(Rebekah, Reuters UK, "Oil hits record above $147," 7-11-8, http://uk.reuters.com/article/usTopNews/idUKT14048520080711?sp=true, 7-11-8) Oil prices jumped $5 to a record high above $147 a barrel on Friday amid growing worries about threats to supplies from Iran and Nigeria and a strike by Brazilian oil workers next week. Analysts said oil's rally could run further if problems with U.S. mortgage companies Fannie Mae and Freddie Mac feed into the commodities boom by reducing the chances of an interest rate hike by the Federal Reserve. The troubles with the mortgage giants -- which control $5 trillion in debt -- helped pare crude's gains after it hit new highs as dealers focused on U.S. economic turmoil that has already slowed oil consumption in the world's top energy user. U.S. crude settled at $145.08 a barrel, up $3.43, after climbing as high as $147.27 earlier in the day and adding to gains of $5.60 from Thursday. London Brent crude settled at $144.49 a barrel, up $2.46. "I'm seeing profit-taking here after the run-up to a new record, but we are going into a weekend and with all these things being reported on Iran, you wouldn't want to go short," said Daniel Flynn, an analyst at Alaron Trading. In addition, Iraq's Defense Ministry said on Friday that it had no knowledge of Israeli air force drills in its airspace, contrary to a media report carried on the Jerusalem Post website that sparked crude early Friday. An Israeli security source also said the report was wrong. "As martial rumors are denied, participants are reverting their gaze on the deteriorating global economy," said Mike Fitzpatrick, vice president at MF Global in New York. Missile tests this week by Iran, against a backdrop of rising tensions with Israel and the United States, has left the oil markets worried about a potential supply disruption from the world's No. 4 exporter. Iran has threatened to strike back at Tel Aviv and U.S. interests in a key oil shipping route if it is attacked over its nuclear program, which Israel and the West fear is aimed at making weapons. Support also came from supply threats in Nigeria and Brazil. The main militant group in OPEC nation Nigeria's oil-producing region said it was abandoning a cease-fire to protest against a British offer to help tackle lawlessness. Workers at Brazil's Petrobras plan to launch a five-day strike on Monday that would affect all 42 Campos basin offshore platforms, which pump than 80 percent of the nation's 1.8 million bpd of output. Oil prices have risen seven-fold since 2002 amid surging demand from China and other emerging markets, and jumped 50 percent this year alone, battering the economies of consumer nation's already hit hard by the global credit crunch.

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91 R&B (Oil)

Oil Price Swings Now (1/4)
Instability in Oil countries leads to constant price fluctuation The Associated Press, 2008
(The New York Times, “Oil Prices Up $5 a Barrel on Mideast Tensions,” July 11th, http://www.nytimes.com/2008/07/11/business/worldbusiness/11oil.html?scp=7&sq=fuel+prices+high&st=nyt, Accessed on 7/11/08) Oil prices rebounded by more than $5 a barrel Thursday, as another missile launching by Iran stoked worries that escalating political tensions in the Middle East could cut off supplies out of the region. A day after Iran tested a missile capable of reaching Israel, Secretary of State Condoleezza Rice warned the oil-producing nation that the United States will defend its allies. Iran then responded with another missile launch. The mounting hostilities drew buyers back into the jittery energy markets, said John Kilduff, senior vice president of risk management at MF Global LLC. “We fell awfully fast, awfully far,” Mr. Kilduff said, “and these Iranian tensions are putting a higher and higher floor under this market.” After falling by nearly $10 a barrel on Monday and Tuesday, light, sweet crude for August delivery soared $5.60 to $141.65 a barrel on the New York Mercantile Exchange. It was crude’s largest daily leap since June 6, when the July contract jumped by $10.75 a barrel. On Wednesday, oil prices had seesawed before settling a penny higher at $136.05, ending two days of sharp declines that left prices well below last Thursday’s record trading high of $145.85 a barrel. The secretary general of the Organization of the Petroleum Exporting Countries said Thursday that the group will not be able to replace any shortfalls if Iran is attacked and takes its crude supplies off the market. Iran has control over the Strait of Hormuz, a passageway that handles about 40 percent of the world’s tanker traffic. Meanwhile, attacks on Nigerian oil facilities could again disrupt supplies in that oil-rich region. On Thursday, Nigeria’s main militant group vowed to resume attacks because of Britain’s recent pledge to back the government in the conflict there. Attacks by the Movement for the Emancipation of the Niger Delta over the past two years have already slashed the country’s normal daily oil output by a quarter.

Oil prices are unstable because of the Iran crisis, Nigeria, and the US Recession. Ould, Reuters, 2008 (Hamid, May 12, Oil prices to remain unstable for months: OPEC head, accessed July 11, 2008)
Mon May 12, 2008 3:17pm EDTALGIERS (Reuters) - OPEC President Chakib Khelil said on Monday geopolitical factors, speculation and the value of the dollar would continue to affect oil prices for the next months or years. "There is a geopolitical situation that the market expects to continue. You have the Iran crisis, the crisis that may develop with Venezuela, with the possibility of the United States imposing an embargo on Venezuela," he said. "You have also problems in Nigeria," Khelil, who is also Algerian energy and mines minister, told Algerian state television. "You have all those elements plus the recession problem in the United States and the strong fall of dollar, which has had a terrible impact on oil prices," he added. "Therefore, there is speculation and geopolitical crisis. The market does not expect that to go away in the next months or years."

(Reporting by Hamid Ould Ahmed; Editing by Christian Wiessner)

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92 R&B (Oil)

Oil Price Swings Now (2/4)
Oil prices are unstable Moon, Staff Writer, 2008
(Angela, Reuters, “BP says oil may tumble if financial factors removed,” 07-10-08, http://uk.reuters.com/article/UK_SMALLCAPSRPT/idUKSEO33766220080710, accessed 07-11-08) SEOUL (Reuters) - Oil could face a "steep" fall if financial factors are removed from the current market, which gained around 40 percent this year, the chief economist at BP (BP.L: Quote, Profile, Research) said on Thursday. Oil prices have more than doubled from a year ago, driven partly by geopolitical instability from Iran to Nigeria as well as expectations that global supplies will fail to keep pace with unrelenting demand growth in the years ahead. Non-market fundamentals, including financial factors such as the easing of the U.S. dollar against other currencies, have prompted investors to use oil and other commodities as a hedge against the weaker greenback and inflation. "If the financial investors move out of the market, then there could be a rapid fall, a steep fall in prices," Christof Ruehl told Reuters on the sidelines of the London-based company's 2008 Statistical Review of World Energy in Seoul. He declined to give an estimate on the fall. "Financial investors will look at real developments, and they will act upon them," he said, adding that financial factors were not triggering, but accelerating oil price fluctuations. Earlier in June, BP CEO Tony Hayward said oil prices were unstable because markets were not well supplied, and higher taxes in producing countries were discouraging investment in new output. Ruehl also said that inventory was the main factor that would determine oil prices, as there were very few new supplies coming into the market. U.S. light crude for August delivery was around $136 a barrel Thursday, falling nearly $10 from last Thursday's record high of $145.85 a barrel, mostly due to a stronger dollar that has reduced the appeal of commodities for investors.

Oil prices unstable because of Israel conflicts, and geopolitical instability. People’s Daily Online, 2006 (Aug 27, Unstable geopolitics, fluctuation oil prices,
http://english.people.com.cn/200608/25/eng20060825_296839.html) International geopolitical instability is the cause of the hike in oil prices. Of greatest concern to security and stability is the Iranian nuclear program, the Israel-Lebanon conflict and general instability in Africa. The turbulence in Nigeria has led to concerns about supplies of crude oil. People fear that US refineries in the Gulf Area could be hit in a repeat of Hurricane Katrina. Most precarious of all though, is the situation in Iran, the world's second largest supplier of crude oil. The dispute over nuclear energy will only intensify. Many people are still concentrating on the conflict between Israel and Hezbollah. On July 14, just two days after the outbreak of open hostilities, international oil prices reached a record high - US$78.40 per barrel. It is nearly two weeks now since the ceasefire came into effect. Yet the peace is a very fragile one. Even the UN has admitted that the ceasefire agreement between Israel and Lebanon could easily be broken. This would be another test for the international crude oil market.

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Oil Price Swings Now (3/4)
Continual political turmoil will ensure prices will remain high and instable Richter, Los Angeles Times Staff Writer, 2008 (Paul, “Nigerian conflicts tighten oil bottleneck,” Los Angeles
Times, June 29, http://fairuse.100webcustomers.com/itsonlyfair/latimes0361.html, accessed online 7-11-08) The disruptions also signaled the sensitivity of the oil markets to political and security pressures at a time of tight supplies, when the smallest fluctuations can quickly drive up prices. Violence regularly disrupts oil flows from Nigeria, Iraq and Colombia; the threat of conflict also hangs over the output of Venezuela, and Iran, Saudi Arabia and other Persian Gulf states, boosting prices. Nigeria's petroleum infrastructure is threatened by militias motivated by anger that the country's leadership and international oil companies were not sharing the oil wealth with the impoverished residents of the Niger Delta. But though the movement has its origins in political grievances, many experts regard the militias as youthful crime gangs that steal oil, carry out kidnappings and buy weapons in a sophisticated scheme that benefits Nigerian military and civilian leaders as well as warlord commandants. The gangs, whose arms include surface-to-air missiles and bazookas, have learned how to siphon thousands of gallons of crude into barges and send it to the high seas for sale on world spot oil markets. Since 2005, attacks have cut 20% to 30% from the nation's oil output. But recently, the oil conflict has combined with labor strikes and other problems to reduce output by 1 million barrels a day, down to an average 1.8 million barrels a day. The decline in West African production represents a fraction of U.S. consumption, about 21 million barrels a day. But it has a powerful effect on oil markets at a time when output from Mexico and Venezuela is falling, and Iraq's production languishes below prewar levels. "The result of this is a much tighter market, in terms of balance between supply and demand, than you have had for decades," Yergin, the oil expert, testified before Congress last week.

Oil prices permanently high- political instability with Iran means speculation is at an all time high Gorondi, AP Staff Writer, 2008 (Pablo, “Oil sets new record near $147 a barrel,” The Associated Press, July 11)
Oil prices spiked Friday as continued tensions in the Middle East and concerns of renewed violence in Nigeria pushed the price for a barrel of oil to a record near $147. By midday in Europe, light, sweet crude for August delivery jumped $5.25 to $146.90 on the New York Mercantile Exchange. Oil prices had fallen $10 over two days to start the week and as oil rebounded Friday, Dow Jones industrial average futures fell more than 120 points. In London, August Brent crude soared $4.92 to $146.95 a barrel on the ICE Futures exchange after hitting a record $147.25. "There's always a fear premium in pricing. The tensions in Iran and the threat of supply disruption will help support oil prices," said Jeff Brown, managing director of FACTS Global Energy in Singapore. JBC Energy in Vienna, Austria, said the news about Iran, Nigeria, as well as a reported threat of a strike by oil workers in Brazil were "enough to wake the market from its twoday slumber." A day after Iran tested a missile capable of reaching Israel, Secretary of State Condoleezza Rice warned the oil-producing nation that the United States will defend its allies. Iran then responded with another missile launch, drawing buyers back to jittery energy markets. Both the U.S. and Israel have not ruled out a military strike on Iran. Domestically, there was another disappointing report on U.S. stocks. Heating oil futures on Friday rose to a record $4.15 In other Nymex trading, adding more than 11 cents a gallon. The Organization of Petroleum Exporting Countries has warned that it cannot replace the shortfall if Iran is attacked and takes its crude supplies off the market. The fear is that Iran, OPEC's second-largest producer, could block the Strait of Hormuz, a passageway that handles about 40 percent of the world's tanker traffic. Meanwhile, attacks on Nigerian oil facilities could again disrupt supplies in the oil-rich region. Nigeria's main militant group vowed Thursday to resume attacks because of Britain's recent pledge to back the government in the conflict there. Unrest over the past two years have already slashed the country's normal daily oil output by a quarter.

