Meltdown

[BachQ]

Wall St Journal

Load Up the Pantry

April 21, 2008 6:47 p.m.

I don't want to alarm anybody, but maybe it's time for Americans to start stockpiling food.No, this is not a drill.You've seen the TV footage of food riots in parts of the developing world. Yes, they're a long way away from the U.S. But most foodstuffs operate in a global market. When the cost of wheat soars in Asia, it will do the same here.Reality: Food prices are already rising here much faster than the returns you are likely to get from keeping your money in a bank or money-market fund. And there are very good reasons to believe prices on the shelves are about to start rising a lot faster."Load up the pantry," says Manu Daftary, one of Wall Street's top investors and the manager of the Quaker Strategic Growth mutual fund. "I think prices are going higher. People are too complacent. They think it isn't going to happen here. But I don't know how the food companies can absorb higher costs." (Full disclosure: I am an investor in Quaker Strategic)Stocking up on food may not replace your long-term investments, but it may make a sensible home for some of your shorter-term cash. Do the math. If you keep your standby cash in a money-market fund you'll be lucky to get a 2.5% interest rate. Even the best one-year certificate of deposit you can find is only going to pay you about 4.1%, according to Bankrate.com. And those yields are before tax.Meanwhile the most recent government data shows food inflation for the average American household is now running at 4.5% a year.And some prices are rising even more quickly. The latest data show cereal prices rising by more than 8% a year. Both flour and rice are up more than 13%. Milk, cheese, bananas and even peanut butter: They're all up by more than 10%. Eggs have rocketed up 30% in a year. Ground beef prices are up 4.8% and chicken by 5.4%.These are trends that have been in place for some time.And if you are hoping they will pass, here's the bad news: They may actually accelerate.The reason? The prices of many underlying raw materials have risen much more quickly still. Wheat prices, for example, have roughly tripled in the past three years.Sooner or later, the food companies are going to have to pass those costs on. Kraft saw its raw material costs soar by about $1.25 billion last year, squeezing profit margins. The company recently warned that higher prices are here to stay. Last month the chief executive of General Mills, Kendall Powell, made a similar point.The main reason for rising prices, of course, is the surge in demand from China and India. Hundreds of millions of people are joining the middle class each year, and that means they want to eat more and better food.A secondary reason has been the growing demand for ethanol as a fuel additive. That's soaking up some of the corn supply.You can't easily stock up on perishables like eggs or milk. But other products will keep. Among them: Dried pasta, rice, cereals, and cans of everything from tuna fish to fruit and vegetables. The kicker: You should also save money by buying them in bulk.If this seems a stretch, ponder this: The emerging bull market in agricultural products is following in the footsteps of oil. A few years ago, many Americans hoped $2 gas was a temporary spike. Now it's the rosy memory of a bygone age.The good news is that it's easier to store Cap'n Crunch or cans of Starkist in your home than it is to store lots of gasoline. Safer, too.           
   

[karlhenning]

Oil prices push airlines to shrink, airfares to grow

Soaring energy prices fuelling a domestic crisis across the UK

Hmm.  Reduced flights London to Bangkok.  No wonder Sean thinks it's the end of the world.

[BachQ]

Will you ever stop, I wonder? 

Yes, on or about December 21, 2012 .......... That's the time when I will stop, along with the rest of the world ........

