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Oil DA Updates Index—Debbie/Hays Lab

Oil DA Updates Index—Debbie/Hays Lab.....................................................................................................................................1

Euro Switch DA—Uniqueness—Petrodollar Dominates Now.......................................................................................................2
Euro Switch DA—Uniqueness—Saudi Holding Off Euro Switch Now........................................................................................3
Euro Switch DA—Links—US Consumption .................................................................................................................................4
Euro Switch DA—Impacts—2NC Iran Attack Scenario ...............................................................................................................5
Euro Switch DA—Impacts—2NC US-Russia Relations Module..................................................................................................6
OPEC Flood DA Answers—Saudi Arabia ↑ Production Now........................................................................................................7
OPEC Flood DA Answers—No Spare Capacity ............................................................................................................................8
OPEC Flood DA Answers—OPEC Can’t Lower Prices ................................................................................................................9
OPEC Flood DA Answers—OPEC Can’t Lower Prices...............................................................................................................10
OPEC Flood DA Answers—No Refining Capacity......................................................................................................................11
OPEC Flood DA Answers—No Refining Capacity......................................................................................................................12
Arab Oil Answers—Diversification Key to Arab Economies/Low Prices Good..........................................................................14
Venezuelan Oil Good—1NC Shell................................................................................................................................................15
Venezuelan Oil Good—1NC Shell................................................................................................................................................17
Venezuelan Oil Good—Internals—Oil Key to Venezuela Economy............................................................................................18
Yemen Oil Good—1NC Shell.......................................................................................................................................................19
Yemen Oil Good—Internals—Oil Key to Yemen Economy.........................................................................................................20
Vietnam Oil Good—1NC Shell.....................................................................................................................................................21
1NC Terrorism → Extinction (Alexander)....................................................................................................................................22
Mexican Oil Good—1NC Shell....................................................................................................................................................23
High Oil Prices Bad—Asian Economies.......................................................................................................................................24
High Oil Prices Bad—Global Economy.......................................................................................................................................25
A2 High Oil Prices Destroy Global Economy..............................................................................................................................26
A2 High Oil Prices Destroy Global Economy .............................................................................................................................27


Euro Switch DA—Uniqueness—Petrodollar Dominates Now

The dollar dominates global oil markets, shutting out the Euro
Nunan 03 (Coilin Nunan, Trustee of the Foundation for the Economics of Sustainability, 2003, “Oil, Currency and the war
in Iraq,”
Oil is not just by far the most important commodity traded internationally, it is the lifeblood of all modern
industrialized economies. If you don't have oil, you have to buy it. And if you want to buy oil on the international
markets, you usually have to have dollars. All OPEC countries agree to sell their oil for dollars only. So long as this
remained the case, the euro was unlikely to become the major reserve currency: there is not a lot of point in stockpiling
euros if every time you need to buy oil you have to change them into dollars. This arrangement also meant that the US
effectively part-controlled the entire world oil market: you could only buy oil if you had dollars, and only one
country had the right to print dollars - the US.


Euro Switch DA—Uniqueness—Saudi Holding Off Euro Switch Now

Only Saudi Arabia is stopping an imminent switch to the Euro; decrease in consumption would
cause immediate switch.
Teslik 07 (Lee Hudson Teslik, Assistant Editor of the Council on Foreign Relations, 7 December 2007, “Considering the
The pressing question, then, is whether OPEC will switch. Here, expert opinion is mixed. Pressure from Saudi Arabia,
OPEC’s heavyweight, seems likely to keep any immediate switch at bay. Two Lehman Brothers economists write on
the website of the Financial Times that Riyadh’s stockpile of petrodollars binds its prospects to the health of the currency.
Still, it seems all but certain that more oil states will follow Iran’s lead in diversifying their holdings away from the
dollar. Riyadh has substantial support (Bloomberg) in defending the dollar, but Nigeria and Angola, two of Africa’s
major oil exporters, are making new efforts to diversify their currency reserves.

Most OPEC countries consider switching; Saudi Arabia prevents the switch in the squo.
Canadian Business 05 (“Oil Currency, Oil Change”, December 2005,
Of course, the wild cards are Saudi Arabia, Kuwait and the United Arab Emirates(UAE). Saudi Arabia had
approximately US$200 billion in reserves before the 1991 Gulf War. However, the combination of a US$36-billion
war contribution to the U.S. effort at the time(mostly by Saudi Arabia, but also by some of the other Gulf States)and other
disastrous Saudi economic policies in the 1990s, led the country to a huge budgetary deficit. As a result, Saudi Arabia's
U.S. dollar reserves have [to] dwindled, given that a substantial portion of its budget goes to servicing its debt. However,
Saudi Arabia stands firm behind the dollar because of its political relations with the U.S., which guarantees the
survival of its current regime. Kuwait also stands firm behind the dollar because of its special relationship with the
U.S. Although the U.S. dollar reserves of Kuwait, Saudi Arabia and the United Arab Emirates are not very large, their strict
adherence to the petrodollar is of great political significance. Saudi Arabia's influence within OPEC--as the world's
largest oil exporter--is substantial, and every OPEC member watches what Saudi officials say and do.
Nevertheless, pressure is mounting from within OPEC (particularly from Iran, Nigeria and Venezuela), and it is only a
matter of time before Arab oil producers consider euros seriously.


Euro Switch DA—Links—US Consumption

Any decrease in US oil consumption would lead OPEC to switch trading currency to the Euro
Yarjani 02 (Javad Yarjani, Head Market Analyst of OPEC, April 2002, “Speech to the Spanish Minister of Economic
Having said that, it is worthwhile to note that in the long run the euro is not at such a disadvantage versus the dollar when
one compares the relative sizes of the economies involved, especially given the EU enlargement plans. Moreover, the euro-
zone has a bigger share of global trade than the US and while the US has a huge current account deficit, the euro
area has a more, or balanced, external accounts position. One of the more compelling arguments for keeping oil
pricing and payments in dollars has been that the US remains the largest importer of oil, despite being a substantial
crude producer itself. However, looking at the statistics of crude oil exports, one notes that the euro-zone can become
an even larger importer of oil and petroleum products than the US. It must also be recalled that the links between
crude oil and the dollar are deeply embedded in economics, politics and trading traditions.