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Oil Price Swings Now (4/4)
Oil prices are horribly unstable right now Energy Saving Trust, 08
(“Producers agree on 'unstable' oil prices,” 6/25, http://www.energysavingtrust.org.uk/resources/daily_news/gas_and_electricity/producers_agree_on_unstable_oil_pr ices, date accessed: 7/11/08 Oil prices close to the $140 (£71) a barrel record are too high, the world's top oil producers and consumers now agree, according to prime minister Gordon Brown. "What we've got here is agreement that the oil price is too high," Mr Brown told journalists on the sidelines of emergency talks in Saudi Arabian port city of Jeddah. "The significance is that the producers are saying this, that the current oil price is detrimental and that it is causing serious damage, that the current price is too high." He also said Britain and other oil consumers should open their markets to new investment from oil producers to move from the old conflict of interest between producers and consumers Saudi Arabia increased output in June and pledged a second increase in July to 9.7 million barrels per day. Mr Brown also said he will open the UK energy industry to investment from oil producing nations as a way of keeping a lid on crude prices and paying for policies to clean up the environment. He said the UK was in talks with Abu Dhabi Investment Authority about new investments and with Qatar government about a joint energy fund. Saudi Arabia had also agreed to work on £1 billion carbon capture and storage facilities, he said. The UK government was close to approving an £800 million offshore wind farm, which Norway's state-owned StatoilHydro plans to build, he added, signalling the "new deal" with oil-producing nations. .

Due to multiple factors, oil prices will remain unstable Ahmed, Reuters Reporter, 08
(Hamid Ould, Reuters, “Oil prices to remain unstable for months: OPEC head,” 5/12, http://www.reuters.com/article/businessNews/idUSAHM26559720080512, date accessed: 7/11/08) ALGIERS (Reuters) - OPEC President Chakib Khelil said on Monday geopolitical factors, speculation and the value of the dollar would continue to affect oil prices for the next months or years. "There is a geopolitical situation that the market expects to continue. You have the Iran crisis, the crisis that may develop with Venezuela, with the possibility of the United States imposing an embargo on Venezuela," he said. "You have also problems in Nigeria," Khelil, who is also Algerian energy and mines minister, told Algerian state television. "You have all those elements plus the recession problem in the United States and the strong fall of dollar, which has had a terrible impact on oil prices," he added. "Therefore, there is speculation and geopolitical crisis. The market does not expect that to go away in the next months or years."

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95 R&B (Oil)

No Backstopping – Production Bottlenecks (1/4)
Oil prices are unable to drop due to infrastructure issues in oil producing countries Fell, Economic Editor, 08 (Charlie, Personal Finance/The Irish Times, May 24, “Demand Puts Price of Oil over a
Barrel”, http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do? docLinkInd=true&risb=21_T4146171603&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=2 9_T4146171606&cisb=22_T4146171605&treeMax=true&treeWidth=0&csi=142626&docNo=20, 7/11/08) Private consumption has responded to the buoyant economy and car sales have been growing at double-digit rates. Demand for air travel is also increasing rapidly. The end result is that Russia has accounted for 6 per cent of the increase in global oil demand since 2005. The acceleration in domestic oil consumption in both the Persian Gulf and Russia has arrived just as their ability to meet growing demand elsewhere is deteriorating. Both Kuwait and Saudi Arabia have struggled to raise production in recent years and strong internal demand calls their ability to boost future export capacity into question. Russia, which had gravitated to the position of swing producer in recent years, saw first-quarter supply drop year-on-year for the first time this decade and the outlook is not encouraging. A heavy tax burden at 80 per cent of all profits above $27 a barrel combined with market-unfriendly government policies and infrastructural constraints have discouraged investment and supply is now price inelastic. The recent surge in oil prices appears to defy economic logic, given the demand destruction in the developed world, causing many to cite investor speculation as the primary cause. However, the economic fundamentals in the oil-producing countries themselves, which have gone largely unnoticed, appear to justify the continuing bull market. Strong internal demand among oil producers, aided by price subsidies in the Persian Gulf and combined with an inadequate supply response that is hampered by government policy in Russia, means that oil producers are less able to meet the needs of the rest of the world. High prices are here to stay.

Even if the market is flooded, refineries don’t have the ability to keep up with production > and building infrastructure would take 5 years Karey, et. Al, 08 (Gerald, Platts Oilgram Price Report, May 7, “US EIA sees higher prices, weaker demand;
Hikes 2008 crude price forecast to over $109.50/g”, Pg. 1 Vol 86 No. 88) Oil refineries can't keep pace with demand No new refinery has been built in the United States in the past 32 years. Capacity at existing refineries has increased about 1% a year, failing to keep pace with demand, says Aaron Brady, a Cambridge Energy Research Associates analyst. Until recently, the tight supplies and surging demand allowed refiners, such as major oil companies, to charge a premium of about $9 a barrel of oil, or 21 cents per gallon of gasoline, Brady says. This year, however, high crude oil prices and lower U.S. demand have forced refiners to live with razor-thin margins. That means if crude prices fall, some of the drop could be offset by higher profits for refiners. The good news: Refiners worldwide are sharply expanding capacity. Oil consortium Motiva plans to double capacity at its Port Arthur, Texas, facility by 2010, creating the largest U.S. refinery. Most of the new equipment is designed to process heavy crude oil, which is more abundant and cheaper than light, sweet crude but more expensive to refine. The bad news: Refining makes up just 10% of the price of gas, so boosting capacity won't help much. "Adding refining capacity is not going to have a significant impact on the price of gasoline," says Kevin Lindemer of financial analysts Global Insight. And much of that refining infrastructure will take three to five years to build, says analyst Robert Linden of Pace Global Energy Services.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

96 R&B (Oil)

No Backstopping – Production Bottlenecks (2/4)
The biggest oil producing countries are having trouble increasing output Mouawad, Journalist for the New York Times, 2008
(Jad, New York Times, “Amid High Oil Prices, Danger Signs in Production,” April 28th, http://www.nytimes.com/2008/04/28/business/worldbusiness/28oil-WEB.html?pagewanted=1&_r=1&hp Accessed on 7/11/08) A key reason that supply is not rising to meet demand is that producers outside of the OPEC cartel — countries like Russia, Mexico and Norway — have been showing troubling signs of sluggishness. Unlike the Organization of the Petroleum Exporting Countries, whose explicit goal is to regulate supply to keep prices up, the other countries are the free traders of the international market, with every incentive to produce flat-out at a time of high prices. But for a variety of reasons, like sharply higher drilling costs and nationalistic policies that restrict foreign investments, these countries are finding it difficult, if not impossible, to increase output. They seem stuck at about 50 million barrels of oil a day, or 60 percent of the world’s oil supplies, with few prospects for growth. Countries that are not members of OPEC have been the main source of production growth in the last three decades, as new fields were discovered in Alaska, the North Sea or West Africa. After the collapse of the Soviet Union, new opportunities emerged in Russia and the Caspian Sea. Analysts at Barclays Capital said last week that non-OPEC supplies were “seemingly dead in the water.” Goldman Sachs raised similar concerns last month, saying that growth in non-OPEC supplies “can no longer be taken for granted.”

Bottlenecks in supply will prevent flooding. National Post's Financial Post, 2007
(& FP Investing (Canada), May 26, “OPEC official sees no need For more crude, blames 'bottleneck' for price hikes” Lexis 7/11/08) Crude oil supply does not need to increase because rising prices reflect bottlenecks in gasoline supply, OPEC's head of research said yesterday, despite calls from consumers for more crude. "I think that pumping more crude into the market is not needed," Hasan Qabazard, head of OPEC's research division, told Reuters. "We have a bottleneck in the supply chain and the bottleneck is the refineries producing gasoline for the summer" that are not at full production. He said prices should ease as refineries complete pre-summer maintenance. The comments came a day after Brent crude rose to a nine-month high above $71US a barrel and on the heels of calls from the International Energy Agency, which represents consumer countries, for OPEC to raise output.

Increasing oil production is costly because demand continually increases the need for expansions. Paavo Suni, Researcher ETLA, and Anthony de Carvalho, 2006 (“Oil Prices Have Risen Permanently, But
Remain Unstable,” http://www.etla.fi/files/1490_FES_05_4_oil_prices_have_risen_permanently.pdf, March 24, accessed online 7-11-08) Indeed, a major problem plaguing the energy sector is the rapid pace of demand growth, which, if it is to be met, requires massive capacity expansions, since crude oil production, among others, is already running near full capacity. It is difficult to imagine how demand growth could slow significantly, especially since transportation is so dependent on fossil raw materials. It is also difficult and expensive to switch quickly to alternative energy sources. The problem with fossil fuels is that raising oil production is difficult and costly and that they emit substantial carbon dioxide when burned. Global warming has triggered efforts to contain growth in carbon dioxide emissions. Coal, natural gas, nuclear power, and biomass energy have seen their shares in total energy consumption rise since the oil crises of the 1970s.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

97 R&B (Oil)

No Backstopping – Production Bottlenecks (3/4)
A severe bottleneck in West Africa prevent OPEC from flooding the markets Richter, Staff Writer, 2008
(Paul, Los Angeles Times, “Nigerian conflicts oil bottleneck,” 06-29-08, http://www.latimes.com/news/printedition/front/la-fg-nigeria29-2008jun29,0,7656385.story, acessed 07-11-08) WASHINGTON — Amid surging demand for oil, a severe bottleneck has developed in production of high-quality West African crude, alarming world leaders and demonstrating a new vulnerability in fragile oil markets. With production declining elsewhere, consumer nations had been looking hopefully toward Nigeria. But rebels who have waged an increasingly bold campaign in the oil-rich Niger Delta have slashed the country's output in their most recent attacks. The deepening disruptions in Nigeria represent a "huge hole in world oil markets," said Daniel Yergin, a top oil expert and chairman of the Cambridge Energy Research Associates consulting firm, who warns of an increasingly crisis-prone oil economy. A nighttime raid by Nigerian militiamen in speedboats in mid-June forced the shutdown of a Shell offshore platform and shocked the industry, demonstrating that even production facilities far from land are no longer safe. That attack, among others, has cast doubt on whether oil companies will continue investing billions of dollars in a region plagued by violence and corruption. And it has raised questions about whether the Bush administration has done enough to pressure Nigeria's government to find a political solution to the unrest. The disruptions also signaled the sensitivity of the oil markets to political and security pressures at a time of tight supplies, when the smallest fluctuations can quickly drive up prices. Violence regularly disrupts oil flows from Nigeria, Iraq and Colombia; the threat of conflict also hangs over the output of Venezuela, and Iran, Saudi Arabia and other Persian Gulf states, boosting prices. Nigeria's petroleum infrastructure is threatened by militias motivated by anger that the country's leadership and international oil companies were not sharing the oil wealth with the impoverished residents of the Niger Delta. But though the movement has its origins in political grievances, many experts regard the militias as youthful crime gangs that steal oil, carry out kidnappings and buy weapons in a sophisticated scheme that benefits Nigerian military and civilian leaders as well as warlord commandants. The gangs, whose arms include surface-to-air missiles and bazookas, have learned how to siphon thousands of gallons of crude into barges and send it to the high seas for sale on world spot oil markets. Since 2005, attacks have cut 20% to 30% from the nation's oil output. But recently, the oil conflict has combined with labor strikes and other problems to reduce output by 1 million barrels a day, down to an average 1.8 million barrels a day. The decline in West African production represents a fraction of U.S. consumption, about 21 million barrels a day. But it has a powerful effect on oil markets at a time when output from Mexico and Venezuela is falling, and Iraq's production languishes below prewar levels. "The result of this is a much tighter market, in terms of balance between supply and demand, than you have had for decades," Yergin, the oil expert, testified before Congress last week. The effects of the conflict in Nigeria were clear last weekend, as the Saudis announced at an international oil conference in Jidda that they would increase output. Ordinarily, that might have set off a slide in prices; instead, they rose in part because of concern over the rebel raid on Shell's Bonga offshore platform.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

98 R&B (Oil)

No Backstopping – Production Bottlenecks (4/4)
Bottlenecks in crucial oil markets make production increases impossible Richter, Los Angeles Times Staff Writer, 2008 (Paul, “Nigerian conflicts tighten oil bottleneck,” Los Angeles
Times, June 29, http://fairuse.100webcustomers.com/itsonlyfair/latimes0361.html, accessed online 7-11-08) Amid surging demand for oil, a severe bottleneck has developed in production of high-quality West African crude, alarming world leaders and demonstrating a new vulnerability in fragile oil markets. With production declining elsewhere, consumer nations had been looking hopefully toward Nigeria. But rebels who have waged an increasingly bold campaign in the oil-rich Niger Delta have slashed the country's output in their most recent attacks. The deepening disruptions in Nigeria represent a "huge hole in world oil markets," said Daniel Yergin, a top oil expert and chairman of the Cambridge Energy Research Associates consulting firm, who warns of an increasingly crisis-prone oil economy. A nighttime raid by Nigerian militiamen in speedboats in mid-June forced the shutdown of a Shell offshore platform and shocked the industry, demonstrating that even production facilities far from land are no longer safe. That attack, among others, has cast doubt on whether oil companies will continue investing billions of dollars in a region plagued by violence and corruption. And it has raised questions about whether the Bush administration has done enough to pressure Nigeria's government to find a political solution to the unrest.