[BachQ]

GETTING ABOUT GREEN: SYDNEY'S FUTURE AFTER THE OIL AGE


With the price of oil now reaching more than $120 per barrel, the reality of peak oil and rising costs at the petrol pump are truly straining the budgets of most Australian families.This worsening issue, the future of the petrol engine and Sydney's troubled transport infrastructure were the focus of a recent UTSpeaks public lecture presented by three of University of Technology Sydney's (UTS) leading sustainability researchers.More than 250 people heard presentations that scoped the problems facing transport in Sydney and associated environmental dangers ahead.According to UTS Institute for Sustainable Futures (ISF) Senior Research Consultant Dr Michelle Zeibots the rising price of petrol will, not surprisingly, hit families living in the outer lying regions of Sydney hardest, where reliance on car trips is greatest."It is inevitable that people living nearer to public transport in outer suburbs will be forced financially to rely on it far more," Dr Zeibots said. "The problem is, however, compared with cities like Tokyo, these same regions are very poorly serviced by public transport, presenting an urgent problem for our governments."ISF researcher and NSW Manager for the Clean Energy Council Chris Dunstan suggested that plug-in hybrid electric cars could be one solution to Sydney's love affair with road travel.He said while biofuels offered some relief from our reliance on fossil fuels, the production of ethanol and bio diesel would demand the cultivation of vast tracts of agricultural land needed for food production and even then would provide only 15%-25% of our forecast fuel needs to 2050."Electric vehicles alone are also a problematic option due to the high expense of batteries with the capability to run vehicles," Mr Dunstan said. "Plug-in hybrid vehicles, on the other hand, make it possible to use batteries with backup fuels to spread demand while significantly minimising greenhouse emissions."Charging batteries in family plug-in hybrid vehicles would ideally take place during periods of cheaper off-peak supply of electricity. The challenge will be to ensure that charging vehicles during off-peak periods doesn't compete with electrical heating of water and running home air conditioners. It certainly makes a stronger case for widespread use of solar water heating and more efficient strategic use of our electricity supply."Senior Lecturer in urban planning with the UTS Faculty of Design, Architecture and Building, Dr Garry Glazebrook, painted a sobering picture of the environmental consequences of climate change due to the greenhouse effect. He said we were fast approaching a concentration of CO2 in the atmosphere that would lead to dramatic and irreversible climate change, acidification of the oceans and dramatic rise in sea level."We are addicted to the car despite the fact it is a very costly way of travel financially and environmentally," Dr Glazebrook said. "Much of our real financial costs are obscured to us by staggered fees associated with car ownership – registration costs, depreciation and so on."We need to get used to the idea of travelling less and when we do travel, choose options that have far fewer environmental impacts."Alternative sources of energy used in association with public transport is one of the most obvious and urgent solutions we should be pursuing. There is no reason why our train system in Sydney should not be run entirely on green energy and our buses be fuelled by electricity."Making urban areas car-free and more conducive to public transport and bike use is an urgent path that Sydney's planners could choose to adopt, as is happening in many other cities throughout the world."In short, all three presenters agreed that far-reaching change is needed now if the quality of our lives and the lives of future generations is to be preserved and environmental disaster averted.

[BachQ]

The U.S. economy: On the brink of collapse?
By: Ashahed M. Muhammad/Special to the NNPA from the Final Call
Posted: 4/20/08



(NNPA) - While America experiences turbulent economic conditions affecting even the nation's most powerful and influential financial giants, an even more severe economic downturn looms for Blacks and Latinos.

Though the subprime lending crisis is the latest economic factor affecting a large number of Americans, other factors such as the rising price of oil, government budgets strained by costs of natural disasters and the increasing debt caused by the mounting cost of the Iraq War are wreaking havoc on America's economy.

In a new book titled, "The Three Trillion Dollar War" by Joseph Stiglitz and Linda Bilmes, their research found that the Bush administration lowballed the estimated cost of the Iraq War saying that it would run between $50 and $60 billion. Before the war, former Secretary of Defense Donald Rumsfeld reportedly scoffed at the estimates of other economic advisers who said the cost could approach $200 billion. Former Deputy Defense Secretary Paul Wolfowitz, who many consider to be the primary architect of the Iraq War, suggested Iraq's oil revenues would finance post-war reconstruction. This has yet to materialize and the cost of the war is being shouldered by American taxpayers.