Euro Switch DA—Impacts—2NC Iran Attack Scenario

Euro Switch leads to nuclear war with Iran

Clark 05 (William Clark, Information Security Analyst, Master of Science in Information Systems from Johns Hopkins
University, 8/2/05, “Petrodollar Warfare: Dollars, Euros and the Upcoming Iranian Oil Bourse”,
The proposed Iranian oil bourse signifies that without some sort of US intervention, the euro is going to establish a
firm foothold in the international oil trade. Given U.S. debt levels and the stated neoconservative project of U.S.
global domination, Tehran’s objective constitutes an obvious encroachment on dollar supremacy in the crucial
international oil market. From the autumn of 2004 through August 2005, numerous leaks by concerned Pentagon
employees have revealed that the neoconservatives in Washington are quietly – but actively – planning for a
possible attack against Iran. The most recent, and by far the most troubling, was an article in The American Conservative
by intelligence analyst Philip Giraldi. His article, “In Case of Emergency, Nuke Iran,” suggested the resurrection of
active U.S. military planning against Iran – but with the shocking disclosure that in the event of another 9/11-type
terrorist attack on U.S. soil, Vice President Dick Cheney’s office wants the Pentagon to be prepared to launch a
potential tactical nuclear attack on Iran – even if the Iranian government was not involved with any such terrorist
attack against the U.S.: The Pentagon, acting under instructions from Vice President Dick Cheney's office, has tasked the
United States Strategic Command (STRATCOM) with drawing up a contingency plan to be employed in response to
another 9/11-type terrorist attack on the United States. The plan includes a large-scale air assault on Iran employing
both conventional and tactical nuclear weapons. Within Iran there are more than 450 major strategic targets, including
numerous suspected nuclear-weapons-program development sites. Many of the targets are hardened or are deep underground
and could not be taken out by conventional weapons, hence the nuclear option. As in the case of Iraq, the response is not
conditional on Iran actually being involved in the act of terrorism directed against the United States. Several senior Air Force
officers involved in the planning are reportedly appalled at the implications of what they are doing – that Iran is being set up
for an unprovoked nuclear attack – but no one is prepared to damage his career by posing any objections. Why would the
Vice President instruct the U.S. military to prepare plans for what could likely be an unprovoked nuclear attack
against Iran? Perhaps one of the answers relates to the same obfuscated reasons why the U.S. launched an unprovoked
invasion to topple the Iraq government – macroeconomics and the desperate desire to maintain U.S. economic
supremacy. In essence, petrodollar hegemony is eroding, which will ultimately force the U.S. to significantly change its
current tax, debt, trade, and energy policies, all of which are severely unbalanced. World oil production is reportedly “flat out,”
and yet the neoconservatives are apparently willing to undertake huge strategic and tactical risks in the Persian Gulf.
Why? Quite simply – their stated goal is U.S. global domination – at any cost.


Euro Switch DA—Impacts—2NC US-Russia Relations Module

Russia contemplating switching from the dollar to the euro

Belton 03 (Catherine Belton, Staff writer Moscow Times, 10.10.03, “Putin: Why not Price Oil in Euros?”,
President Vladimir Putin said Thursday Russia could switch its trade in oil from dollars to euros, a move that could
have far-reaching repercussions for the global balance of power -- potentially hurting the U.S. dollar and economy
and providing a massive boost to the euro zone. "We do not rule out that it is possible. That would be interesting for our
European partners," Putin said at a joint news conference with German Chancellor Gerhard Schroeder in the Urals town of
Yekaterinburg, where the two leaders conducted two-day talks. "But this does not depend solely on us. We do not want to hurt
prices on the market," he said. "Putin's putting a big card on the table," said Youssef Ibrahim, managing director of the
Strategic Energy Investment Group in Dubai and a member of the U.S. Council on Foreign Relations, an influential body of
leading world thinkers thought to help set the United States' foreign policy agenda. "In the context of what is happening
worldwide, this statement is very important," he said.
Euro switch would end global dollar domination and destroy US-Russian relations
Global Research Foundation 03 (Global Research Foundation, 21 October 2003, “The Global Redlining of America”,
Americans can thank George Bush and his Pirates for accelerating a process that might have taken decades to evolve,
but which now looms as a "catastrophe" on the horizon. "There are already a number of countries within OPEC that
would prefer to trade in euros," said oil analyst and U.S. Council on Foreign Relations member Youssef Ibrahim, in an
interview with the Moscow Times, October 10. "Putin's putting a big card on the table." A switch to the euro "is really
possible," according to Russian economist and Putin advisor Yevgeny Gavrilenkov. "Why not? More than half of
Russia's oil trade is with Europe. But there will be great opposition to this from the United States." Gayrilenkov can
be forgiven his understatement. Russian President Vladimir Putin dropped his bombshell as if casually stating the time of day.
Is Russia considering a switch from dollar-pricing of petroleum? "We do not rule out that it is possible. That would be
interesting for our European partners," Putin told reporters at a joint news conference with German Chancellor Gerhard
Schroeder in the Ural Mountains region of Russia. Interesting, indeed. Even more important than the huge and immediate
boost that a Russian oil-euro arrangement would provide to the European Union, the move would signal the
definitive end of America's artificial dollar-domination of the planet, a privileged status the U.S. has abused as a
weapon since the end of World War II.
Deterioration of US-Russian relations leads to nuclear war
Cirincione 01 (Joseph Cirincione, Project Director of the Carnegie Endowment, 13.11.01, “Does the Size of the Russian
Nuclear Arsenal Matter?”,
There are real dangers associated with large, deployed forces. Missiles with multiple warheads are considered
high-value targets. In order to protect these assets, military commands in both countries keep such missiles on high
alert, ready to launch within minutes. Given the poor and degrading state of the Russian early-warning system, the
continued deployment of multiple-warhead ICBMs poses a major risk of accidental launch or launch-in-error, even
during periods of strategic stability. Such risk would rise exponentially if U.S.-Russian relations deteriorate.

OPEC Flood DA Answers—Saudi Arabia ↑ Production Now

No link: Saudi Arabia already plans to flood the oil market

New York Times, 6/14/08, Jad Mouawad, New York Times staff writer,

Saudi Arabia, the world’s biggest oil exporter, is planning to increase its output next month by about a half-million barrels a day, according to
analysts and oil traders who have been briefed by Saudi officials.

The increase could bring Saudi output to a production level of 10 million barrels a day, which, if sustained, would be the
kingdom’s highest ever. The move was seen as a sign that the Saudis are becoming increasingly nervous about both the political and economic effect
of high oil prices. In recent weeks, soaring fuel costs have incited demonstrations and protests from Italy to Indonesia.

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

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

Link: OPEC has spare capacity now

Martyn Wingrove, 2/14/07, industry analyst for Lloyd’s List and BNET, “OPEC pours in cash to raise capacity levels: Top exporter Saudi Arabia leads
way,” lexis.

[OPEC], especially Saudi Arabia, is spending vast capital on existing oil and gas fields to boost spare capacity and prevent
supply shocks.

The oil cartel has implemented investment programs to raise medium-term production levels to meet growing global demand with top exporter Saudi Arabia

leading the way.

Claude Mandil, executive director of the International Energy Agency, believes the oil price is connected to spare capacity, which is over
actual production levels, so a rise in this will help to lower prices.
Until 2002 OPEC's spare production capacity was around 4m to 5m barrels a day when global output was around 80m bpd. But over the past four years it has

been down to 2m bpd, or 2.5% of world production, said Mr. Mandil at International Petroleum Week.

Low spare capacity levels were partially responsible for the sky high oil prices seen since 2005. By building spare
capacity consumers hope prices will begin to fall.
"Good spare capacity should last several years," Mr. Mandil told delegates.


OPEC Flood DA Answers—No Spare Capacity

No link: Spare capacity will be completely gone by 2010

Bloomberg News, 7/9/07, Stephen Voss, editorial and documentary photojournalist, “2010 a crunch year for world oil users,” lexis.
The world faces an oil ''supply crunch'' after 2010 because demand will outpace the growth in production from non-OPEC countries,
according to the International Energy Agency.

Output growth outside of the Organization of Petroleum Exporting Countries, led by Russia and Brazil, will be countered by a decline in Europe, the Paris-

based agency said this week. That shrinks the cushion of excess capacity that OPEC members such as Saudi Arabia provide, the agency said.