Refinery bottlenecks prevent a dropping in price Ouliaris et al ,Senior Economist at the Research Department of the IMF ‘05
Sam, International Monetary Fund, “The Structure of the Oil Market and Causes of High Prices”, 9/21/05 http://www.imf.org/external/np/pp/eng/2005/092105o.htm Accessed: 7/11/08 Although many factors have contributed to higher crude oil prices, a combination of strong (and somewhat unexpected) global demand for oil since 2003 and expectations of continuing future tightness is the major cause. These demand/supply imbalances reflect robust global activity, an apparent shift in the demand for oil by China2 and other emerging economies, and limited investment in the oil sector in the past two decades. Naturally, given the tightness in the oil market and uncertainties about demand and supply, factors such as geopolitical developments, fears of potential supply disruptions, and speculation have also all played a part in price movements, but largely through their impact on expectations regarding future fundamentals. Refinery bottlenecks have put additional pressures on petroleum product prices—as demonstrated by the significant rise in gasoline prices following the 10 percent reduction in U.S. refinery capacity caused by Hurricane Katrina.3

Production bottlenecks prevent OPEC from flooding the market
Financial Post, 07. [“OPEC official sees no need For more crude, blames 'bottleneck' for price hikes,” Financial Post, May 26, 2007 Saturday, Pg. FP8. Accessed 7/11/08 from Lexis.] Crude oil supply does not need to increase because rising prices reflect bottlenecks in gasoline supply, OPEC's head of research said yesterday, despite calls from consumers for more crude. "I think that pumping more crude into the market is not needed," Hasan Qabazard, head of OPEC's research division, told Reuters. "We have a bottleneck in the supply chain and the bottleneck is the refineries producing gasoline for the summer" that are not at full production. He said prices should ease as refineries complete pre-summer maintenance. The comments came a day after Brent crude rose to a ninemonth high above $71US a barrel and on the heels of calls from the International Energy Agency, which represents consumer countries, for OPEC to raise output.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

99 R&B (Oil)

A2: Backstopping – Oil Prices will stay high
Oil prices, even if production increased, would still remain high Gulf Daily News, 08
(“More crude 'won't ease prices woes',” 7/2, http://www.gulf-daily-news.com/Story.asp? Article=221889&Sn=BUSI&IssueID=31104, 7/6/08) KUWAIT CITY: Oil prices would not ease even if production were raised because speculation and taxes are behind the soaring market, Saudi King Abdullah said yesterday. "People who think that oil prices will go down once production is raised are wrong because there are indications the prices will remain high," he said and added that speculators and duties on fuel in some countries were among reasons for the high prices. "Starting from the establishment of Opec, we have always been keen on keeping the price of oil at a normal level to reduce the burden on both the producers and consumers... We have nothing to do with the rising prices of oil in the world," he said.

Supply and demand curves and backstopping threats no longer apply to oil Mouawad, Journalist for the New York Times, 2008
(Jad, New York Times, “Amid High Oil Prices, Danger Signs in Production,” April 28th, http://www.nytimes.com/2008/04/28/business/worldbusiness/28oil-WEB.html?pagewanted=1&_r=1&hp Accessed on 7/11/08) As oil prices soared to record levels in recent years, basic economics suggested that consumption would fall and supply would rise as producers opened the taps to pump more. But as prices flirt with $120 a barrel, many energy specialists are becoming worried that neither seems to be happening. Higher prices have done little to attract new production or to suppress global demand, and the resulting mismatch has sent oil prices spiraling upward. “According to normal economic theory, and the history of oil, rising prices have two major effects,” said Fatih Birol, the chief economist at the International Energy Agency, which advises industrialized countries. “They reduce demand and they induce oil supplies. Not this time.”

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

100 R&B (Oil)

TURN: OPEC will cut production and increase prices
Switches to alternative energy will send oil prices through the roof. Blas, Commodities Correspondent, 07
(Javier, Financial Times, “Drive on biofuels risks oil price surge,” 6/5, http://www.ft.com/cms/s/0/aeb9a650-136e11dc-9866-000b5df10621.html, date accessed: 7/11/08) Opec on Tuesday warned western countries that their efforts to develop biofuels as an alternative energy source to combat climate change risked driving the price of oil “through the roof”. Abdalla ElBadri, secretary-general of the Organisation of the Petroleum Exporting Countries, said the powerful cartel was considering cutting its investment in new oil production in response to moves by the developed world to use more biofuels. The warning from Opec, which controls about 40 per cent of global oil production, comes as the group of eight leading industrialised nations meets on Wednesday with climate change at the top of its agenda. The US and Europe want to use biofuels to combat global warming and to strengthen energy security. Opec has previously expressed scepticism about alternative energy but Mr El-Badri’s comments mark the first clear threat that the cartel might act to safeguard its interests in the face of a shift towards biofuels. “They are really concerned,” said Julian Lee of the Centre for Global Energy Studies in London. “Opec will continue investing, but with biofuels on the horizon, they may not invest enough.”

Flooding the market with oil actually drives up prices Watson and Jones, Watson-Author of “Order out of Chaos”, Jones directs ‘Martial Law, 9-11: Rise of the Police State’. ‘05
Paul Joseph & Alex. Prison Planet. “The Myth of Peak Oil” October 12 2005. http://www.prisonplanet.com/archives/peak_oil/index.htm Accessed: 7/1/08 It seems that every time there is some kind of energy crisis, OPEC INCREASES production. The remarkable thing about this is that they always state that they are doing it to ease prices, yet prices always shoot up because they promulgate the myth that they are putting some of their last reserves into the market. Analysts seem confused and always state that they don't believe upping production will cut prices.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

101 R&B (Oil)

A2: Renewables increase Oil capacity
OPEC spare capacity will remain low even with increases in renewable energies. Platts Oilgram News, 2007.
(July 10, 2007 Tuesday, “IEA warns of increasingly tight oil market; Sees oil supply crunch amid speeding demand growth” Lexis Accessed on July 10, 2008) Demand for OPEC crude plus inventory changes is seen rising from 31.3 million b/d in 2007 to 36.18 million b/d in 2012, an increase of 4.88 million b/d. "OPEC spare capacity, which has steadily recovered from minimal levels at the end of 2004 to almost 3 million b/d at mid-2007, remains relatively constrained through to 2009, but declines sharply thereafter," the IEA said, adding: "These effects could be magnified if the effective level of spare capacity remains close to its historical 1 million b/d below nominal levels." But the IEA said that while recent history tended to justify a "conservative approach" when calculating OPEC's "usable" spare capacity, "there is the potential that over time some of the constraints on this inaccessible portion could change?lifting the available reserve." Citing a combination of a stronger demand outlook, project slippage and geopolitical problems, the IEA said it had revised its projection of spare capacity within the OPEC cartel downward by 2 million b/d in 2009. "Despite an increase in biofuels production and a bunching of supply projects over the next few years, OPEC spare capacity is expected to remain relatively constrained before 2009 when slowing upstream capacity growth and accelerating non-OECD demand once more pull it down to uncomfortably low levels," it said. World oil demand is forecast to grow by 9.69 million b/d between 2007, when global demand is forecast at 86.13 million b/d, and 2012, when demand is to average 95.82 million b/d. Between now and 2011, demand is forecast to grow by 7.41 million b/d?110,000 b/d more than the 7.3 million b/d projected in the IEA's February 2007 update to its 2006 medium-term report.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

102 R&B (Oil)

OPEC can’t flood the market – No spare capacity (1/7)
OPEC doesn’t have the ability or capacity to flood the market The Herald, 08
(“Oil crisis is now worse than in the 1970s, http://www.theherald.co.uk/news/news/display.var.2357437.0.Oil_crisis_is_now_worse_than_in_the_1970s_say s_Brown.php, 6/23, date accessed: 7/10/08) Alan Duncan, Shadow Business Secretary and a former oil trader himself, said it was "total fantasy" for the PM to imagine there was much Opec, the oil producers' cartel, could do about rising oil prices. "The idea that Opec can just go like that and flood the market with oil and bring the price down just shows that Gordon Brown does not understand global markets," said Mr Duncan. Vince Cable for the Liberal Democrats made a similar point, saying the PM's trip was "either empty-gesture politics or an act of self-delusion" while his leader Nick Clegg insisted: "It's slightly humiliating to see the Prime Minister fly off at taxpayers' expense to Jeddah to announce some gimmick where he hopes Opec will fund wind farms in the UK. "He's living in cloud cuckoo land if he thinks that's a sustainable solution to the crisis."

OPEC’s ability to flood the markets is a MYTH—even the Saudi reserves are dry: OPEC HAS NO INFLUENCE OVER OIL PRICES Sodhi, Economist at the CIS, 2008
(Gaurav, The Center for Independent Studies, “The Myth of OPEC”, June 24th, http://www.cis.org.au/executive_highlights/EH2008/eh63608.html, Date accessed: July 11, 2008) 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. There are two reasons for this. Member countries of course have a financial incentive to pump more at higher prices: Saudi Arabia alone earns more than a billion dollars a day in oil revenue. For most OPEC countries, oil is their main source of revenue and if there is one thing governments like, its revenue. But there is a more important reason. OPECs members aren’t stable democratic countries in which petroleum is just another industry. They are mostly authoritarian states that use oil as a means of sustaining political power. Oil money is a way of buying support from key parts of society and financing a security apparatus to deal with enemies. Oil creates the revenues that enable many OPEC regimes to continue to stay in power. By allowing countries to both buy authority and enforce it, oil strengthens regimes that would otherwise be very wobbly. Nothing would be more destabilizing for the Saudi monarchy or the Iranian theocracy than a fall in oil revenues. Would Hugo Chavez survive in Venezuela without using cheap oil to buy off allies? Governments in Libya, Nigeria and Angola would similarly all be in perilous political positions without the benefit of oil money. Far from being an economic boogey man, the truth about OPEC is that it is a largely powerless organisation that sustains its own existence with a myth, a myth that governments in the West are complicit in spreading. Like a peacock that impresses with a great show of colour and noise, OPEC is really just a big bird that can’t fly.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

103 R&B (Oil)

OPEC can’t flood the market – No spare capacity (2/7)
OPEC can not flood market with cheap oil. Gaurav Sodhi, Australian finical review, 08
(The Myth of OPEC, June 24 08, http://www.cis.org.au/executive_highlights/, accesed 7-11-08) OPEC has long been considered an economic boogey man terrorizing economies all over the world. When politicians fret that oil prices are rising too high too fast, it is OPEC that they run to for relief. American, European and now Australian leaders have all pleaded publicly for OPEC to increase production. So why hasn’t OPEC acted? How can they get away with holding back supply? OPEC is famously secretive about output and its reserve positions for good reason; it doest want the truth to slip that it has no sway in oil markets. It’s a safe bet that OPEC is pumping as much oil as it can. OPEC is a cartel, not a monopoly. There is an important difference. If OPEC were a single country with a dominant share of global oil output, it would be an international menace that could set the global price of oil single handedly. But it is actually just a loose alliance of 12 diverse oil producing countries that tries to influence prices by controlling output.