In fiscal year 2008 alone, the Bush administration has asked for $200 billion in financing approval from Congress. The government's latest estimate has placed the cost of the Iraq War at around $600 billion. Still other financial analysts have placed the long-term cost at between $2 and $4 trillion.

The recent financial troubles of Bear Stearns prompted an emergency bail out by the Federal Reserve and JP Morgan Chase & Co. to avoid what many financial analysts predicted could have been a total economic collapse of financial markets. Another troubled lender, Countrywide Financial Corporation, was rocked by allegations of financial irresponsibility and possible impropriety leading to a downward spiral in stock prices. Well-known companies such as Morgan Stanley, Lehman Brothers, Merrill Lynch, Citigroup, UBS and Goldman Sachs are taking another look at their risky loan processes and closely monitoring their stock prices.

On March 31, Treasury Secretary Henry Paulson proposed a set of massive changes to the financial system of the United States which included expansion of the power of the Federal Reserve.

Those companies at the very high end of financial wealth management are intricately involved in the financial system of the United States. While losses are heavy among many financial lenders and investors, many are financially insulated from the consequences felt by the average American living paycheck to paycheck.

Managing Editor of Political Affairs magazine Joel Wendland is a frequent critic of the Bush administration's fiscal policies. He said there are varying opinions of what an actual recession is, based on frame of reference.

"Some [economists] who are oriented toward Wall Street see recessions as starting only when hard times hit Wall Street. Progressive economists talk about recession from the standpoint of the impact of (the) crisis on working families. One economist said workers haven't really recovered from the 2001 recession as high unemployment figures, stagnant real wages, and the enormous cost of Bush-type polices - health care cuts, education cuts, tight state and local budgets, no new funding for anti-poverty programs, and so on - indicate that for millions of working families, disproportionately African American, Latino, but also millions of white, the 2001 recession never went away," said Wendland.

Ginna Green of the Center for Responsible Lending, an advocacy resource for predatory lending opponents, said ironically, the policies and practices of leading financial lenders have brought the American economy to the brink of collapse and caused a loss of economic confidence.

"We've got a major player (Bear Stearns) who has had a major hand in causing the problem getting a federal bailout and yet, we can't do the same for every day hardworking Americans who were put into loans that shouldn't have been offered in the first place," said Green.

According to the Center for Responsible Lending, more than 2 million families will face foreclosure in the next 24 to 36 months. Forty million families living in surrounding neighborhoods will feel the effects of these foreclosures as property values in their areas plunge by an estimated $350 billion.

In a separate, joint study by several regional policy and advocacy groups titled "Paying More for the American Dream" released in March, huge pricing disparities of mortgage loans granted to Black and Latino borrowers were found - including subprime and convention prime loans.

Even during times of greater economic stability, the unemployment rate of Blacks and Latinos is higher than that of whites leading some experts to suggest the unemployment rate is actually higher than what is being reported.

"Because the government only counts people who are looking for work and who have applied for unemployment compensation benefits, the real figures of unemployed are much higher than reported," said Wendland.

Arewa L. Karen Winters, a prevention specialist and cultural programs coordinator at the Bobby E. Wright Comprehensive Community Behavior Health Center, Inc. in Chicago said the dire economic conditions within the Black and Latino communities are resulting in an increase in the abuse of drugs, alcohol, and the use of sex-especially among young people-as a result of what she called "a massive economic void" in the community.

"A lot of it is (because of) poverty. When you talk about a recession and young people who have no food at home, some of them have no lights or gas, that makes them angry and then they go out here and see other students dressing nice, it makes them angry, it makes them hostile," said Winters.

[BachQ]

$100 fill-ups arrive at gas pumps


COALINGA, California (CNN) -- Noel Bosse and Ken Davis watch as the numbers keep spinning at the gas pump -- 70 bucks, 80 bucks. Gulp, guzzle, then it stops: $101 for about 25 gallons.