''Despite four years of high oil prices, this report sees increasing market tightness beyond 2010, with OPEC spare
capacity declining to minimal levels by 2012,'' the IEA said in its Medium-Term Oil Market Report, published every six months. ''Low
OPEC spare capacity and slow non-OPEC production growth are of significant concern.''
OPEC doesn’t have spare capacity.
Gulf Times 6-10-08 (Gulf Times, Qatar’s largest English-language newspaper, “Thin spare capacity in Gulf may cap Opec
price leverage”, http://www.gulf-
However, as calls grow louder for 13-member Opec to open the taps and release more crude to the market to bring
down prices from record highs of nearly $140 a barrel, the question is how much additional oil the group, led by Gulf
producers, is actually able to supply. “There is a problem and this problem is thin spare capacity, and the markets are
realizing this now which is driving prices to new record highs,” Kuwait-based oil analyst Kamel Haramy said. “The
spare capacity for Gulf countries in general is not more than 2mn bpd.” According to the latest report by the Paris-based
International Energy Agency, Opec members could pump another 2.3mn bpd, almost all of which would come from Saudi
Arabia and the UAE. According to different estimates, Saudi Arabia, the holder of the world’s largest oil reserves, has an
estimated spare capacity of between 1.85mn and 2mn bpd, followed by the UAE with as much as 400,000 bpd. Iraq, where oil
production remains constrained since the US invasion in 2003, is producing near its limits at about 2.4mn bpd, while Iran has
another 90,000 bpd to spare, according to the IEA. Excluding Iraq and Iran, “the spare capacity of Gulf states right now
is estimated at about 1.5mn bpd. This is mainly from Saudi Arabia and the UAE, as other Gulf countries don’t have
much spare capacity,” a senior official at the Organisation of Arab Petroleum Exporting Countries (Oapec), told Zawya Dow
Jones. Other analysts take an even more pessimistic stance on how much additional crude Opec can deliver. “I
believe there is an overestimation of Opec’s spare capacity, it is definitely not anywhere near 1.5mn bpd to 2mn
bpd, at least not right now,” Issam Jalaby, an independent Iraqi oil analyst based in Jordan, said. “As it stands, I don’t
believe Gulf Opec members have more than 500,000 bpd in spare capacity, and that is mainly from Saudi Arabia,”
he said. “The market is definitely picking up on this shortage in spare capacity, and this is pressuring prices higher.
Why wouldn’t they increase – even if as a gesture – if they have the spare capacity? Oil is at $140 a barrel, what
better time to increase?” Jalaby added.


OPEC Flood DA Answers—OPEC Can’t Lower Prices

No link: OPEC flood will not affect oil prices

Africa News, 8/8/06, “Nigeria; OPEC Unable to Bring Down Crude Oil Prices – IEA,” lexis.
THE Organization of Petroleum Exporting Countries (OPEC) has no powers to control or influence the global crude markets any
further, the International Energy Agency (IEA) has said.
The Organization for Economic Corporation and development OECD, an energy watchdog and OPEC has also agreed on the fact that the cartel alone
cannot bring down crude oil prices without the easing of political tensions in the Middle East and other global hot
OPEC President Edmund Daukoru who was in Iran recently to discuss how the cartel should deal with high prices told reporters "It is not the fault of OPEC,

We have spare capacity and the market is well supplied."

IEA head Claude Mandil is also now speaking in the same language. Indeed it is not very often that OPEC and the IEA with conflicting and contrasting

interests and job descriptions agree on issues.

Yet the energy world is such an equalizer that both are coming to virtually the same conclusion about the basic issue afflicting the energy world today, how to

overcome and tame the bull ride in the oil markets and ensure security of supplies as well as security of demand, from the cartel's view point. OPEC and its

stalwarts, including Saudi Oil Minister Ali al Naimi, have been stressing for a considerable period of time now that there is plenty of oil in the market, and in

the pipeline, and all talks of shortage and scarcity is wrong, And that more oil would not help deflate oil prices. Both the IEA and OPEC now
agrees on this issue, Claude Mandil told reporters recently that the world did not need more oil to moderate record prices.
He also stressed the point the OPEC stakeholders have been trying to drive home for some time now, that the cartel alone was powerless to bring down oil

prices without the easing of political tension in the Middle East and other global hot spots."Nothing can moderate oil prices if there are no improvements in

the political situation in the Middle East and all places where there is turmoil," [IEA head] Mr. [Claude] Mandil was quoted as saying
immediately after the G8 summit, in which the Lebanon crisis loomed large. And thus he very much doubted the ability of OPEC, and its
largest producer Saudi Arabia, to bring the prices down simply by pumping more oil to the market. That won’t work, he
almost conceded.

OPEC no longer has control over the oil market.

El-Bladri 08 (Abdallah El-Baldri, Secretary- General of OPEC, 20 January 2008, Interview with Der Spiegel,,1518,529564,00.html)
I have no concrete sense of target prices, not even of a specific range. We at OPEC don't want extremes, prices that are too
high or too low. What we do want is a stable price. This would benefit the producers and the consumers. But, as I said, the
market determines that. We only dictated things for a short period in our history. Those days are long gone. The
countries that belong to OPEC currently supply about 40 percent of the petroleum consumed in the world. One
cannot exactly say that we truly control the market.


OPEC Flood DA Answers—OPEC Can’t Lower Prices

OPEC can no longer control prices.

Noguera and Pecchecnino 06 (Jose Noguera, professor at CERGE-EI, Czech Republic; Rowena A. Pecchecnino,
professor at MSU, 26 May 2006, “OPEC and the International Oil Market”,
We suggest, in contrast, that some of the blame for the economic decline may lie in the cartel rather than in the
resources it allocates. While OPEC, at least in principle, can adjust supply to maintain targeted (nominal) oil prices to
maximize oil firm profits, it has not been able to control the market adequately to ensure a steady stream of oil
derived revenues, that is, national income and so macroeconomic stability. For example, Venezuela's public sector oil
revenues were 27% of GDP in 1996 but only 12.5% in 1998 (Barnett and Ossowski, 2003). The orderly market, the
supposed empirical manifestation of a profit oriented pricing policy, is claimed to be a reality (Jalali-Naini and Asali,
2004), but the implied macroeconomic benefits to OPEC members are more like a fiction. When OPEC was
founded in the early 1960s, the oil market was quite stable and the cartel strategy appeared to work. Yet, with the
high oil market volatility from the 1970s on, the dual OPEC goals of long-term growth and development may not
be achievable via the unitary profit-oriented pricing policy.


OPEC Flood DA Answers—No Refining Capacity

No link: No space capacity or tanker capacity

French Press Agency, 6/10/08, “Saudi talks call seen as bid to shift oil price blame,” lexis.
Saudi economist Ali al-Dakkak said world prices were being driven by "wild speculation" and a lack of refining capacity in consumer
countries, especially the United States.

"Consumer demands for increasing output are politically motivated," he said.

OPEC has maintained that the oil market is adequately supplied and that there is no need for any output increase,
although a shortage of spare production capacity has kept the market on edge.
Harami said that there needed to be more investment in boosting capacity so that there was a buffer to meet spikes in demand.

"The world needs at least three million barrels (per day) of sustainable spare output capacity, which should be increased by one million barrels every year.

This requires huge investments," Harami said.

At present, only Saudi Arabia has some spare production capacity, but well below the required levels, he said.
No link: No refining capacity
Reuters, 6/28/06, “Saudi Arabia finds buyers for all its crude difficult to find,” lexis.
Saudi Arabia cannot sell some of its crude oil production due to a lack of buying interest from oil refiners, the kingdom's
ambassador to the United States told a conference in Houston yesterday. "We have 300,000 to 400,000 barrels per day that is going unsold because there are

no buyers," said Prince Turki Al-Faisal. Saudi Arabia has said it will sell as much oil as buyers want in order to bring prices down from their current levels but

Saudi crude oil production dipped to just more than nine million barrels a day in May this year amid a lack of buying interest. Qatar Oil Minister Abdullah al-

Attiyah remarked on the sidelines of the same conference on Monday that a lack of heavy crude oil refining capacity worldwide was
making it difficult for OPEC to sell all of its production, although he added the group should not alter its production policies until oil prices
fall to $50US a barrel. OPEC members have attributed the rise in oil prices in 2006 to factors beyond their control, such as worries over the security of oil

supplies due to political unrest in major oil exporters and the consequences of years of underinvestment in oil refining capacity.