OPEC doesn’t have enough spare capacity to flood the market Karey, et. Al, 08 (Gerald, Platts Oilgram Price Report, May 7, “US EIA sees higher prices, weaker demand;
Hikes 2008 crude price forecast to over $109.50/g”, Pg. 1 Vol 86 No. 88) Production from OPEC's 13 members fell 530,000 b/d to 31.78 million b/d in April, led by sharp declines from Nigeria and Iraq, EIA said. Nigeria produced 1.85 million b/d of crude last month, down 250,000 b/d from March. The country was hit by union strikes and sabotage from rebel groups. Iraqi production fell 200,000 b/d to 2.1 million b/d, while output from OPEC kingpin Saudi Arabia fell 100,000 b/d to 9.1 million b/d. Small increases from Algeria and Ecuador were more than offset by the declines from larger producers. Non-OPEC supply is expected to grow by 600,000 b/d in 2008, essentially unchanged from the previous month's projections, the agency said. "Upward revisions in Africa and the United States offset lower expectations for growth in Russia and the North Sea, Brazil, Azerbaijan, and Sudan are expected to account for most of the increases in production in 2008, while the United Kingdom, Mexico, and Norway are among countries expected to experience declines," EIA said. "Most of the non-OPEC supply growth in 2008 is expected in the second half of the year." But EIA cautioned: "Net production increases could be less than the current forecast." OECD stocks were expected to end 2008 at 2.56 billion barrels, a downward revision of 48 million barrels from April's forecast. Stocks ended the first quarter at 2.54 billion barrels, 22 million barrels above the previous five-year average level. OECD stocks, however, fell a seasonal 300,000 b/d in the first quarter, about 100,000 b/d less than the average during this time.

OPEC is near full capacity, doesn’t have the ability to flood the market Mouwad, 2004 (John, September 13, “OPEC Finds Few Options to Put a Lid on Oil Prices”, New York Times, http://www.nytimes.com/2004/09/13/business/worldbusiness/13oil.html
With crude oil setting a price record almost daily in August, the cartel tried to persuade the markets that it was working overtime to step up supply. But with most of its 11 members already pumping at full capacity, the promise had a hollow ring; traders shrugged, and crude prices climbed to within pennies of $50 a barrel in New York before slipping back into the mid-$40's. Though it has a third of the world's oil production, half of oil exports and three-quarters of known reserves, OPEC is finding that its ability to influence prices has largely been exhausted, at least when it comes to holding them down. With most members producing all the oil they can, the oil ministers have few options to consider when they meet in Vienna.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

104 R&B (Oil)

OPEC can’t flood the market – No spare capacity (3/7)
OPEC bluffs they don’t have the oil to flood the markets let alone supply the world for very much longer Lazarus 05 (David, http://peakoil.blogspot.com/2005/05/opec-still-sings-same-tune.html May 5th, 7-11-08)
In fact, we think we're providing you more than enough oil, so we're not going to increase production even though the United States, the world's largest oil consumer, is entering its peak driving season. "We believe there is 2 million barrels per day of overproduction in the market," the president of the Organization of the Petroleum Exporting Countries, Sheikh Ahmed Fahd al-Sabah of Kuwait, was quoted as saying this week. Added Iran's oil minister, Bijan Namdar Zangeneh: "The market situation is good." In reality, said David Goodstein, a physics professor at the California Institute of Technology and author of "Out of Gas: The End of the Age of Oil," we're nowhere near a good market situation. "There's very little excess capacity," he said. "Everyone is pretty much maxed out in terms of production." Yet that's not the song OPEC has sung year after year. In November, after oil prices topped $50 per barrel for the first time, Iran's OPEC governor, Hossein Kazempour Ardebili, said the organization should slash
production because there was more than enough crude on hand. "The market is currently oversupplied by 2 million barrels a day," he said, using the same questionable figure trotted out this week. Earlier, in April 2003, OPEC was fretting because oil was trading near $22 per barrel, the lower end of the organization's preferred trading range (it was more than double this price at $52 on Tuesday). OPEC officials urged cutbacks in production. "The market is facing a surplus today, not a shortage," the organization's then-president, Abdullah bin Hamad al-Attiyah, said at the time. Prior to that, in December 2002, then-OPEC General Secretary Alvaro Silva Calderon said the organization may need to reduce production because, well, there was too much oil around."The market is oversupplied at the present time," he said. Nearly two years earlier, in January 2001, the Saudi oil minister, Ali Naimi, said production would need to be throttled back because -- you guessed it -- too much crude was flooding a thirsty world. "We think the market is oversupplied," he said. "We are here to steady the market." Before that, in December 2000, President-elect George W. Bush was calling on OPEC to "open the spigots" and bring down oil prices. Then-OPEC President Ali Rodriguez of Venezuela replied that there was no need to do this because, yup, there was plenty of oil to go around. "At the moment, there is an oversupply of oil," he said. And so on and so on. I wrote last month about peak oil, the inevitable moment when global oil production hits its peak and, from that point on, reserves are on an ever-

dwindling downward spiral. Peak oil means prices will push higher and higher in the face of surging demand. This in turn will have a catastrophic impact on oil-addicted economies worldwide and, according to some prognosticators, will lead to wars over remaining supplies. Despite OPEC's persistent and almost laughable declarations that the planet is burdened with a glut of oil, many analysts say we'll reach peak oil at some point during the next decade (if we haven't already). Oil prices -- and, in turn, the price of virtually everything else -- will continue to rise until world economies hit the breaking point."We're playing with the future of our civilization," said Caltech's Goodstein. "We could soon find ourselves without oil or anything to substitute for oil." He says OPEC keeps going out of its way to create an illusion of excess capacity as a means of deterring investment in alternative energy sources. "If they can keep people believing they can flood the market with cheap oil anytime they want, no one will pursue alternatives," Goodstein said. "But it's just a myth. Supplies are very tight." Yet each year that passes without a serious commitment to ameliorating this situation is another that pads the pockets of
OPEC and other oil producers at the expense of, well, all of humanity. "Every year we waste is another really important year lost," said Matthew Simmons, chief exec and chairman of Houston's Simmons & Co. International, the world's largest investment bank focusing on the energy business. He says we may have already reached peak oil and should be aggressively working to prepare for the unavoidable consequences. "Solar and nuclear and wind are all very important, but they're not the answer," Simmons said. "None of them will be able to replace oil." Basically, he doesn't know what the answer to our energy dilemma may be. He just knows that some new discovery or technology will almost certainly come our way -- as long as we manage our resources wisely until it gets here. That means investing in alternative fuels like solar and nuclear power as a stopgap until that miraculous new energy source arrives. It also means promoting conservation and efficiency in both industry and daily life to get the most out of our waning oil supply. "We need to do everything at once so we have the ability to fail at one or two things along the

way," Simmons said. "The most important thing is that we need to buy ourselves some time." And time, like oil, is running out.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

105 R&B (Oil)

OPEC can’t flood the market – No spare capacity (4/7)
OPEC cant flood the market, low inventories are keeping prices high Washington Post ‘08
“OPEC Says Members Wont Pump More Oil” 4/6/08 http://www.washingtonpost.com/wpdyn/content/article/2008/03/05/AR2008030500500.html Accessed: 7/11/08 OPEC's decision and Naimi's comments provided new fuel for the debate over the level of world oil inventories. Over the past year, OPEC has achieved its goal of shrinking world inventories from 120 million barrels above the five-year average to slightly below the five-year average, Verrastro said. But with much of the inventories in government strategic stockpiles, and with oil demand growing rapidly in the Middle East and China, many analysts think that OPEC's position might leave companies short of oil in a weather or political crisis and that low inventories might be propping up prices. OPEC blames hedge funds and speculators for high prices. In the past year, the price for a basket of different grades of OPEC crude has increased to $96.78 a barrel, from $58.59, according to the OPEC Web site. "They see speculation in the market, I see a decline in global inventories," Energy Secretary Samuel W. Bodman said in an interview with Bloomberg Television yesterday. White House press secretary Dana Perino said President Bush "would have liked OPEC to have made a different decision. He is disappointed that they decided not to increase production." The Energy Information Administration reported this week that the average retail price for home heating oil in the United States reached a record $3.55 a gallon, up $1.08 in the past year.

Impossible for OPEC to flood the market – they don’t have enough oil Washington Post ‘08
“OPEC Says Members Wont Pump More Oil” 4/6/08 http://www.washingtonpost.com/wpdyn/content/article/2008/03/05/AR2008030500500.html Accessed: 7/11/08 Despite a pledge by OPEC ministers to increase oil production, don't expect much of a break on oil prices. With crude oil prices hitting a record $56 a barrel Wednesday, OPEC ministers meeting in Iran have been grappling with a problem they haven’t confronted in the cartel’s 45-year history. In the past, OPEC tried to cool overheated prices by pumping more when supplies got too tight. But most OPEC producers say they’re already pumping as fast as they can. And despite the high cost of a barrel of crude, world demand shows no signs of slowing. To help stop the surge in prices, OPEC ministers agreed to pump an extra half million barrels of oil a day beginning April 1. OPEC said it would consider pumping more later if the extra oil doesn't push prices lower. But even before the decision was announced, some ministers had openly expressed doubts that the move will do any good, saying they’ve run out of options in trying to rein in the price of crude. Global oil demand has taken up most of the slack in extra OPEC capacity. Consumption is now believed by many analysts to be pressing up against the limits of what the world can produce. Saudi Arabia is the only country believed to have any surplus production left, and even then the Saudis are pumping close to 90 percent of capacity, according to the U.S. Department of Energy. "There is not much we can do,” Algerian Oil Minister Chakib Khelil told reporters Tuesday in Isfahan, Iran, the site of Wednesday’s meeting.

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106 R&B (Oil)

OPEC can’t flood the market – No spare capacity (5/7)
Political instability in OPEC nations leave spare capacity at a bare minimum Reuters, 2008 (“OPEC's Ability to Tame Oil Prices Is Limited,” CNBC News, Jan 9,
http://www.cnbc.com/id/22570967/, accessed online 7-11-08) In 2004, when oil prices hit then-record highs as Chinese demand surged and stretched producers, OPEC members committed to expanding their production potential. They have been building capacity up, but due to lower than expected supply from producers outside the group, it has been eaten up by growing global demand, said Paul Horsnell, analyst at Barclays Capital. Political turmoil in some OPEC nations has crimped the group's reserve production in recent years. Around 15 percent of Nigeria's installed oil output capacity of around 3 million bpd is shut down because of political violence in the country's volatile Delta region. Insurgency and insecurity in Iraq, holder of the world's third-largest oil reserves, have prevented the country from revamping its industry and reaching ambitious production targets. And Venezuela, in the late 1990s an OPEC member that pumped far beyond agreed levels, has lost over 500,000 bpd of output that it never recovered after a strike that crippled the oil industry in 2003. While some analysts still ascribe a small amount of spare capacity to the country, others doubt that it would hold oil back with the price at $100.

OPEC doesn’t have spare capacity. Platts Oilgram News, 2007.
(July 10, 2007 Tuesday, “IEA warns of increasingly tight oil market; Sees oil supply crunch amid speeding demand growth” Lexis Accessed on July 10, 2008) The International Energy Agency July 9 delivered a stark new warning that the world faces an oil supply crunch in the next few years amid accelerating demand growth, limited gains in non-OPEC supply and "minimal" spare capacity within OPEC. "It is possible that the supply crunch could be deferred?but not by much," the agency said in its Medium-Term Oil Market Report. The IEA said its demand forecast, derived from OECD and International Monetary Fund projections, assumed average annual global economic growth of 4.5%. But, it added, even if global growth turns out to be lower than forecast, this will not dramatically alter the projections. Global oil demand is now forecast to grow at an annual rate of 2.2% between 2007 and 2012, accelerating beyond the 2% annual growth rate for the 2006-2011 period projected by the IEA in February. The agency said in the medium-term report that it saw world oil markets becoming increasingly tight beyond 2010, "with OPEC spare capacity declining to minimal levels by 2012." The report projects OPEC spare capacity could be as low as 1.55 million b/d in 2012. The IEA forecasts OPEC crude capacity at 38.4 million b/d in 2012, up from an estimated 34.4 million b/d in 2007 but "below OPEC's own estimates of near 40 million b/d for 2010." Of the 4 million b/d increment over the next five years, Saudi Arabia is expected to account for 1.8 million b/d, and the UAE and Angola 500,000 b/d each.

Indonesia runs out of oil and many OPEC countries will follow suit. Bloomberg 2008 (May 28, Indonesia pulls out of OPEC as it rapidly runs out of oil,
http://propagandapress.org/2008/05/28/indonesia-pulls-out-of-opec-as-it-rapidly-runs-out-of-oil/, accessed July 11, 2008) May 28 (Bloomberg) — Indonesia, the only OPEC member in Southeast Asia, will pull out of the group after aging fields and declining production force the region’s biggest economy to boost imports as crude oil prices reached records. Energy Minister Purnomo Yusgiantoro will sign a decree today to exit the Organization of Petroleum Exporting Countries, he told reporters in Jakarta. The nation, a member since 1962, has been considering leaving the body in the past three years. Indonesia imports about a third of its oil because of inadequate refining capacity and faces falling output as disputes with Exxon Mobil Corp. delayed field developments and deterred investments. The country’s oil output has slumped 49 percent from a peak in 1977 while subsidies to cap domestic diesel and gasoline prices may exceed $13 billion this year.