The $100 fill-up has arrived in the United States.  "I think it's absolutely ridiculous," Bosse says with disgust. Bosse and Davis are returning from Las Vegas, Nevada, heading back to their home near Seattle, Washington. They're pulling a trailer full of Arabian horses in their passenger van.
Bosse says they're averaging 200 miles every fill-up or 10 miles to the gallon.  Bosse has been showing dogs and horses in competitions across the country for 35 years. With gas prices soaring, she's starting to rethink some of the upcoming shows.

"We're sitting here hauling a horse trailer eating gas," she says. "I don't see how people make it these days."  California is home to the nation's highest average gas price, $3.87 for regular unleaded; diesel is pushing $4.43 a gallon, according to Troy Green, with AAA.  San Francisco is the most expensive city, averaging $3.97 a gallon. However, a drive around the city shows many stations have jumped over $4.
The national average for regular unleaded is $3.53 and rising daily. Last year at this time, it was $2.86 per gallon. According to AAA, 24 states and the District of Columbia are averaging at or above $3.50 a gallon for regular unleaded. The state with the lowest gas is New Jersey, at $3.34 per gallon.

[BachQ]

The Biofuels Scam, Food Shortages and the Coming Collapse of the Human Population
by Mike Adams (see all articles by this author)

(NaturalNews) It was one of the dumbest "green" ideas ever proposed: Convert millions of acres of cropland into fields for growing ethanol from corn, then burn fossil fuels to harvest the ethanol, expending more energy to extract the fuel than you get from the fuel itself! Meanwhile, sit back and proclaim you've achieved a monumental green victory (President Bush, anyone?) all while unleashing a dangerous spike in global food prices that's causing a ripple effect of food shortages and rationing around the world.

I think politicians need to spend less time bragging about their latest greenwashing schemes and more time studying The Law of Unintended Consequences. Because while growing fuel on cropland initially sounds like a great idea, any honest assessment of the total impact leads you to the inescapable conclusion that biofuels are largely a government-sponsored scam. With a few exceptions (see below), biofuels produce no net increase in energy output, and they cause food shortages while creating strong economic incentives for the destruction of the very rainforests we desperately need to stabilize the climate!

And now we're just starting to see the early signs of the economic and social insanity that has been unleashed by this foolish pursuit of biofuels around the world: Food rationing in Sam's Club stores in the U.S., rapidly-rising prices on bread, rice and corn, and price spikes at cafeterias and restaurants that depend on these staple ingredients. The price of rice has tripled globally, unleashing riots in Haiti and Bangladesh, and the United Nations has issued warnings that millions of people around the world now face starvation because they can't afford to buy food. Americans are even starting to hoard food once again, after years of avoiding basic preparedness measures. (One benefit to all this, however, is that farmers are actually getting paid decent prices for their crops now, after years of operating on the verge of bankruptcy...)
Most biofuel efforts are a sham
Not all of these price spikes are due to the conversion of croplands to biofuel fields, but much of it is. As a result, it's suddenly becoming obvious to nearly everyone that the pursuit of biofuels, as currently structured, is a grand greenwashing hoax. It doesn't produce more fuel than it consumes, and it drives up food prices to boot!

Now, there are biofuels programs that really do work. The growing and harvesting of sugar cane in Brazil, for example, provides an 8-to-1 return on energy investment. But even that pursuit is tarnished by claims of unsafe work environments and massive environmental pollution (the sugar cane fields are burned before being harvested, a process that releases massive amounts of CO2 into the environment).

The only truly promising biofuels technology available today is based on microalgae. Feed CO2 to a vat of algae, and you can produce biofuels cheaply and responsibly, without destroying the environment. But these programs are only in experimental phases. Nobody is producing biofuels on a large scale from algae farms (not yet, anyway).