No link: No refining capacity

Martyn Wingrove, 6/29/06, industry analyst for Lloyd’s List and BNET, “Heavy oil overload hits OPEC producers: A fall in demand for heavy crude has

left producers with volumes no one wants,” lexis.

"[OPEC is] offering a lot of heavy oil but some refineries cannot treat it," he said in Houston.
"But we are not cutting production and are still offering this oil."

Other members of OPEC are finding it hard to obtain buyers for heavy crude, which makes up most of the known spare
production capacity.
Saudi Arabia, the world's largest oil exporter, has lowered its production rate to meet actual demand for its crude.

As the kingdom's ambassador to the US told a conference in Houston this week, Saudi Arabia simply cannot sell some of its crude oil
production due to a lack of buying interest from oil refiners.


OPEC Flood DA Answers—No Refining Capacity

There aren’t enough refineries and new ones are too expensive to build.
The Economist 08 (The Economist, 29 May 2008, “Double, Double, Oil and Trouble”,
The problem is exacerbated by a growing mismatch between the type of oil being produced and the refineries that
must process it. The most common benchmark prices, including the one used in this article, refer to “light” crude, the least
viscous sort, which produces the most petrol and diesel when refined. “Heavy” oil, by contrast, yields more fuel oil, which is
used mainly for heating. At the moment, diesel is in short supply and there is a glut of fuel oil. That makes processing
heavy oil unprofitable for some refineries, since the gains from diesel are outweighed by losses on fuel oil. As
refineries turn instead to lighter grades, it pushes their prices yet higher. The discount on heavier crudes has risen to
record levels. But even then, points out Ed Morse, of Lehman Brothers, another investment bank, Iran is having trouble
selling the stuff. It is storing huge quantities of unsold oil on tankers moored off its coast. Presumably, Iran and other heavy-
oil producers will eventually be obliged to drop prices far enough to make processing the stuff worth refiners' while. In the
longer run, more refineries will invest in the equipment needed to crack more diesel out of heavy oil. Both steps will, in effect,
increase the world's oil supply, and so help to ease prices. But improving an existing refinery or building a new one is a
slow and capital-intensive business. Firms tend to be very conservative in their investments, since refineries have
decades-long life-spans, during which prices and profits can fluctuate wildly. It can also be difficult to find a site
and obtain the right permits—one of the reasons why no new refineries have been built in America for over 30
years. Worse, new kit is becoming ever more expensive. Cambridge Energy Research Associates (CERA), a
consultancy, calculates that capital costs for refineries and petrochemical plants have risen by 76% since 2000.
The US’ refining capacity has been effectively crippled, stopping a price drop.
Washington Times 05 (“US to make Strategic Petroleum Reserve Available to Oil Refineries”, 9/1/05,
The petroleum reserve could be emptied; but if refinery capacity is not available to process the crude into gasoline,
diesel, jet fuel, heating oil and other petroleum products, then the extra crude emptied onto the market will have little
impact on the ultimate price of gasoline and other fuels. With nine Gulf Coast refineries closed because of Katrina,
there is a massive shortage of refinery capacity. Those nine refineries represent 12 % of US refining capacity, or about 2
mm barrels of oil per day. Several factors have contributed to the refinery shutdowns, including massive flooding, the loss of
power and the evacuation of thousands of skilled technicians needed to operate these particularly pernickety plants. Katrina
also inflicted substantial damage on major pipelines bringing crude to operating refineries and finished products to
market. US refineries have become increasingly temperamental because they have been around for a very long
time. In fact, we haven't built a new refinery in more than 25 years. Yes, existing refineries have undergone
significant expansion over the years as others have been shuttered, but many of them are more than 30 years old.
Already operating near total capacity before Katrina, the aging refinery infrastructure left little margin for error.
Katrina, needless to say, obliterated that margin and then much more. Now we are paying the price, which, appropriately
enough, has reflected itself in soaring gasoline prices around the nation. Beyond more frequent breakdowns and fires,
America's pre-Katrina refinery problem was further apparent from the rising level of refined petroleum products
that have been imported in recent years. Since 1995, imported petroleum products have nearly doubled, rising from
1.6 mm bpd to more than 3.1 mm for the first half of 2005.


Arab Oil Answers—Diversification Key to Arab Economies/Low Prices


No impact: Economic diversification saves oil-producing countries from economic collapse

following a price crash: Dubai proves
Associated Press, 2/4/07, James Calderwood, AP writer, “Leaders, economists say diversification may save Dubai from oil crash,” lexis.
Dubai's push to diversify its economy may not only save it from a possible crash in oil prices but could also serve
as a model to other Gulf Arab states for a post-oil era, its leader and economists said.
Dubai's ruler, Sheik Mohammed bin Rashid Al-Maktoum, vowed at a ceremony Saturday to make his emirate "a pioneering global city" that would be "free of

the direct influence of oil price fluctuations."

The occasion marked the launching of the so-called Dubai Strategic Plan an ambitious project to increase the real per capita gross domestic product, which takes into account inflation, of this Arab city from its

current value of $31,000 to $44,000 in 2015.

The increase would require a sky-high 11 percent annual GDP growth rate.

Al-Maktoum said the non-oil sector now accounts for 97 percent of the emirate's total GDP a significant shift from 1975,
when oil revenues made up 64 percent of the GDP.

This is in sharp contrast to the oil-rich Abu Dhabi emirate, which produces more than 85 percent of all oil from the Emirates combined. The non-oil sector

contributed only 37 percent of Abu Dhabi's GDP in 2006, according to official sources.

Unlike Abu Dhabi and the five other emirates in the oil-rich United Arab Emirates, Dubai is not home to significant oil reserves.

This has forced it to tap into other assets and become a prime holiday location and investment banking center for the rich and famous,
especially from the Arab world. Dubai has also taken advantage of its location to become the biggest re-exporting center in
the Middle East, accounting for about 85 percent of the Emirates re-export trade, according to official statistics.
Tactics to attract investment have included liberal government policies, highly developed infrastructure, and low operational costs.

"This city has tried for the last 15 years to accomplish one strategic objective to build the first non-oil economy in the region," said Abdul Khaleq Abdulla,

economist and political science professor at United Arab Emirates University in Abu Dhabi.

"It wants to prove that life after oil is possible, and can even be better," Abdulla said. "Dubai has proven that we
should take it seriously."
Even though Dubai still exists in an oil region and attracts oil money surplus, when the oil price drops, Abdulla said, "There is not going to be a
crash landing."
Steve Brice, regional head of research for the Standard Chartered Bank, said Dubai leaders broke ahead of other Gulf Cooperation Council, or GCC, countries

in the early 1990s by realizing that oil revenues alone were not sufficient to develop the economy.

Now Dubai serves as a leader for other Gulf countries in diversification, Brice said. "Oil prices matter less and less."


Venezuelan Oil Good—1NC Shell

A price crash devastates the Venezuelan economy

Associated Press, 8/27/07, John Lyons, Wall Street Journal staff writer, “Venezuelans chase dollars amid economy worries,” lexis.
But there are signs of trouble. Oil production is falling as the state oil company loses top managers and invests less.
Inflation is running at 19 percent, according to the Venezuelan government, though many private economists say the rate is more like 25 percent, given the increasing role of a black
market in hard-to-obtain goods. Partly as a result, the bolivar, officially fixed at 2,150 per dollar, has lost more than half its value on the black market. Many locals fear that official devaluation and runaway

inflation is inevitable.