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107 R&B (Oil)

OPEC can’t flood the market – No spare capacity (6/7)
OPEC will not raise output because they are running out of oil. Baltimore Sun, 2008 (June 13, OPEC president rules out oil output rise,
http://www.baltimoresun.com/business/bal-bz.digestadd133jun13,0,1790270.story, accessed July 11, 2008) Organization of Petroleum Exporting Countries President Chakib Khelil ruled out the possibility that the oil-producer group would raise output to curb record prices when it meets with consuming nations in Saudi Arabia this month. This column was compiled from dispatches by the Associated Press and Bloomberg News.

Overestimated reserves means OPEC can not flood the market Burgess, managing editor of Secret Stock Files, Extreme Opportunites, and Gold World, 2006
(Luke, August 1, http://www.energyandcapital.com/articles/oil-opec-reserves/248#) The Kuwaiti Case Back in January, Petroleum Intelligence Weekly -- considered by many as the "Bible" of the international oil and gas industry -- published a report that said Kuwait's official estimate on the country's remaining oil reserves has been grossly overstated. PIW claimed that they saw internal documents from state-run Kuwait Petroleum Corp. that said the true reserves are barely half the level of the official estimate. According to data circulated in Kuwait Oil Co., the upstream arm of state Kuwait Petroleum Corp, Kuwait's remaining proven and non-proven oil reserves are only about 48 billion barrels -- not the 96.5 million that's officially estimated. And what's more is that only 24 of the 48 billion barrels are so far only proven. The other 24 billion barrels of reserves are non-proven! "...in a series of controversies revolving around the oil industry and its global implications, it has been revealed through certain individuals that the official figure is a mockery, since what has actually been accounted for is way below the official figures." - Fouad Al-Obaid, Kuwait times If what Petroleum Intelligence Weekly is claiming is true, then we've lost over 5% of the world's global oil reserves without even knowing it. And that's the very last thing the world needs right now. OPEC will continue to be the big tuna in the sea of oil producers. Yet we may not know how much oil they have left until it's too late.

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108 R&B (Oil)

OPEC can’t flood the market – No spare capacity (7/7)
OPEC has very little spare capacity- they are unable to flood the market
Wingrove, staff writer for Lloyd’s List, 04. [Martyn, “Global spare capacity at risk ,” Lloyd's List, July 6, 2004, Markets; Pg. 4. Accessed 7/11/08 from Lexis] GLOBAL spare oil production capacity is shrinking at a time when oil demand is rising and Middle East producers are forced to take on the role of providing additional volumes when supplies are disrupted elsewhere. There are concerns from key industry watchers that the Organisation of Petroleum Exporting Countries has not built up sufficient spare production capacity to meet a sudden slip in output from other areas, leaving oil markets vulnerable. London-based Centre of Global Energy Studies has questioned whether the world has enough developed oil fields not currently in production to enable the market to cope with any unforeseen slump in supplies from possibly Iraq, Nigeria or Venezuela. "Since the rest of the world is usually producing flat out, does Opec have enough idle capacity to cope with some of the likely eventualities?" ask analysts at CGES in its monthly report. Oil demand in the second quarter of 2004, traditionally the quiet period due to warmer weather in the northern hemisphere and slower demand in the US, was running at around 79.2m barrels per day. Demand is due to rise this year as the US enters the driving season before the northern hemisphere cools through the autumn, and will be over 81m bpd by the fourth quarter. It is also growing year-on-year at between 1.5m-2m bpd per annum. Opec claims to have a production capacity, including Iraq, of 31.6m bpd and produced around 28m daily barrels in May, including 1.8m barrels from Iraq. This implies the oil cartel has an idle capacity of 3.6m bpd, 3.4% of global demand, said CGES. Taking away Iraq's production and capacity, which is not within any Opec quota, the other 10 members, that have the ability to change output levels, have a production capacity of 29m bpd and are pumping around 27m bpd of this. This leaves an idle production capacity of only 2m bpd, which represents 2.8% of the world's oil demand, and more importantly, is a lot less than output from countries where production could be suddenly halted. Considering Venezuela's output of more than 2.5m bpd was cut off for almost two months last year through country-wide oil field strikes, there are concerns that Opec may not have the capacity to meet demand in another crisis.

OPEC's spare oil capacity is shrinking Smith, Staff Writer for Bloomberg, 08
(Grant, Bloomberg, "IEA Says Lower OPEC Capacity to Keep Market 'Tight,'" 7-1-8, http://www.bloomberg.com/apps/news?pid=20601086&sid=a5LCOJnfgLI4&refer=latin_america, 7-10-8) The International Energy Agency said a drop in OPEC spare capacity and delays to production projects will keep the oil market `tight.'' Lower-than-expected output growth and a ``negligible'' OPEC supply cushion may counter the impact of record prices on consumption. The Paris-based adviser to 27 oil consuming nations cut more than 3 million barrels a day from its 2012 global demand forecast in its Medium-Term Oil Market Report today. ``With oil prices hitting $140 we are clearly in the third oil shock, with prices affecting economic growth,'' IEA Executive Director Nobuo Tanaka said at the World Petroleum Congress in Madrid today. ``Truck drivers are going on strike. Airlines are closing down.'' While the IEA expected its barrel-counting analysis would show weaker demand, the ``surprise'' was that its supply forecast also needed to be cut, Tanaka said. Growth in global supply capacity will peak at about 2.5 million barrels a day in 2010, slowing to less than a million a day for the following three years, the report said. The oil market will be ``tighter'' than previously expected because many major oil projects are experiencing ``slippage'' of 12 to 15 months in their completion time, he said.

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109 R&B (Oil)

Saudi Arabia can’t flood the market – no spare capacity (1/3)
Saudi oil cannot sustain long term oil flooding Reuters, 2008 (“OPEC's Ability to Tame Oil Prices Is Limited,” CNBC News, Jan 9,
http://www.cnbc.com/id/22570967/, accessed online 7-11-08) "Right now, Saudi Arabia has around 2.3 million bpd of spare capacity," a Saudi source said. "We could go to 11.3 million bpd and sustain it. That would not be just a surge and would not need any extra effort. Our spare capacity has been tested before on many occasions." The kingdom was pumping as much as 9.6 million bpd in November 2005, and cut back to around 8.6 million bpd in March last year. Current output stands at around 9 million bpd. But some experts, including a former senior official at Saudi Aramco, the state oil company, question how long a big boost in supply from mothballed capacity could be maintained. "The spare capacity they say they have is all there, so bringing it on line is not a problem," said Sadad alHusseini, a former top official at state oil giant Saudi Aramco. "The question is how long can you sustain it?"

Saudi Arabia has NO spare oil capacity. Drum, writer of The Washington Monthly, 2005 (Kevin, Washington Monthly, “Crude Awakening”, June 2005,
http://www.washingtonmonthly.com/features/2005/0506.drum.html, assessed July 11, 2008) Even if the doomsayers are right, solutions are hard to agree on. Market forces will certainly solve part of the problem. As prices increase, demand for oil will level out and production will--for a while--increase slightly as it becomes profitable to drill in marginal fields that are currently lying fallow. But this obscures the fact that high prices, as bad as they are for an economy addicted to cheap oil, aren't the worst prospect facing us. The real problem is spare capacity. Spare capacity is not the same as the possibility of future discovery, which is necessarily speculative and, in any case, won't be on line for years, if ever. Rather, it's pumping capacity that is currently unused but can be turned on immediately if needed in a crisis. Saudi Arabia, for example, was able to open the taps on its wells practically overnight during the 1979 Iranian crisis, and then again in 1991 during the first Gulf War. If that immediate spare capacity hadn't been available, oil prices wouldn't have just spiked, they would have skyrocketed. But those days are gone. Twenty years ago, OPEC had spare production capacity of about 15 million bpd. A decade ago that had dropped to 5.5 million bpd. By 1990, spare capacity has dropped almost to zero. What this means is that arguments over the exact timing of peak oil are increasingly academic. No matter who's right, what we can say with some certainty is that even if oil production continues to grow, it will grow slowly, which means that supply will barely keep up with rising demand. In other words, it's likely that we're now in a permanent state of near zero spare capacity, which in turn will lead to an increasingly unstable world. As we enter an era in which even Saudi Arabia has no spare capacity to smooth out supply disruptions elsewhere in the world, any blip in supply, whether from political unrest, terrorism, or merely unforeseen natural events, will cause prices to carom wildly. A world with $100 per barrel oil is bad enough, but a world in which a single pipeline meltdown could cause prices to skyrocket to $300 per barrel for a few months and then back down is far worse. What to do? Any serious policy solution has to be based on four fundamental pillars: increased production, development of alternative fuels, conservation, and increased efficiency. And because these are all very long lead items, the time to start is now. After all, if the peak oil theorists are right, we have only a few years left until oil production peaks and then starts to decline. But even if they're wrong, the peak is still only 10 or 20 years down the road--and instability induced by spare capacity is a looming problem regardless.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

110 R&B (Oil)

Saudi Arabia can’t flood the market – no spare capacity (2/3)
Production bottlenecks, instability in certain OPEC countries and declining Saudi production all result in a very limited spare capacity in the squo
Swann, staff writer fot Platts Oilgram News, 08. [Richard, “IEA says world needs bigger cushion on oil inventories,” Platts Oilgram News March 12, 2008, pg1. Accessed 7/11/08 from Lexis] The IEA's estimate of the "call" on OPEC crude and stocks for 2008 was left unchanged at 31.8 million b/d. This is below the cartel's current production, which the IEA estimated at 32.12 million b/d in February, down from 32.24 million b/d in January. The IEA said output fell last month from several OPEC countries, including Saudi Arabia, Iran. Nigeria and Angola, with the declines partially offset by a rise in Iraqi production. Excluding Iraq, the 12 members bound by output agreements produced 29.75 million b/d in February, down from 30.02 million b/d in January but still above their collective 29.673 million b/d target. Total world oil production rose to 87.47 million b/d in February, up from 87.29 million b/d in January, the IEA said, thanks to higher volumes from the Americas and the former Soviet Union. The agency estimated OPEC's effective spare crude production capacity at 2.2 million b/d, with Saudi Arabia and the UAE accounting for 2 million b/d of this total. "Recent pipeline outages and border tensions affecting Ecuador and Colombia, weather-related disruptions in the North Sea and Australia, and the ongoing susceptibility of Nigerian and Iraqi facilities to insurgent attacks illustrate market vulnerability and suggest that a more comfortable supply cushion is desirable," the IEA said. The IEA figures do not include any spare capacity for Indonesia, Iraq, Nigeria or Venezuela, which it said were "deemed likely to struggle to increase production in the short term." Bottlenecks in oil services are contributing to the lack of spare capacity, as is reticence from producers about increasing capacity in the face of uncertain future demand growth. Some OPEC countries are fighting to maintain existing capacity levels either for security reasons or because their oil fields are getting old. On top of this, high prices are encouraging producers to strike a harder bargain with investors over contract terms, the IEA said, a trend which it said was "undermining marginal investments." All these factors are leading to an "investment logjam" which may only be broken with greater clarity and consensus between producers on future demand. OPEC countries with mature oil producing regions also may need more flexibility in what they can offer international oil companies. "Sustaining, let alone increasing, capacity in future may require more innovative investment models...contract flexibility needs to be a two-way street," the IEA said.

Saudi Arabia will not be able to flood the market Dunn 05(Kevin, The Washing Monthly
http://www.washingtonmonthly.com/features/2005/0506.drum.html#byline June 5th 7-11-08) But a growing number of analysts view these arguments as Pollyannaish at best and obtuse at worst. Yes, production has risen steadily over the past century, but declining oil fields mean this is unlikely to continue in the future. Claimed reserves have increased, but this is due more to political and statistical finagling than to actual new discoveries. And the slowing rate of big new finds combined with the increasing number of disappointments suggests that we shouldn't count on future mother lodes to bail us out. Saudi Arabia really is our last, best hope. If Simmons is right that Saudi Arabia's oil production has peaked, so has the world's.
Even if the doomsayers are right, solutions are hard to agree on. Market forces will certainly solve part of the problem. As prices increase, demand for oil will level out and production will--for a while--increase slightly as it becomes profitable to drill in marginal fields that are currently lying fallow. But this obscures the fact that high prices, as bad as they are for an economy addicted to cheap oil, aren't the worst prospect facing us. The real problem is spare capacity. The same is true of other prospects touted for the future. There might be lots of oil in the Arctic or in the deepwater off the coasts of Africa. There are also tar sands in Canada and heavy oil in Venezuela. But even if they pan out, projects like these take years--or decades--to develop, are likely to produce at modest rates, and, in the end, will do little more than replace declines from older fields elsewhere in the world anyway. We're still looking for 16 million bpd of new oil.