And that leaves the great American breadbasket: The corn and wheat fields. It is here that food is now being displaced by crops grown for biofuel processing. So where a farmer used to grow corn as a food source, he's now growing it to sell to a biofuel processing facility which turns the corn into ethanol. Obviously, the laws of economics come into play here, meaning that every bushel of corn used for biofuels production means one less bushel of corn available for food. Factor in the laws of supply and demand, and you can see that the more crops we use for biofuels, the higher the prices will rise for food.

Politicians, it seems, have no understanding of economics. They need to study the basics as they are presented in Henry Hazlitt's Book, Economics in One Lesson, which is a Libertarian-oriented guide that explains basic economics to anyone willing to learn. Economics is focused on the study of human behavior, or more precisely, consumer choice. Now, it seems, consumers are about to be faced with a choice they never wanted to have to make: Should I buy fuel, or food?

In other words: Do I want to drive my car, or do I want to eat?
You can have fuel or food, but not both
Under a biofuels-focused agricultural policy, the same limited resources (soil, sunlight and water, essentially) can be used for only one thing at a time. You can't use the corn twice, obviously (you can't eat the corn and process it for biofuels at the same time), so you've got to make a choice: Will you grow the corn for fuel, or for food?

The more you grow for fuel, of course, the less food you have, and that drives up food prices. But if you swing back the other way and grow more corn for food to ease food prices, the fuel prices go up. Trying to solve both problems at once is a bit like trying to pick up a wet watermelon seed with your fingers: It keeps slipping to the side.

One thing that has become abundantly clear in all this is that the era of cheap food and cheap fuel is over. I've written about this on NaturalNews, where I use the term "food bubble" to describe the most recent era of cheap food. As it turns out, cheap food is only made possible by cheap oil, and with oil now approaching $120 a barrel (a price that virtually no one thought possible just two years ago), food prices are simultaneously skyrocketing. (Modern farming practices use a lot of fossil fuel. So does transporting food across the country or around the world. Eat local, folks!)

Add to this the fact that global climate change is already underway, altering weather patterns and creating floods, droughts and other agricultural calamities, and you start to get the picture of just how bad things might get. That's not even to mention the very serious problem of collapsing honeybee populations due to a mysterious condition called colony collapse disorder that's devastating honeybee populations across North America right this minute. Honeybees, in case you didn't know, pollinate plants that represent about 30% of all the calories consumed by Americans. That's about one out of every three bites of your dinner, and it all depends on the "free" work performed by honeybees -- bees who are apparently going on strike by refusing to keep working for us.
Prepare for mass global starvation
So, to repeat, the food bubble is now starting to implode. What does it all mean? It means that as these economic and climate realities unfold, our world is facing massive starvation and food shortages. The first place this will be felt is in poor developing nations. It is there that people live on the edge of economic livelihood, where even a 20% rise in the price of basic food staples can put desperately-needed calories out of reach of tens of millions of families. If something is not done to rescue these people from their plight, they will starve to death.

Wealthy nations like America, Canada, the U.K., and others will be able to absorb the price increases, so you won't see mass starvation in North America any time soon (unless, of course, all the honeybees die, in which case prepare to start chewing your shoelaces...), but it will lead to significant increases in the cost of living, annoying consumers and reducing the amount of money available for other purchases (like vacations, cars, fuel, etc.). That, of course, will put downward pressure on the national economy.

But what we're seeing right now, folks, is just a small foreshadowing of events to come in the next couple of decades. Think about it: If these minor climate changes and foolish biofuels policies are already unleashing alarming rises in food prices, just imagine what we'll see when Peak Oil kicks in and global oil supplies really start to dwindle. When gasoline is $10 a gallon in the U.S., how expensive will food be around the world? The answer, of course, is that it will be triple or quadruple the current price. And that means many more people will starve.