[Eleven paragraphs later]

Few economists who follow Venezuela are forecasting deep financial trouble soon, at least while oil prices remain high. But the longer-term
prognosis is far from clear. Mark Weisbrot, co-director of the Center for Economic and Policy Research, a Washington think tank, who is generally supportive of Mr. Chavez, says the government has time to

boost economic growth by investing in industries outside the oil sector. Other economists are more skeptical. They contend that the government isn't making enough long-term investments, such as building

factories, and that it remains far too dependent on oil revenue.

"We don't know when a crash will happen," says Alberto Ramos, a senior Latin America economist at Goldman Sachs. "But Chavez is driving down the wrong side of the road."
Collapse of the Venezuelan economy causes war throughout the Southern Hemisphere
Knight Ridder and Tribune, 5/10/00, Juan Gabriel Tokatlian, Director of Political Science and International Relations at the Universidad de San Andrés, “Economic and political collapse
of Andean region is likely to threaten more prosperous neighbors to the north and south,” lexis.

As we enter the 21st century, these trends have only accelerated. In Ecuador, President Jamil Mahaud is overthrown; in Peru, President Fujimori attempts to

manipulate the election to perpetuate his autocratic rule; in Venezuela, the political environment continues to deteriorate under the
populist-messianic rule of President Hugo Chavez; in Bolivia, the economy is near collapse under President Banzer; and in Colombia, President Andres

Pastrana faces an explosive confrontation with drug lords and rebels.

Armed conflict between nations remains a real possibility. While the border dispute between Ecuador and Peru appears to have been resolved, the current hottest
boundary dispute is between Colombia and Venezuela.

Human rights are routinely violated through the region, particularly in Colombia and Peru. The area is home to some of the most
intensive cultivation, processing and trafficking in cocaine and, along with Mexico, is home to the lucrative and violent drug emporium. It is where one
can find some of the most corrupt governments in the world, according to numerous independent organizations. Everywhere, state institutions
are breaking down and the traditional elites are losing credibility, legitimacy and power. It should come as no surprise that Andean countries are seeing a growing autonomy by the military and a declining in

civilian authority.

Finally, the environment in these countries, which along with Brazil encompass the Amazon basin, is undergoing degradation and depletion at an alarming rate, according to the United Nations. The economies of

these countries remain mired in recession, with high rates of unemployment, according to the World Bank. They continue to suffer from financial mismanagement, growing poverty, a lack of foreign investment,

and a dangerous concentration of wealth. The quality of life is falling in all five countries.

The crisis in the Andes region can no longer be ignored by their more prosperous and stable neighbors to both the north and south. If for
no other reason than to ensure their own security, nations such as Argentina need to take the lead in launching a serious diplomatic and economic effort to resolve the underlying issues that have

created widespread chaos in the Andes.

The United States needs to join with like-minded regional powers to design an initiative to rescue and reform the Andean countries. What is needed is a mixture of the Marshall Plan and an Alliance for Progress

that would offer trade incentives, investment opportunities, technical-assistance programs, institutional change, judicial reform and military modernization.

Without such leadership from countries both north and south of the Andean countries, the region is in danger of
degenerating further into chaos and violence. The results of such a collapse are certain to be felt throughout the


Venezuelan Oil Good—1NC Shell

War in the Southern Hemisphere leads to global nuclear war

David Krieger, 9/15/06, president of the Nuclear Age Peace Foundation, “Nuclear Weapons: The Narrowing North-South Divide,”

North and South are approximations, reflecting both a geographic and economic divide. There is no monolithic North, nor South. There is South within North and North within South, inasmuch as in the North

there exists much poverty and in the South there is a stratum enjoying great wealth in most societies. In general, though, the North tends toward industrialization, wealth, dominance

and exploitation, while the South, which has a long history of domination by the North in colonial and post-colonial times, tends toward poverty, including

extreme and sometimes devastating poverty. Within both South and North powerful subcultures of militarism and extremist
violence have emerged that, when linked to nuclear weapons, threaten cities, countries, civilization and the future
of life.
Nuclear weapons have been primarily developed and brandished by the North, and used to threaten other countries, North and South. The South, which
for the most part has lacked the technology to develop nuclear weapons, has begun to cross this technological
threshold and join the North in obtaining these weapons of mass annihilation. The original nuclear weapons states - the US,
Soviet Union, UK, France and China - were largely of the dominant North, although the Soviet Union had major areas of poverty and China, although

geographically in the North was the exception, reflecting the poverty of the South after having been subjected to humiliating colonial domination and


Israel, an outpost of the North surrounded by oil-rich but underdeveloped countries of the South, surreptitiously developed a nuclear arsenal. India and Pakistan, coming from a background of poverty and

colonial domination, developed nuclear arsenals after it became clear that the other nuclear weapons states were intent upon indefinitely maintaining their nuclear arsenals rather than fulfilling their obligations for

nuclear disarmament . Both countries were clearly on the Southern side of the economic and colonial divide, as was the final nuclear weapons state, North Korea,
which is thought to have developed a small arsenal of nuclear weapons.

The world is at a critical nuclear crossroads. In one direction lies an increasing number of nuclear weapons states
and nuclear-armed terrorist organizations, a world of unfathomable danger. In the other direction, lies a nuclear weapons-free
world. It is the responsibility of those of us alive today on our planet to choose in which direction we shall travel. We do not have the option of standing still,

with North and South, rich and poor, dominant and exploited frozen in time and inequity. Terrorism is inherent in the possession and
implicit threat of use of nuclear weapons by any country. Such state terrorism creates the possibility that extremist
non-state actors, who can neither be located nor deterred, will gain possession of these weapons or the materials to
make them and threaten or use nuclear weapons against even the most powerful, nuclear-armed countries.


Venezuelan Oil Good—Internals—Oil Key to Venezuela Economy

Oil is a key staple of the Venezuelan economy – an oil flood kills the economy
Library of Congress – Federal Research Division, March 2005, “Country Profile: Venezuela,”
Overview: Petroleum has been the mainstay of the Venezuelan economy since the 1920s and accounts for between one-quarter
and one-third of gross domestic product (GDP), about 80 percent of export earnings, and as much as one-half of the central
government’s operating revenue. Venezuelan Petroleum is one of the world’s largest oil companies and Venezuela’s leading employer, although it
fired 18,000 of its 48,000 employees after the strike of 2002–3. The company’s revenues in 2004 were an estimated US$32 billion. Venezuela was the world’s fifth largest oil producer until

the end of the 1990s, when it was overtaken by Mexico. Since the government reopened the oil sector to private capital in the 1990s and modified oil taxation, the government’s share of oil revenue from

Venezuelan Petroleum has been falling and amounted to only US$0.39 per US$1 by 2000, as compared with US$0.71 per US$1 in 1981. Dependence on oil-export revenue makes Venezuela

particularly vulnerable to fluctuations in the global economy. Although Venezuela benefited from the increase in petroleum prices beginning in the early

1970s, it suffered from oil price declines in 1986, 1998, and 2001. Oil prices started to recover again in March 2002. Despite a massive windfall in oil
revenue resulting from rising world prices since late 2002, Venezuela has been running a sizable central government deficit, largely as a result of fiscal profligacy.