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111 R&B (Oil)

Saudi Arabia can’t flood the market – no spare capacity (3/3)
Saudi Arabia has NO spare oil capacity. Drum, writer of The Washington Monthly, 2005 (Kevin, Washington Monthly, “Crude Awakening”, June 2005,
http://www.washingtonmonthly.com/features/2005/0506.drum.html, assessed July 11, 2008) Even if the doomsayers are right, solutions are hard to agree on. Market forces will certainly solve part of the problem. As prices increase, demand for oil will level out and production will--for a while--increase slightly as it becomes profitable to drill in marginal fields that are currently lying fallow. But this obscures the fact that high prices, as bad as they are for an economy addicted to cheap oil, aren't the worst prospect facing us. The real problem is spare capacity. Spare capacity is not the same as the possibility of future discovery, which is necessarily speculative and, in any case, won't be on line for years, if ever. Rather, it's pumping capacity that is currently unused but can be turned on immediately if needed in a crisis. Saudi Arabia, for example, was able to open the taps on its wells practically overnight during the 1979 Iranian crisis, and then again in 1991 during the first Gulf War. If that immediate spare capacity hadn't been available, oil prices wouldn't have just spiked, they would have skyrocketed. But those days are gone. Twenty years ago, OPEC had spare production capacity of about 15 million bpd. A decade ago that had dropped to 5.5 million bpd. By 1990, spare capacity has dropped almost to zero. What this means is that arguments over the exact timing of peak oil are increasingly academic. No matter who's right, what we can say with some certainty is that even if oil production continues to grow, it will grow slowly, which means that supply will barely keep up with rising demand. In other words, it's likely that we're now in a permanent state of near zero spare capacity, which in turn will lead to an increasingly unstable world. As we enter an era in which even Saudi Arabia has no spare capacity to smooth out supply disruptions elsewhere in the world, any blip in supply, whether from political unrest, terrorism, or merely unforeseen natural events, will cause prices to carom wildly. A world with $100 per barrel oil is bad enough, but a world in which a single pipeline meltdown could cause prices to skyrocket to $300 per barrel for a few months and then back down is far worse. What to do? Any serious policy solution has to be based on four fundamental pillars: increased production, development of alternative fuels, conservation, and increased efficiency. And because these are all very long lead items, the time to start is now. After all, if the peak oil theorists are right, we have only a few years left until oil production peaks and then starts to decline. But even if they're wrong, the peak is still only 10 or 20 years down the road--and instability induced by spare capacity is a looming problem regardless.

Gonzaga Debate Institute 2008
Lacy/Symonds/Bowen

112 R&B (Oil)

Saudi Arabia can’t flood the market – Production problems
The problem isn’t oil, it’s the Saudi’s process of extracting oil that is contaminating the oil with large amounts of water Drum, writer of The Washington Monthly, 2005 (Kevin, Washington Monthly, “Crude Awakening”, June 2005,
http://www.washingtonmonthly.com/features/2005/0506.drum.html, assessed July 11, 2008) In retrospect, this effort may someday be viewed as one of the most disastrous PR campaigns in history. Far from reassuring everybody, a closer look at the Saudi oil industry caused some analysts to lose hope altogether. In The End of Oil, published last year, Paul Roberts recounted his visit to Saudi Arabia: "I was standing on a sand dune in Saudi Arabia's 'Empty Quarter,' the vast, rust-red desert where one-quarter of the world's oil is found, when I lost my faith in the modern energy economy." Peculiar as it sounds, Roberts's problem wasn't with Saudi Arabia's oil, it was with Saudi Arabia's water. In most large oil fields, including all of Saudi Arabia's, oil is forced to the surface by the natural pressure of the reservoir itself. In order to keep this pressure up as more and more oil is extracted, water is injected back into the reservoir. This standard part of oil field maintenance still carries a cost: Eventually the injected water seeps into the oil itself, and the stuff that makes it to the surface becomes increasingly contaminated. That's perfectly normal, but what prompted Roberts's dismay was the discovery that at Saudi Arabia's Ghawar field, the biggest oil field in the world, the percentage of water mixed in with the oil is now 30 percent. That's a dangerously high level. Another analyst who made the post-9/11 pilgrimage to Saudi Arabia was Matthew Simmons, an advisor to Dick Cheney's energy task force and a one time contributor to George Bush's energy plan during the 2000 campaign. An investment banker who has specialized in the energy industry for 30 years, Simmons visited Saudi Arabia for six days in 2003 as part of a U.S. energy delegation and, like Roberts, came away skeptical. Could Saudi Arabia really double its production rate over the next decade? For that matter, could it increase its production rate at all? Or had Saudi production already peaked?

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113 R&B (Oil)

Saudi Arabia will only slightly increase production
Saudi Arabia will only produce just enough oil to sustain market. Donna Abu, Associated Press Writer,08 (U.S Energy Chief, Low oil production drives prices, June 21, 08,
http://www.huffingtonpost.com/2008 accessed 7-11-08) Bodman disputed that assertion Saturday, saying oil production has not kept pace with growing demand, especially from developing countries like China and India. "Market fundamentals show us that production has not kept pace with growing demand for oil, resulting in increasing prices and increasingly volatile prices," Bodman told reporters. "There is no evidence that we can find that speculators are driving futures prices" for oil. He said commodities markets have experienced a huge influx of money from financial investors in recent years, but they have been following the market upward rather than driving the increase in the price of oil. Saudi Arabia called the unusual meeting in Jiddah between oil producing and consuming nations as a way to show that it was not deaf to international cries that high oil prices have caused social and economic turmoil. The Gulf nation has also become increasingly concerned that record oil prices could hinder growth in the U.S. and other major industrialized economies, potentially leading to a decline in oil demand and a sharp drop-off in prices. While Saudi Arabia has been reluctant to drastically increase production, it has announced several small increases recently that it says were made to satisfy increased customer demand. The country has consistently said that it will produce enough oil to ensure the market is supplied.

Saudis are increasing oil production to help slow the soaring price of oil Abbot, Associated Press Writer, 2008, (Sebastian, WTOP News, “Minister: Saudi Arabia can increase oil
production”, June 22, 2008, http://www.wtop.com/?nid=105&pid=0&sid=1426281&page=1, accessed on July 11, 2008) JIDDAH, Saudi Arabia (AP) - Saudi Arabia is willing to produce more oil if customers need it, the kingdom's oil minister said Sunday without citing any specific output increase. Saudi Arabia, the world's largest oil exporter, has been under intense pressure from the U.S. and other oil consumers to increase its crude output to help slow the soaring price of oil. The kingdom already announced modest increases and said it would pump 9.7 million barrels a day beginning in July. But those increases have not done much to stem the skyrocketing price of oil, which closed near $135 a barrel on Friday. The high prices are affecting consumers and economies across the United States, Europe and much of the world. Many countries have experienced social unrest as rising fuel prices have driven significant increases in the cost of food and other basic goods. The cost of gasoline has also become a sore point in the U.S. presidential race, with President Bush and Republican candidate John McCain calling for lifting of a long-standing ban on offshore oil and gas drilling to increase domestic oil production. But Democratic candidate Barack Obama has said such steps will do nothing in the short term to ease American consumer's pain. It was unclear if Oil Minister Ali alNaimi's remarks Sunday at a closed-door session during the high-level oil summit in the port city of Jiddah would quell concerns. Al-Naimi, who was expected to formally make the announcements in a speech later Sunday, reiterated his government's position that the recent run-up in prices has not been caused by a supply shortage. But he said he also believes each country must do what it can "to alleviate these difficult conditions." For the remainder of the year "Saudi Arabia is willing to produce additional barrels of crude oil above and beyond the 9.7 million barrels per day which we plan to produce during the month of July, if demand for such quantities materializes and our customers tell us they are needed," al-Naimi said in the speech, a copy of which was obtained by The Associated Press in advance.

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114 R&B (Oil)

Saudi Arabia won’t flood the market
Saudi Arabia is already prepared for a US decline in US consumption and has compensated through non-OECD nations. Platts Oilgram News, 2008
(April 8, “Report sees big jump in Saudi export earnings.” Lexis 7/11/08) Saudi Arabia's oil export earnings are expected to rise to $307.5 billion in 2008, from $225.5 billion in 2007, with the price of Saudi crude expected to average $89/barrel this year, the Samba Financial Group said in a report issued April 6. "We expect oil production to edge up this year to average around 9.25 million b/d, some 6.3% ahead of 2007," Samba said in the report, entitled "The Saudi Economy:Recent Performance and Prospects for 2008-09." "We expect the export price of Saudi crude to average $89/barrel this year, up from $68.5/b in 2007, a 30% increase," said the report. Samba, formerly the Saudi American bank but now 100% Saudi-owned, also expects oil prices to fall slightly in the current quarter as a result of cyclical factors and an easing of US energy demand. However, prices will remain strong on continued growth in the East Asia, Middle East and North Africa regions, ongoing tightness in supply, global refining constraints, political uncertainties in some producing countries and continued (but diminishing) speculation in the commodities market, Samba said.

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115 R&B (Oil)

Non-OPEC countries running out of capacity
The world is running out of oil production capacity Mouawad, Journalist for the New York Times, 2008
(Jad, New York Times, “Amid High Oil Prices, Danger Signs in Production,” April 28th, http://www.nytimes.com/2008/04/28/business/worldbusiness/28oil-WEB.html?pagewanted=1&_r=1&hp Accessed on 7/11/08) The outlook for oil supplies “signals a period of unprecedented scarcity,” an analyst at CIBC World Markets, Jeff Rubin, said last week. Oil prices might reach more than $200 by 2012, he said, a level that would probably mean $7-a-gallon gasoline in the United States. Some regions are simply running out of reserves. Norway’s production has slumped by 25 percent since its peak in 2001. In Britain, oil production has plummeted 43 percent in eight years. The North Sea is now considered a dying oil basin. Alaska’s giant field at Prudhoe Bay has declined 65 percent since its peak 20 years ago. In many other places, the problems are not located below ground, as energy executives like to put it, but above ground. Higher petroleum taxes and more costly licensing agreements, scarce manpower and swelling costs, as well as political wrangling and violence, are making it much harder to raise production. “It’s a crunch,” said J. Robinson West, chairman of PFC Energy, an energy consulting firm in Washington. “The world is not running out of oil, but rather it’s running out of oil production capacity.” Recently, the case that has attracted the most attention is Mexico, the second-biggest exporter to the United States, which seems increasingly helpless to stem the collapse of its largest oil field, Cantarell. Last week, the country’s state-owned oil company, Pemex, said that production had fallen 300,000 barrels a day so far this year to 2.9 million barrels a day, a stunning drop from its peak production of 3.4 million in 2004. But earlier this month, Russian energy officials warned that the days of stunning growth that followed the demise of the Soviet Union were over, as the country would focus on stabilizing its output. Russia today produces about 10 million barrels of oil a day, up from a low point of 6 million barrels in 1996.

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116 R&B (Oil)

OPEC won’t flood the market (1/3)
OPEC wont flood – they want to save reserves to continue making money for decades TIME ‘08
“OPEC: Gas Prices Will Stay High” April 11th 2008 http://www.time.com/time/world/article/0,8599,1730117,00.html Accessed: 7/11/08 Analysts don't absolve OPEC of blame for keeping prices sky-high. They have voted three times since last fall against raising production, despite direct appeals for relief to Naimi from President George W. Bush and Vice President Dick Cheney. That's partly because they fear they could some day run dry of oil, leaving future generations without the key source of Arab wealth. "It's understandable," says Fatih Birol, chief economist of the International Energy Agency, a Paris-based watchdog organization for big oil-consuming countries. "Oil-producing countries have policies not to run down their reserves." And that, of course, will keep oil companies very profitable for decades to come.