Fossil fuels, of course, aren't the only limiting factor threatening future food supplies on our planet: There's also fossil water. That's water from underground aquifers that's being pumped up to the surface to water crops, then it's lost to evaporation. Countries like India and China are depending heavily on fossil water to irrigate their crops, and not surprisingly, the water levels in those aquifers is dropping steadily. In a few more years (as little as five years in some cases), that water will simply run dry, and the crops that were once irrigated to feed a nation will dry up and turn to dust. Mass starvation will only take a few months to kick in. Think North Korea after a season of floods. Perhaps 95% of humanity is just one crop season away from mass starvation.
The carrying capacity of planet Earth has reached its apex
The truth about all this, folks, is that the resources on our planet can only support a limited population, and I think we've over-populated the planet to a point where we're wiping out non-renewable resources at an alarming rate. This means a population correction is due. When there are too many people consuming too much food, using up too much water and burning too much oil, you can get away with a rapid expansion for a little while (a few decades, perhaps), but eventually reality kicks in and there's a global population correction that brings the population size back down to levels that can be sustained on the planet.

It's not a pretty picture. We're talking about the loss of a billion human lives, perhaps more. This is what's coming. It's as predictable as the laws of gravity. When you over-populate a planet and use up all the resources, the population eventually finds itself in a resource panic, and mass death ensues. You can observe the same thing with colonies of bacteria on a nutrient-rich petri dish: They will expand at an accelerating rate, multiplying their numbers until there's no more food left in the petri dish, and then they will experience a massive die-off. You might say that human beings are smarter than bacteria, and that's true, but as current events are clearly demonstrating, they're not much wiser! They still doom themselves to the same stupid fate by refusing to look at the long-term implications of their actions.

Humans are really good at making babies and eating food, but they're terrible at thinking even ten years ahead about the implications of their present-day decisions. That's why the global population control masterminds call people "feeders and breeders," by the way. Those are the two things human beings do extremely well: Fornicate and clean their plate. (Not necessarily in that order, though...)

The economies of our world have, sadly, been based on economic models that strongly encourage this kind of consumption and growth. We live in a "throwaway economy," where people are encouraged to consume and expend as much as possible. No corporation makes money teaching people how to use less. And so we've pushed for aggressive expansion since about the 1950's: Build more, eat more, consume more. We've turned farm lands into housing tracts, and rainforests into biofuel fields. We've over-fished the oceans, over-farmed the soils and over-extended ourselves to the point where a population correction is inevitable. We, the human race, have painted ourselves into a desperate corner, and the simple fact of the matter is that unless we quickly discover some new energy technology that provides the world with cheap, plentiful energy, we are headed straight towards a global population implosion that will leave a billion or more people dead.

And biofuels, of course, are no answer for this problem. You cannot grow enough corn to solve the problems of an expansionist, imperialistic race of beings (that's us humans) who have taken over the planet like a cancer tumor, wiped out countless species, destroyed huge swaths of natural rainforests, poisoned the oceans and rivers, polluted the skies and, at every opportunity, betrayed the very Earth that has given us a home in the first place. Humans can betray Mother Nature for a while, but in the end, we will pay a dear price for our own arrogance, greed and lack of vision. The human race is being sent back to kindergarten, where it needs to learn some basic lessons about living in harmony with the planet. Lessons like: Don't use up all the resources in a few generations. Don't think you're smarter than nature. And never forget how much Mother Nature does for us all for free! (Like pollinating the crops, producing oxygen, cleaning the air, water, etc. Read the book Mycelium Running to learn more...)

In time, we will either learn these lessons, or we will perish. It's really as simple as that. And all these suddenly-popular "save the planet" efforts we've seen by corporations recently are just a joke. We can't save the planet. The planet will be fine after we're gone, folks. What we're trying to save here is human civilization. The very idea that we think we can "save the planet" is arrogant all by itself. All we can do is respect the planet and find ways to live with it as polite guests living on a generous host.