[Ten paragraphs later]

With 77.8 billion barrels of proven oil reserves in 2004, Venezuela has the largest proven oil reserves in South America and the sixth
largest in the world—more than Canada, Mexico, and the United States combined. Venezuela’s 2002 production of 2.8 million barrels per
day (bbl/d) of crude was a drop of 8.3 percent over 2001 and the country’s lowest production figure since 1994. In 2003, a year in which production was halted for a couple of

months by a general strike and further disrupted by the firing of nearly half of the state oil company’s work force, Venezuela's total oil production was an estimated 2.6 million bbl/d. In 2004 oil production totaled

about 3 million bbl/d, according to the government’s estimate. Prior to President Chávez's December 1998 election, Venezuela regularly exceeded its Organization of the Petroleum Exporting Countries (OPEC)-

agreed oil production targets. Chávez has maintained a policy of strict adherence to OPEC quotas and has played a leading role in shifting OPEC from a volume-oriented strategy to one of controlling prices. With

planned investments of US$26 billion in oil and natural gas exploration and production between 2004 and 2009, Venezuelan Petroleum expects oil production to reach 5 million bbl/d by 2009.


Yemen Oil Good—1NC Shell

Price crash kills Yemen’s economy

Associated Press, 1/16/07, “Nigeria says OPEC should wait until February before making new cuts in oil production,” lexis.
Meanwhile, Yemen, which is not a member of the OPEC, said its economy would be hurt if crude prices slip further.
Yemen's oil minister, Khalid Mahfoudh Bahah, said his government's budget has factored in crude prices averaging at $55US a barrel this year. Yemen

currently produces 426,000 barrels a day.

"Current prices are acceptable. If (the average) goes below $55US that will affect [Yemen’s] economy," he told reporters on the
sidelines of the energy conference in New Delhi.

Yemeni economic collapse leads to terrorism

Washington Times, 8/25/04, Peter Willems, staff writer for The Washington Times, “Fixing economy vital to Yemen,” lexis.
Despite government successes in the war on terror, many say Yemen still must reduce its grinding poverty and revive the economy
or it will remain one of the region's most fertile recruiting grounds for al Qaeda and other radical Islamist groups.
Renewed fighting this week in northern Yemen with followers of radical Muslim cleric Hussein Badr Eddin al-Houti provided a grim reminder of the

country's challenges, despite the capture of hundreds of terror suspects and key al Qaeda operatives in the past three years.

The government has started to clamp down on religious schools where radical Islam is thought to be taught, but critics worry that more fundamental problems are not being addressed.

Abdullah al-Faqih, a professor of political science at San'a University, said if the government does not act soon to reform the economy, "Yemen will undergo

periods of instability, conflict and lawlessness."

"It will be a breeding ground for extremism and terrorism. It will serve as a destabilizing force in the region," he
Underscoring the Bush administration's concern about cultivating Yemeni cooperation in the global terrorism war, a U.S. military delegation arrived in Yemen

this week for talks on security and military cooperation and combating terror, Agence France-Presse reported, citing local official sources and the U.S.


The delegation is being headed by Brig. Gen. Samuel Helland, commander of the joint forces in the Horn of Africa.

The official weekly September 26 reported that the delegation will meet Yemeni officials in the ministries of interior and defense for security and military


Anti-U.S. sentiment is high in Yemen, as in many countries in the region, because of the presence of U.S. troops in Iraq and the Israeli-
Palestinian conflict.

[Twenty one paragraphs later]

"Poverty breeds terrorism," Mr. Hindle said. "It's important for the Yemeni government to tackle the poverty issue to help prevent the emergence of extremism. If the government acts now,
it will be able to improve the lives of the Yemeni people. But the longer it waits, the more difficult it will become."

Insert terrorism impact (Alexander, Easterbook, Beres, etc.)


Yemen Oil Good—Internals—Oil Key to Yemen Economy

An oil flood causes a collapse of Yemen’s economy

UPI, 12/7/04, “Yemen economy reliance on oil deplored,” lexis.
An economic report warns against the dangers of having the Yemeni economy depend largely on oil exports
making vulnerable to international oil prices.
The report published in daily Rai News criticized the government for focusing on developing the oil sector at the expense of other sectors, including

agriculture and fisheries.

"Non-oil exports have not been developed because there is special focus on the exportation of one item which
makes the whole Yemeni economy more vulnerable to fluctuations in the oil market ... This automatically reflects
adversely on the country's foreign currency reserves," the report said.
It noted in 2000 Yemen's oil exports constituted 96.8 percent of total exports and in 2004 the percentage dropped to 90.4 percent. Non-oil exports amounted to

only 3.2 percent in 2000 and 9.6 percent in 2003.

The report deplored the alarming drop in the productivity of non-oil sectors, especially agricultural products and fisheries.


Vietnam Oil Good—1NC Shell

The Vietnamese economy relies heavily on oil exports – an oil flood would kill the economy
Library of Congress – Federal Research Division, December 2005, “Country Profile: Vietnam,”
Energy: Petroleum is the main source of commercial energy, followed by coal, which contributes about 25 percent of the country’s energy (excluding

biomass). Vietnam’s oil reserves are in the range of 270–500 million tons. The World Bank cites the lower bound of the range. Oil production rose
rapidly to 403,300 barrels per day in 2004, but output is believed to have peaked and is expected to decline gradually. Vietnam’s anthracite coal reserves are estimated at
3.7 billion tons. Coal production was almost 19 million tons in 2003, compared with 9.6 million tons in 1999. Vietnam’s potential natural gas reserves are 1.3 trillion cubic meters. In 2002 Vietnam brought ashore

2.26 billion cubic meters of natural gas. Hydroelectric power is another source of energy. In 2004 Vietnam began to build a nuclear power plant with Russian assistance.

Crude oil is Vietnam’s leading export, totaling 17 million tons in 2002; in 2004 crude oil represented 22 percent of all export
earnings. Petroleum exports are in the form of crude petroleum because Vietnam has a very limited refining capacity. Vietnam’s only operational refinery,
a facility at Cat Hai near Ho Chi Minh City, has a capacity of only 800 barrels per day. Several consortia have abandoned commitments to finance a 130,000-

barrel-per-day facility at Dung Quat in central Vietnam. Refined petroleum accounted for 10.2 percent of total imports in 2002.

Vietnam’s economic strength is the only thing holding back terrorism

Asia Times, 1/18/08, Shawn W. Crispin, Southeast Asia Editor for the Asia Times, “Democratic pebble in Vietnam's shoe,”

Behind the speaker hung conspicuously the red-and-gold striped flag of the former South Vietnam, a still potent symbol for the country's post-1975 Diaspora.

So potent, in fact, Vietnamese diplomats requested on January 5 that Malaysian officials remove the flag from the civil society-promoting
conference, which assembled 200 ethnic-Vietnamese youth from around the world, including from Vietnam.

The Vietnamese officials also claimed that some of the conference's speakers promoted terrorism inside Vietnam during their presentations and
told their Malaysian counterparts that if the dissident flag was allowed to fly, it could complicate bilateral ties only days before an official Vietnamese

delegation was due to arrive in Malaysia. The flag, nonetheless, remained aloft throughout the event.

The symbolic skirmish marked the latest confrontation on an international stage between Vietnam's Communist Party and
the exile-run, pro-democracy Viet Tan. On November 17, Vietnamese authorities arrested and jailed a group of Viet Tan members, including US, French,
Thai and Vietnamese citizens, who distributed fliers calling for non-violent democratic change. Four of the six foreign nationals have since been released, with one American and

one Thai citizen still in detention.