OPEC won’t flood the market to reduce oil prices Mufson, Staff Writer, 3-6-08
[Steven, Washington Post, Page D01] Though OPEC's production decision was widely expected, Naimi's comments and the wording of the group's communique added to concern that OPEC is more worried about pumping too much oil for weakening economies than it is about the possible harm that high oil prices might do to those economies. In its statement after the meeting in Vienna, OPEC pointed to "the economic slowdown in the U.S.A., which, together with the deepening credit crisis in financial markets, is increasing the downside risks for world economic growth and, consequently, demand for crude oil." The cartel, which produces nearly 40 percent of the world's petroleum, added that "the market is well-supplied, with current commercial oil stocks standing above their five-year average." OPEC's decision and Naimi's comments provided new fuel for the debate over the level of world oil inventories. Over the past year, OPEC has achieved its goal of shrinking world inventories from 120 million barrels above the five-year average to slightly below the five-year average, Verrastro said.

OPEC won’t sell more oil – they’re afraid of the impact it will have on economies Washington Post ‘08
“OPEC Says Members Wont Pump More Oil” 4/6/08 http://www.washingtonpost.com/wpdyn/content/article/2008/03/05/AR2008030500500.html Accessed: 7/11/08 The Organization of the Petroleum Exporting Countries yesterday decided to leave production unchanged despite the high cost of crude oil, contributing to a $5-a-barrel leap to a new record price and drawing a rebuke from a "disappointed" White House. Saudi Oil Minister Ali al-Naimi said OPEC would also try to keep stockpiles near their five-year average, a level many analysts think may be too low for comfort in a world of rising oil demand. Though OPEC's production decision was widely expected, Naimi's comments and the wording of the group's communique added to concern that OPEC is more worried about pumping too much oil for weakening economies than it is about the possible harm that high oil prices might do to those economies. In its statement after the meeting in Vienna, OPEC pointed to "the economic slowdown in the U.S.A., which, together with the deepening credit crisis in financial markets, is increasing the downside risks for world economic growth and, consequently, demand for crude oil." The cartel, which produces nearly 40 percent of the world's petroleum, added that "the market is well-supplied, with current commercial oil stocks standing above their five-year average."

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117 R&B (Oil)

OPEC won’t flood the market (2/3)
Opec is is at record levels supplies are tight and they don’t’ want to increase production Forbes ‘08 (http://www.forbes.com/2008/07/01/oil-opec-closer-markets-equity-cx_ll_ra_0701markets46.html 711-08 July 1st) Even with OPEC pumping oil at record levels oil supplies are tight, sending already-high oil prices soaring despite sliding demand in the U.S. and Europe. Although demand for oil is on the decline in most developed countries, as economic growth and higher fuel prices take their toll, the Paris-based International Energy Agency warned on Tuesday that supply constraints and fast-growing emerging markets would keep the balance tight over the medium term. U.S. Treasury Secretary Henry Paulson agreed. During a visit to Berlin he said "there don't seem to be any obvious short-term solutions" to soaring oil prices. As for the OPEC oil-exporting cartel--which has staunchly refused to hike production significantly--don't expect its position to change anytime soon. The organization's president, Chakib Khelil, said that concerns about demand destruction meant that it might think twice about investing to expand production capacity. Ongoing tensions in the Middle East pushed oil prices higher as well. Light, sweet crude for August delivery rose 97 cents to settle at a new high of $140.97 per barrel, from $140 per barrel, at the close in New York. The European Brent crude benchmark lifted to $141.34, from $139.31 per barrel. "A" shares in Royal Dutch Shell) closed down 2.3%, to 20.15 pounds ($40.16), in London; also fell 2.4%. Shares in Chevron ticked down 0.1%, to $99.08, at the close in New York. Part of the worry behind high oil prices is not that OPEC will not increase production, but that there is no more production to add. "OPEC production is at record highs," said the executive director of the International Energy Agency, Nobuo Tanaka, on Tuesday, "and non-OPEC producers are working at full throttle, but stocks show no unusual build." This is not necessarily a case for peak oil. There is a glut in the market of heavy, sour crude, the kind that is high on sulfur and difficult to refine; the problem is that refining capacity is under pressure and lacks the free capacity to handle such oil. New refinery projects, such as the planned 400,000 barrel-perday refinery planned by Total in Saudi Arabia, could help ease the strain. But many will not come on-stream for another five years, and higher costs and delays are already pushing back many projects. The IEA predicted on Tuesday that at least 1 million barrels per day of refining capacity had already been pushed back to 2013, from 2012, piling on the medium-term pressure.

OPEC will not flood the market. The Scotsman, 2008,
(February 25, “OPEC unlikely to cut oil output” Lexis 7/11/08) OPEC is unlikely to agree a change in oil output at its meeting next month, as high prices and concern about the economy balance expectations for a seasonal demand fall. A delegate to the meeting of the oil cartels' ministers said yesterday that they would not sanction a change in oil production. Speaking on condition of anonymity, the delegate said: "The [OPEC] ministers could voice concern about demand in the second quarter and about the economy. But I don't think we will do anything. The price is still high." US oil hit a record of dollars 101.32 a barrel last Wednesday, before retreating to just under dollars 99 on Friday. The rally to a fresh record came in part on expectations that OPEC would maintain or reduce output at the March meeting, rather than increase to meet calls from consumers for more oil. OPEC argues that factors beyond its control are pushing prices higher, such as a flood of cash from investors into commodities and international political tension. "We've said many times the price is not related to oil market fundamentals," said the delegate. "It is where it is because of geopolitics and speculation. But it is still high and I think demand is being affected by high prices." Despite the high prices, some in OPEC have called on the group to curb output when they meet on 5 March to match the fall in demand as the northern hemisphere winter ends and consumers need less fuel for heating. Iran supports a cut in production by OPEC and expects the group to take such action, the country's oil minister said in remarks published at the weekend.

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118 R&B (Oil)

OPEC won’t flood the market (3/3)
OPEC is in a deadlock over whether to increase production- too many members oppose the idea for it to become a reality
Mouawad, staff writer at The New York Times, 08. [Jad, “OPEC Is Expected to Keep Oil Production Unchanged,” New York Times, February 1, 2008, pC3. Accessed 7/11/08 from Lexis] Ignoring calls from the United States and other consuming countries to pump more oil into the global economy, the OPEC oil cartel is expected to keep its output unchanged when the group's ministers meet in Vienna on Friday. With the United States seemingly heading toward a recession and global stock markets gyrating, OPEC is not contemplating an increase in oil production. In fact, it thinks it might soon have to cut its output to offset a seasonal demand slowdown in the spring. As an indication of just how difficult their position is, representatives from the Organization of the Petroleum Exporting Countries met two months ago in Abu Dhabi and could not resolve a debate over whether to add more oil to the market. The group is scheduled to meet again next month at its secretariat in Vienna. At that point, energy analysts say the cartel is likely to cut output. Friday's meeting comes as economic troubles worsen in the United States. A decision not to raise output would most likely be seen as a rebuke to President Bush, who pleaded with King Abdullah, the Saudi monarch, last month to take action to help ease the effects of high oil prices on American consumers. Saudi Arabia, the world's top oil exporter, is the de facto leader of OPEC and generally sets the group's agenda. Mr. Bush's visit to the Persian Gulf, which included a night on King Abdullah's farm, was followed by a trip to the region by Samuel W. Bodman, the energy secretary. An increase in OPEC's production could lower oil prices and ''that would help our economy,'' Mr. Bodman said on Tuesday after he returned to Washington. In Vienna, such public pressure appears to be having little effect. Chakib Khelil, the Algerian oil minister and OPEC's president this year, told reporters on Thursday: ''I don't see what increasing the supply of oil would do for the economy.'' The group's 13 members, who account for about 40 percent of the world's oil exports, are less eager to reassure consumers than to avoid repeating the mistake of 1997, when the cartel increased output just as the Asian financial crisis was brewing. A result of that mistimed decision was that prices collapsed to about $10 a barrel, rattling oil producers.

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119 R&B (Oil)

OPEC can’t reduce Oil Prices (1/4)
It’s impossible for OPEC to flood the market enough to drop oil prices Settle, Staff Writer, 08 (Michael, The Herald, “Oil crisis is now worse than in the 1970s, says Brown,” 06-23-08, http://www.theherald.co.uk/misc/print.php?artid=2357437, accessed 07-02-08)
Gordon Brown held out the prospect of a fall in oil prices after a trip to Saudi Arabia where he called for a "new deal" to promote clean energy and end the conflict of interest between oil producers and oil consumers. The Prime Minister said last night the current crisis was worse than the one in the 1970s and called for a "more balanced energy market". He urged oil-rich states to use some of the $3 trillion of extra income from the current hike in prices to invest in Britain's £100bn "green programme" - the building of more wind farms and nuclear power stations to help the UK meet its share of an EU target to generate 20% of energy from renewables by 2020. However, as Mr Brown was addressing ministers from the 35 major oil-producing and consuming economies, his political opponents were rubbishing any idea his mission would lead to a quick fall in petrol prices at the pump. Alan Duncan, Shadow Business Secretary and a former oil trader himself, said it was "total fantasy" for the PM to imagine there was much Opec, the oil producers' cartel, could do about rising oil prices. "The idea that Opec can just go like that and flood the market with oil and bring the price down just shows that Gordon Brown does not understand global markets," said Mr Duncan. Vince Cable for the Liberal Democrats made a similar point, saying the PM's trip was "either empty-gesture politics or an act of self-delusion" while his leader Nick Clegg insisted: "It's slightly humiliating to see the Prime Minister fly off at taxpayers' expense to Jeddah to announce some gimmick where he hopes Opec will fund wind farms in the UK. "He's living in cloud cuckoo land if he thinks that's a sustainable solution to the crisis." Saudi Arabia, the world's largest oil exporter, has been under intense pressure from the US and other oil consumers to increase its crude output to help slow the soaring price of oil. The kingdom has already announced modest increases and said it would pump 9.7 million barrels a day beginning in July. But those increases have not done much to stem the skyrocketing price of oil, which closed near $135 a barrel on Friday. King Abdullah said Saudi Arabia was not to blame for soaring oil prices and instead pointed his finger at speculators, high fuel taxes in consuming countries and increased oil consumption in developing economies.

One million barrels a day would take six months and not all OPEC have spare capacity Anson, 2007
(Stuart, The Sunday Times (London), “Opec’s capacity,” 12-23-07, http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do? docLinkInd=true&risb=21_T4146209192&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=2 9_T4146209196&cisb=22_T4146209195&treeMax=true&treeWidth=0&csi=332263&docNo=10, accessed 07-1108) Opec's capacity: I would question Irwin Stelzer's view on how much spare capacity Opec has ("Worried? Blame the Chinese and the Arabs" December 9). Only Saudi Arabia seems to have spare capacity of 1m barrels a day and that would take six months to ramp up. Domestic demand in Saudi will rise by about 1m barrels a day within 10 years given economic and population growth. And output from mature fields will decline. Other leading Opec countries have no noticeable spare capacity (except Nigeria and Iraq, which are in political turmoil). Iran, Kuwait, Venezuela, UAE, Angola, Libya are all fully producing and their expansion projects are largely delayed by hugely increasing costs and overstretched contractors.