Whether humans survive the next hundred years or not, planet Earth certainly will. And frankly, the planet will do much better without us. With humans gone, the Earth would quickly be restored to a vibrant, pristine state, full of life and abundance. The Earth doesn't need us, folks. But we, of course, certainly need the Earth. The real question is this: Can we learn to play nice and treat the Earth with respect? If not, we won't be around much longer to worry about it.
Nature needs to be granted legal standing
One final thought: I am an advocate of the idea that Mother Nature needs to be granted legal standing. I believe that humans do not automatically "own" nature, and that we cannot simply cut down forests, bulldoze mountainsides, fish the oceans, build dams and engage in other highly disruptive activities without first getting permission and paying royalties to a global Mother Nature Authority that stands up for the rights of the planet. Nature is not ours to own or destroy. We, as the guests on this planet, have no right to simply assume ownership over other living systems on this planet and exploit them for our own financial gain. The "destroy and consume" model of free market enterprise is simply not sustainable, folks. It does not lead us to a happy future; it leads to our own destruction.

Or, put another way, over the last hundred years or so, mankind has committed countless acts of violence against nature. It has pursued a policy of committing atrocities against Mother Nature -- a kind of genocide against anything non-human (animals, plants, fish, etc.). Humans have proven themselves to be, by far, the most violent and destructive life forms to ever exist on this planet. And yet paired with that violence, humans are an infant species, with little or no foresight, with virtually no ability to see the future implications of their own actions. We are, in a sense, the dumbest intelligent creatures ever to walk the face of this Earth.

We can land a man on the moon, but we can't even prevent our own rainforests from being clear-cut by soybean farmers and cattle ranchers. We can develop high-tech medicines, but we can't even openly recognize the more powerful medicines found in a simple dandelion plant. We can create amazing computers and televisions and internet technologies the beam information across the globe at the speed of light, but we pollute those information pathways with corporate ads for useless stuff and dangerous medicines that only make our fellow humans beings less enlightened. We are capable of so much, and yet we have accomplished so little. We are, by any honest assessment, a race of little children, running around the planet with far too much power and not nearly enough maturity. We're like a band of infants with flamethrowers.

Frankly, we don't deserve this planet, and Mother Nature is about to take it away from us. It's time for us to either grow up, or perish. And all these people who say "we have to protect the economy, not the environment" should probably just be rounded up and shipped off to Mars where they can play with the Martian dust all they want until they finally get the picture.

[karlhenning]

Gulp, guzzle, then it stops: $101 for about 25 gallons.

Our tank is 19 gallons. Not that anyone asked.

[BorisG]

Oil prices slip on dollar recovery, rising US crude inventories

1 hour ago

LONDON (AFP) — Oil prices fell on Thursday as traders took profits after this week's record-breaking run on the back of the strengthening dollar and rising US crude stockpiles.

New York's main oil futures contract, light sweet crude for delivery in June, dropped 1.21 dollars to 117.09 dollars a barrel. The May contract had struck a record high 119.90 dollars before expiring on Tuesday.

London's Brent North Sea crude for June delivery lost 85 cents to 115.61 dollars on Thursday, after hitting a peak of 116.75 dollars on Tuesday.

"Crude futures slipped lower, falling under pressure from the recovering greenback," said Sucden analyst Andrey Kryuchenkov.

"It seems that a larger-than-expected increase in US crude inventories during last week and a stronger dollar were good excuses for some investors to book profits."

US crude reserves rose 2.4 million barrels last week, beating market expectations for a 1.5-million-barrel gain.

In the foreign exchange market on Thursday, the euro fell to 1.5708 dollars from 1.5882 in New York late on Wednesday, after a disappointing survey on business confidence in Germany.

"The dollar continued to strengthen against the euro, putting some downward pressure on oil prices and correcting after hitting a record low beyond 1.60 dollars against the single currency earlier this week," Kryuchenkov noted.

A stronger US currency makes dollar-priced crude more expensive for foreign buyers and therefore tends to discourage demand.

However, prices were supported by ongoing supply worries.

Talks aimed at heading off a planned strike at one of Britain's key oil refineries broke down on Wednesday, a union spokesman said.