[Seventeen paragraphs later]

Moreover, the government continues to implement World Bank and United Nations Development Program advised economic reforms and recently took onboard a certain civil society call for more participation in

government planning approvals. Compared to Cambodia and China, where corrupt government officials have with impunity seized lands occupied by poor peasants, Vietnamese authorities have shown more

sensitivity towards its aggrieved farmers, addressing land-grabbing complaints on a case-by-case basis. That would seem to indicate that certain upward pressures are
impacting on the Communist Party's decision-making, a realization Viet Tan has made and is now trying to
capitalize on through calls for more clean governance, social justice and political freedoms. Barring any sudden collapse in economic
growth, political change in Vietnam is still most likely to emerge from Communist Party cadres themselves, including the
younger generation who favor political reforms that move the party away from its traditional faceless functionary approach.

Insert terrorism impact (Alexander, Easterbrook, Beres, etc.)


1NC Terrorism → Extinction (Alexander)

Terrorists will seek, acquire, and use WMDs—this risks extinction

Alexander 03 (Yonah, professor and director of the Inter-University for Terrorism Studies, Wash Times, 8/28, lexis)
Unlike their historical counterparts, contemporary terrorists have introduced a new scale of violence in terms of conventional and
unconventional threats and impact.
The internationalization and brutalization of current and future terrorism make it clear we have entered an Age of Super
Terrorism [e.g. biological, chemical, radiological, nuclear and cyber] with its serious implications concerning national, regional and
global security concerns.

Two myths in particular must be debunked immediately if an effective counterterrorism "best practices" strategy can be developed [ e.g.,
strengthening international cooperation].

The first illusion is that terrorism can be greatly reduced, if not eliminated completely, provided the root causes of conflicts -
political, social and economic - are addressed.
The conventional illusion is that terrorism must be justified by oppressed people seeking to achieve their goals and consequently the argument advanced by

"freedom fighters" anywhere, "give me liberty and I will give you death," should be tolerated if not glorified.

This traditional rationalization of "sacred" violence often conceals that the real purpose of terrorist groups is to gain political power through the barrel of the

gun, in violation of fundamental human rights of the noncombatant segment of societies. For instance, Palestinians religious movements [ e.g., Hamas, Islamic

Jihad] and secular entities [such as Fatah's Tanzim and Aqsa Martyr Brigades]] wish not only to resolve national grievances [such as Jewish settlements, right

of return, Jerusalem] but primarily to destroy the Jewish state.

Similarly, Osama bin Laden's international network not only opposes the presence of American military in the Arabian Peninsula and Iraq, but its stated

objective is to "unite all Muslims and establish a government that follows the rule of the Caliphs."

The second myth is that strong action against terrorist infrastructure [leaders, recruitment, funding, propaganda, training,
weapons, operational command and control] will only increase terrorism. The argument here is that law-enforcement efforts
and military retaliation inevitably will fuel more brutal acts of violent revenge.
Clearly, if this perception continues to prevail, particularly in democratic societies, there is the danger it will paralyze
governments and thereby encourage further terrorist attacks .
In sum, past experience provides useful lessons for a realistic future strategy. The prudent application of force has been
demonstrated to be an effective tool for short- and long-term deterrence of terrorism . For example, Israel's targeted killing of
Mohammed Sider, the Hebron commander of the Islamic Jihad, defused a "ticking bomb." The assassination of Ismail Abu Shanab - a top Hamas leader in the

Gaza Strip who was directly responsible for several suicide bombings including the latest bus attack in Jerusalem - disrupted potential terrorist operations.

Similarly, the U.S. military operation in Iraq eliminated Saddam Hussein's regime as a state sponsor of terror.

Thus, it behooves those countries victimized by terrorism to understand a cardinal message communicated by Winston Churchill to the
House of Commons on May 13, 1940: "Victory at all costs, victory in spite of terror, victory however long and hard the road may be : For
without victory, there is no survival."


Mexican Oil Good—1NC Shell

Mexico’s economy relies heavily on oil – an oil flood would kill the Mexican economy, and in turn,
the U.S. economy
Library of Congress – Federal Research Division, July 2006, “Country Profile: Mexico,”
Overview: Mexico is a middle-income country with a developing economy that is closely linked to the much larger economy of the
United States. Mexico’s economy ranks as “mostly free” in the 2006 Index of Economic Freedom (a joint publication of the Wall Street Journal and the
Heritage Foundation). From the 1940s through the late 1960s, successive governments followed an economic strategy of import substitution and fiscal and monetary restraint intended to promote growth

while holding inflation in check. During the 1970s, populist governments abandoned fiscal discipline and oversaw a massive expansion of consumer subsidies and state ownership of productive sectors.

Unsustainable public-sector spending backed by over-reliance on oil export revenues and abundant international credit contributed to chronically high inflation and wild fluctuations in economic performance. As

a result, the economy experienced spurts of rapid growth followed by sharp depressions in 1976 and 1982. The mid- to late 1980s were years of economic austerity and stagnant growth during which Mexico was

able to balance its national accounts while combating high inflation. Gross domestic product (GDP) grew at an average rate of just 0.1 percent per year between 1983 and 1988. During these years, monetary

policy was severely restricted and public-sector spending sharply curtailed.

The late 1980s and early 1990s saw far-reaching market-oriented structural reforms, including privatization of hundreds of state-owned enterprises, liberalization of foreign investment laws, deregulation of the

financial services sector, and across-the-board reductions in tariffs and nontariff trade barriers. These reforms, which culminated in the ratification of the North American Free Trade Agreement (NAFTA) in 1994,

attracted an influx of US$148 billion in foreign direct investment (FDI) during the next decade. From 1988 to 1994, GDP growth averaged 2.6 percent, sustained by exports and an influx of foreign capital.

However, the collapse of the peso in December 1994 and the ensuing economic crisis erased most of the real wage gains from the previous years. In response to the 1994 crisis, Mexico passed legislation granting

greater independence to its central bank. Growth resumed in the late 1990s, but the recovery was cut short by the spillover effects of the 2001 recession in the United States. Since 2002 a worldwide commodity

price boom, a U.S. economic recovery, and sound macroeconomic policies have helped boost economic growth while allowing inflation to remain in the single digits. ((OT))

The economy is hampered by structural weaknesses that limit Mexico’s potential for future growth and job creation. Mexico’s workers are generally low skilled and have less schooling than workers in advanced

industrial economies. This deficit in human capital manifests itself in terms of stagnant labor productivity and real wages, as well through the existence of a large “informal” labor sector that deprives the

education, health care, and social security systems of crucial tax revenues. Income distribution remains highly unequal; about half of Mexico’s population lives in poverty.

Despite recent reforms, public policy continues to impose artificial restraints on the economy’s competitiveness and growth potential: rigid labor and

commercial codes discourage hiring and inhibit informal workers from transitioning into the formal economy; the lucrative energy sector, which remains

state-owned, suffers from numerous inefficiencies and undercapitalization; and the federal government relies heavily on the oil industry for
revenues, which consequently renders public budgets vulnerable to cyclical fluctuations in hydrocarbon prices. While the liberalizing reforms associated
with NAFTA have been a boon to northern and central Mexico’s manufacturing centers, few new jobs have materialized for the predominantly agricultural

states in the south and southwest. This uneven development pattern has failed to slow large-scale wage migration to the United States. As global competition for capital investment has increased—

particularly from low-cost manufacturing in Asia—Mexico’s status as a premier export hub for the North American market has eroded.