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120 R&B (Oil)

OPEC can’t reduce Oil Prices (2/4)
OPEC has no control over oil prices anymore Schoen, Senior Producer, 2005
(John W., March 16, http://www.msnbc.msn.com/id/7190109/)
Despite a pledge by OPEC ministers to increase oil production, don't expect much of a break on oil prices. With crude oil prices hitting a record $56 a barrel Wednesday, OPEC ministers meeting in Iran have been grappling with a problem they haven’t confronted in the cartel’s 45-year history. In the past, OPEC tried to cool overheated prices by pumping more when supplies got

too tight. But most OPEC producers say they’re already pumping as fast as they can. And despite the high cost of a barrel of crude, world demand shows no signs of slowing.
To help stop the surge in prices, OPEC ministers agreed to pump an extra half million barrels of oil a day beginning April 1. OPEC said it would consider pumping more later if the extra oil doesn't push prices lower. But even before the decision was announced, some ministers had openly expressed doubts that the move will do any good, saying

they’ve run out of options in trying to rein in the price of crude. Global oil demand has taken up most of the slack in extra OPEC capacity. Consumption is now believed by many analysts to be pressing up against the limits of
what the world can produce. Saudi Arabia is the only country believed to have any surplus production left, and even then the Saudis are pumping close to 90 percent of capacity, according to the U.S. Department of Energy. "There is not much we can do,” Algerian Oil Minister Chakib Khelil told reporters Tuesday in Isfahan, Iran, the site of Wednesday’s meeting. "OPEC has done all it can do.” Qatar Oil Minister Abdullah al-Attiyah said. “This is out of the control of OPEC." The oil markets seem to agree. After word came that OPEC pledged to pump harder, oil prices surged Wednesday on concerns about the latest weekly reports on inventories. Crude for April delivery rose $1.41 to settle at $56.46 a barrel Wednesday, the highest price for the commodity on the New York Mercantile Exchange since it introduced crude oil futures trading in March 1983. Crude prices soared after the EIA reported that domestic gasoline stocks in the March 11 week fell 2.9 million barrels to 221.4 million barrels -- nearly three times the decline forecast by analysts. A year ago, gasoline stocks stood at 202.4 million barrels. And even as President Bush expressed concern Wednesday about rising oil prices, he cited tight global supplies -- not OPEC policies -for the price surge. “I think if you look at all the statistics, demand is outracing supply and supplies are getting tight. And that’s why you’re seeing the price reflected,” Bush said. OPEC's admission that has lost control of oil prices hasn’t eased political pressure on the cartel. On Tuesday, several oil ministers said they had received calls from U.S. Energy Secretary Sam Bodman. Sen. Ron Wyden (D Ore.) said Tuesday he’s not convinced that OPEC’s hands are tied by global demand reaching the limits of production capacity. ‘This is their claim. But the fact of the matter is that nobody knows what their capacity is.’ — Sen. Ron Wyden Dem. – Oregon “This is their claim,” said Wyden. “But the fact of the matter is that nobody knows what their capacity is.” Though data on OPEC’s oil production capacity have always been hard to come by, there’s little disagreement on the rapid growth of global consumption -especially in China and India. With worldwide demand this year rising by roughly 2 million barrels per day, whatever excess capacity is out there will be gone soon, according to Marshal Adkins, an oil industry analyst at Raymond James “Maybe this year, but certainly in ‘06 there won’t be any excess capacity,” he said. “We haven’t been in that kind of market in our lifetime. You’ve always have more capacity than demand.” That’s little solace to energy consumers, who are watching rising crude oil prices push pump prices to record levels. Though U.S. economy has yet to show signs of slowing and inflation remains low, a continued rise in oil prices will eventually slow growth, analysts say. “We will find the price level that will slow demand,” said Adkins. “It may be $60; it may be $100. I think it’s fair to say its going to be in that price band.” Seasonal lull? Analysts say OPEC typically eases back on production at this time of year because demand slows as the winter heating season winds down and drivers haven’t yet hit the road for summer vacations. But with prices nearly double levels just 18 months ago, production cutbacks are unlikely, say analysts. “OPEC’s only real option is to maintain the status quo for now," said Smith Barney Citigroup oil analyst Doug Leggate in a recent research report. Oil prices have also risen for a variety of other factors over which OPEC has no control, according to Adkins. Tanker prices haven jumped from $3 a barrel to $10 a barrel during the recent run-up in crude prices. To increase output, Saudi Arabia has been selling lower grade crude, which has boosted the price of more desirable light, sweet crude. And the falling dollar has effectively cut the value of oil payments to OPEC producers. “When were looking on our screens seeing $45 oil, Saudis are cashing checks for $25 oil,” he said. “So in their mind -– their $25 price (target) -– that’s what they’re getting.” As rising demand has approached the world’s production limits, OPEC’s decisions have less impact on prices. In the past, the cartel has "controlled" oil prices (or tried to) by adding or withholding production. By holding back oil, the market remained "tight" and prices stayed relatively high. The "oil shortages" of the 1970s were engineered by OPEC -- not the result of a true lack of supply. But production quotas have had mixed success. For starters, many OPEC producers have "cheated" over the years -- agreeing cut back at OPEC meetings but then pumping more when they went home. A big run-up in inventories in 1997, for example, came just in time for the Asian economic meltdown in 1998. OPEC couldn’t cut production fast enough and oil prices fell to $10 a barrel. But eventually cutbacks sent prices back up above $30 a barrel by 2000. Then came the U.S. stock market crash, Sept. 11 and recession -- which sent oil back down to $15. OPEC cut production again, and prices began their run back to $30 -- and beyond. Now, with prices above $50, OPEC risks seeing prices tumble again if high energy costs put a damper on world growth. That’s why – despite relatively high crude oil inventories for this time of year – Saudi Arabia has proposed boosting production by 2 percent, to 27.5 million bpd. "We're concerned about prices, we're also concerned about economic growth and we're particularly concerned about economic growth in developing countries," said Saudi Oil Minister Ali al-Naimi. "Hopefully I will be convincing enough to move the rest to my thinking." But ministers from Iran, Kuwait and Nigeria have recommended postponing any increase until May 1 to see if demand eases as it usually does in the second quarter. And some OPEC ministers don’t think oil prices at current levels will slow the global economy. Some U.S. analysts concur, noting that the U.S. economy is less dependent on oil than it was during the “oil shocks” of the 1970s, when oil hit $80 a barrel when measured in today’s dollars. "Even at $60 we see no economic impact," Libyan Energy Minister Fathi Omar Bin Shatwan told reporters.

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121 R&B (Oil)

OPEC can’t reduce Oil Prices (3/4)
OPEC cant influence the price of oil, the market’s already oversupplied Reuters ‘08 Gulf News “OPEC Cant Help Reduce Price – Iran” July 2nd 2008 http://archive.gulfnews.com/indepth/oil/more_stories/10225265.html Accessed: 7/11/08
Tehran: Iran's oil minister said the market was over-supplied with crude and Opec could not do anything to reduce prices, the website of the country's Oil Ministry reported on Tuesday. "There is enough oil in the market. The market is oversupplied .... the price rise is not because of a shortage of supply," it quoted Oil Minister Gholamhossein Nozari as saying on the sidelines of a conference in Madrid. "Opec as a major oil producer group can't do anything to decrease prices," Nozari said.

OPEC doesn’t have to capacity to lower prices- limited production proves Reuters, 2008 (“OPEC's Ability to Tame Oil Prices Is Limited,” CNBC News, Jan 9,
http://www.cnbc.com/id/22570967/, accessed online 7-11-08) OPEC's ability to tame oil prices that hit a record high above $100 a barrel last week is curbed by limited unused production capacity, officials from the exporter group and analysts say. The Organization of the Petroleum Exporting Countries says it holds around 3 million barrels per day of production in reserve. Since many members have expressed unease with record prices, that begs the question: why are they not raising output? Since oil hit $100 for the first time last week, some OPEC ministers and officials have said most members are already pumping at full tilt, leaving little room for collective action. "Because most members are currently producing at full capacity, it seems that even if there is a decision to increase the output ceiling, not all members would be able to," Mohammad Ali Khatibi, deputy director of international affairs at the National Iranian Oil Company, said recently. While OPEC says it could boost output by an additional 3 million bpd -- enough to flood the 86 million bpd world market -- other analysts say that figure is too high. The U.S. government's Energy Information Administration pegged the group's reserve much lower at 1.6 million bpd in its monthly outlook on Tuesday.

Flooding the market has empirically done nothing to decrease oil prices Elliott, economics editor, 2008
(Larry, The Guardian, “$135 and rising ... has cheap oil gone for ever?” May 24, http://www.guardian.co.uk/business/2008/may/24/oil.commodities, Accessed on 7/11/08) Turner said it was worrying that the markets ignored the Saudis' announcement that they would pump an additional 300,000 barrels per day. "Saudi Arabia is struggling to stem a long term reversal in production, and any offer to boost output raised the prospect of a steeper drop from 2009, when the decline in global supplies is expected to accelerate. It is perhaps telling that futures prices have climbed even more quickly than the spot market, underlining the very real fears of peak oil."

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122 R&B (Oil)

OPEC can’t reduce Oil Prices (4/4)
There is no way to decrease the price of crude oil Elliott, economics editor, 2008
(Larry, The Guardian, “$135 and rising ... has cheap oil gone for ever?” May 24, http://www.guardian.co.uk/business/2008/may/24/oil.commodities, Accessed on 7/11/08) If the peak oil theories are right, the market frenzy seen this week is likely to return even if prices drop back temporarily when the bubble bursts. "Because the price of oil is particularly vulnerable to global events, it will always be volatile, displaying peaks and troughs like a hospital monitor tracking an irregular heartbeat," said Andrew Simms of the New Economics Foundation. "What's different today is that there is no way back compared to the price hikes of the 1970s. There are no 'swing producers' to fill the gap. Even the more conservative estimates for the global peak of oil production give us little more than a decade before supplies plateau and begin a long decline."

OPEC has only a short period of time when it will still be in control of the market Kingsdale, Journalist for Seeking Alpha, 2008
(Jim, Seeking Alpha, “The End of OPEC,” May 11th, http://seekingalpha.com/article/76725-the-end-of-opec Acessed on 7/11/08) I suspect the new Saudi fields being brought on this year and next will give them some ability to flood the market with oil and lower the price temporarily if they choose to do so. But once that surge is over, probably starting in 2010, there will be no ability of OPEC to influence the price of oil. In a Peak Oil world, OPEC, by definition, will not be able to contain the rise in the price of oil; they simply will not have the reserves to do so. Since we are either at or very near Peak Oil, OPEC is now or soon will be quite powerless.

OPEC will soon lose all power and be forced to disband Kingsdale, Journalist for Seeking Alpha, 2008
(Jim, Seeking Alpha, “The End of OPEC,” May 11th, http://seekingalpha.com/article/76725-the-end-of-opec Acessed on 7/11/08) This explains why OPEC is currently saying, first, that there is no supply problem in oil, that the high price is all due to speculation. Second, they are saying they will meet in September to re-consider their stance. Why? Because right now they cannot add much oil to the market, but they hope that by September the new Saudi fields will be on line and capable of actually making a difference in the global supply. They could maybe do that for a year to two years before being swamped by new higher levels of demand once and for all. Why will OPEC end? Well, clearly once they are known to have no power they will have no reason to exist. But even before that, I suspect they may wake up to the fact that OPEC no longer benefits their members. While their powers have diminished to nearly zero, they are increasingly being blamed for the rise in oil prices that is starting to become a serious problem for the global economy and is already a disaster for the world’s poor. Why would OPEC members want to keep that scorn focused upon themselves? It makes no sense. They no longer benefit economically from OPEC because it is not OPEC that is keeping their oil price high. No economic benefit AND becoming the object of global blame? It is not in their self-interest. I predict that OPEC will soon disband. I define “soon” as within the next three years.

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123 R&B (Oil)

Crunch inevitable – OPEC can’t meet demand
OPEC and Saudi Arabia are not going to be able to increase supply to meet the rising world demand for oil Mouawad, Journalist for the New York Times, 2008
(Jad, New York Times, “Amid High Oil Prices, Danger Signs in Production,” April 28th, http://www.nytimes.com/2008/04/28/business/worldbusiness/28oil-WEB.html?pagewanted=1&_r=1&hp Accessed on 7/11/08) About 75 percent of the world’s oil reserves are in OPEC countries, where governments voluntarily restrict their output to push up prices. As countries like Russia slow output, analysts say OPEC will have to pick up the slack. The oil cartel currently accounts for 40 percent of the world’s oil exports. Further clouding the picture, Saudi Arabia, the world’s top oil exporter, signaled last week that it might have trouble increasing its production. Saudi Arabia, the de facto leader of OPEC, signaled it would freeze any further expansion after next year. That dims the long-range outlook for OPEC supplies, though in the near term, Saudi Arabia is expected to loom larger in the market as it completes a $50 billion plan to increase its capacity to 12.5 million barrels a day. Yet that leaves it well short of the 15 million barrels that most experts expected the kingdom to produce in the long run. The cartel’s 13 members say they plan to spend $150 billion to expand capacity by 5 million barrels a day by 2012, according to estimates by OPEC. But that falls short of most projections, which say OPEC will need to pump 60 million barrels a day by 2030, up from around 36 million barrels a day today, to meet the expected growth in demand. Reaching that level is going to be impossible unless the violence and tensions in both Iran and Iraq are resolved, analysts said. Because of sanctions for the last 30 years, both countries have been producing much less than their huge oil reserves would permit.