[Seven paragraphs later]

Energy: Mexico is the world’s sixth largest oil producer, extracting an average of 3.4 million barrels per day of crude oil in 2005. As of January
2005, Mexico had 14.6 billion barrels of crude oil reserves—the third largest reserves in the Western Hemisphere—mostly located in the Cantarell fields in the

Gulf of Mexico. About half of Mexico’s crude oil production is consumed domestically, while the other half is exported—mainly
to the United States. Over the past two decades, the oil sector’s share of total export revenues has fallen sharply as the economy has diversified and as an
increasing share of production has been dedicated to meeting domestic demand. Crude oil exports accounted for 12 percent of total export revenues in 2004 versus 61 percent in 1985.

Although production has remained relatively constant in recent years, few new oil reserves have been discovered. Mexico’s state oil corporation, Petróleos de Mexico (Pemex), operates an extensive pipeline

network consisting of approximately 453 pipelines spanning 4,700 kilometers.

Insert relevant impacts (Mead 92, etc.)


High Oil Prices Bad—Asian Economies

High oil prices cause huge Asian inflation

Associated Press, 8/21/05, “Oil-guzzling Asian economies batten down for 70-dollar oil prices,” lexis.
Asia's oil-guzzling economies are bracing themselves for the worst as crude prices threaten to hit 70 dollars a barrel, stoking fears of
slower growth, soaring inflation and rising interest rates.
[Five Paragraphs Later]

For Thailand, soaring oil prices would slash corporate profits as consumers tighten their belts, Macquarie Securities' head of research Andrew
Stotz said.

Other analysts said the economy would suffer from higher inflation, slower GDP growth and a wider current account and trade
[Six Paragraphs Later]

Bangladesh, whose oil bill totaled 1.5 billion US dollars in the financial year ending June 30, said skyrocketing prices have already strained the
country's balance of payments position. Inflation is approaching 10 percent.
Sri Lanka's annual average inflation jumped to 12.7 percent this month, up from 4.3 percent a year ago, mainly due to higher oil prices,
the central bank said.

Vajira Premawardhana, Executive Director at LOLC Securities, said the government may try to keep retail prices artificially low because of impending


But economist Harsha de Silva said it would be difficult.

"Who's going to pay for the free lunch? Something has to give in, either exchange rate or inflation," de Silva said.
[Five Paragraphs Later]

"If higher oil prices act as a drag on the US economy and people tighten their consumption, the Japanese stock markets will likely be impacted,"
said Ryuta Otsuka, strategist at Tokyo Securities.

Japan spent 55 billion US dollars on oil imports last year.

Analysts in China said the impact of high oil prices on the stock market would be mixed.

"Enterprise will pass their extra costs on to the consumers. But energy-consuming items such as cars make up a relatively small part of the typical consumer

basket, so the impact on private consumer spending will be limited," said Niu Li of the State Information Center, a government think-tank.

For Taiwan, 70-dollar oil prices would hurt economic growth and fuel inflation, said Norman Yin, professor of National Chengchi University.
"If the upward trend of oil prices continued, the (impact) on the economy would be particularly felt from the third quarter," Yin said.
Soaring oil prices collapse the fragile Asian economy
Japan Economic Newswire, 11/10/00, “APEC remains concerned about oil price hike,” lexis.
Asia-Pacific Economic Cooperation (APEC) forum, in a report presented to APEC senior officials Friday, has reiterated its concern about soaring
oil prices and their impact on a fragile Asian economic recovery.
'Higher oil prices, if sustained, could pose a downside risk on the generally positive outlook of APEC economies through next year,' said the
report prepared by a committee within the group.

'The majority are oil-importing economies, so that the net effect on APEC economies as whole would be negative,' the report, which was
discussed by APEC senior officials on the first day of their two-day meeting in Brunei's capital, said.


High Oil Prices Bad—Global Economy

Sky high oil prices collapse the global economy

Darby Mullany, Fred Katayama, and Stephen Roach, 8/19/04, CNN Anchor, CNN Correspondent, and Chief Economist at Morgan

Stanley, lexis.

MULLANY: So inching closer to 50. That's a big psychologically important level. People are worried that high oil prices could push the economy
into a full-fledged recession.
Fred Katayama takes a look. (BEGIN VIDEOTAPE)

FRED KATAYAMA, CNNfn CORRESPONDENT(voice over): As gas price remain sky high, consumers tighten their wallets in the US. And in Japan, the

world's second largest economy, businesses crimp spending last quarter. Economist Stephen Roach predicts a 40 percent chance that the global economy
will slide into a recession next year.
STEPHEN ROACH, CHIEF ECONOMIST, MORGAN STANLEY: It's not just that the oil price rises and therefore the economy rolls over. It's that higher
oil prices if they hit a strong economy, they will not hurt that much. If they hit a vulnerable economy they will hurt a lot. In the US, right
now, I think it's at its maximum state of vulnerability.
KATAYAMA: Vulnerable because of sluggish job and wage growth in the US budget and trade deficits. Europe and Asia's economies are at risk because of

their heavy reliance on exports.

What's more, the price of crude oil has spurted from $33 to $ 47 this year and historically, an energy price hike has preceded just about every
global recession.


A2 High Oil Prices Destroy Global Economy

High oil prices don’t affect the economy

Oil & Gas Journal, 8/23/04, “High oil prices not squeezing economic growth – yet,” p. 18, lexis.
Conventional wisdom states that high oil prices slow economic growth. This conventional wisdom does not apply to the recent
period of high oil prices. The conditions surrounding the recent period of high oil prices are different from the conditions that
prevailed in the 1970s and that helped form the conventional wisdom.

The conventional wisdom generally holds if all the variables other than oil prices and economic growth remain virtually constant. These other variables

include exchange rates, government expenditures, military expenditures, interest rates, and expectations. Based on the conventional wisdom, the impact of

high oil prices on the economy is worse when government expenditures decrease and interest rates increase, which was the case in the 1970s.

The current situation is different. The increase in oil prices in the 1970s was sudden, unexpected, and significant. People expected prices to continue

increasing as several reports indicated that the world was running out of oil. The recent depreciation of the dollar relative to the euro and the yen limited the

impact of high oil prices to the US. Several factors limited the impact of high oil prices on US economic growth. These factors include an unprecedented

increase in government expenditures and an unprecedented continuous decrease in interest rates. Unlike the 1970s, oil prices have increased slowly and

gradually. Traders and experts expected the increase. They also expect oil prices to decrease, which has created a backwardation in the market.

In fact, the past 2 years are the only period in OECD history when oil prices, economic growth, government expenditures, and military spending all have

increased at a time when interest rates and the value of the dollar have continued to decrease.

One important factor that distinguishes the 1970s from the current situation that this article mentions but does not discuss is price control, which also

contributed to lower economic growth and exacerbated the energy crises of the 1970s. Having had that experience, we have learned how to mitigate the

impact of high oil prices and deal with them in other, more-productive ways. A relatively short period of high oil prices accompanied by expectations
of a decline in oil prices will not affect economic growth.


A2 High Oil Prices Destroy Global Economy

High oil prices don’t affect the Asian economy

Japan Economic Newswire, 11/10/00, “APEC remains concerned about oil price hike,” lexis.
The report, which was based on a survey of member economies' assessment of the impact of high oil prices on their own economies, showed, however an
optimistic view that high oil prices will not fuel a region-wide recession, mainly because developed economies such as the United States and
Japan are now less dependent on oil than they used to be.

The survey 'suggests that higher oil prices this time would not result in a region-wide recession or stagflation, unlike the two oil-price hike
episodes during the 1970s that triggered worldwide recessions.'