The collapse of discussions between officials from Unite and Ineos, which owns the Grangemouth refinery between Glasgow and Edinburgh, means 1,200 workers at the site will go on strike Sunday and Monday.

"There will still be some worries around Grangemouth," said Petromatrix analyst Olivier Jakob. "We will see some support coming from that."

Ineos has begun shutting down Grangemouth, the biggest refinery in Scotland, producing 210,000 barrels of oil a day, and has warned of fuel shortages later this week if the strike were to go ahead.

Traders were monitoring production problems in Nigeria, which is the largest crude producer in Africa.

Members of a white-collar union working for Mobil Producing Nigeria (MPN), an affiliate of US oil group ExxonMobil, began an indefinite strike on Thursday over pay and working conditions.

Earlier this week, the Anglo-Dutch oil giant Shell said it had reduced output by 165,000 bpd following the sabotage of supply pipelines to the Bonny export terminal in southern Nigeria.

Nigeria has a daily oil output of 2.1 million barrels but unrest in the crude-rich Niger Delta has cut exports by a quarter since January 2006.

[BachQ]

Oil prices, gasoline costs to double: CIBC report
SHAWN MCCARTHY
Globe and Mail Update
April 24, 2008 at 11:17 AM EDT


OTTAWA — Crude oil prices will soar to more than $200 (U.S.) per barrel over the next five year – driving Canadian pump prices to $2.25 a litre and forcing a fundamental transformation in the North American economy, says Jeff Rubin, chief economist with CIBC World Markets Inc.

In a new report, Mr. Rubin forecast a continued run-up in crude prices, despite a slowing world economy and slumping petroleum demand in United States, the world's leading oil consumer.

He said he expects crude prices – now trading at above $116 (U.S.) a barrel - to average $150 by 2010, and more than $200 by 2012. That would translate into pump prices of $7 (U.S.) per gallon in the United States, and $2.25 per litre in Canada, double the current levels.

"Whether we are already at the peak of world oil production remains to be seen, but it increasingly clear that the outlook for oil supply signals a period of unprecedented scarcity," the economist said.
World oil production has essentially stagnated at about 85-million barrels per day over the last two years, with growing demand met by increases in natural gas liquids, a fuel source that is used by the petrochemical industry but is of little use for transportation.

Mr. Rubin said he expects crude oil production to grow by about 1-million barrels per day over the next several years.

Meanwhile, growing demand in China, India, Russia and the Middle East will more than offset declines in the industrialized world.

"Millions of new households will suddenly have straws to start sucking at the world's rapidly shrinking oil reserves," he wrote.

He said the sharply higher oil prices will prove devastating for the North America's industrial base, particularly the auto industry. But Canadians will benefit from the spinoffs, in terms of jobs, tax revenues and procurement, from the country's oil-rich provinces.

[BachQ]

The Era of Cheap Food, Energy and Credit at an End
Rob Mackrill - Thu 24 Apr, 2008



Eight years into the new millennium it feels like the end of an era. An era of cheap credit, cheap food and cheap energy

Eight years into a new millennium, it feels like the end of an era.  The end of the eras of cheap credit, cheap food and cheap energy. Will they be back? Even Pollyanna might swallow hard before giving the nod to that one.  On the credit front, banks around the world may have lost somewhere in the region of a $1trn between them, so something has to give. Namely loans to customers. Whether they be first time buyers trying to get a foot on the housing ladder, a business needing finance or some private equity house putting together a leveraged buyout. Subprime has blown a large hole in the banks, and that means credit rationing for customers.

On the subject of mishaps... The one-time claim of Swiss banking conservatism looks again to be a claim as hollow as their Emmental today as Credit Suisse revealed anything but credit. They notched up a first quarter loss after a $5.2bn write-down.  But fear not. Central banks are on the case. They're cutting interest rates. The Fed has cut rates from 4.5% to 2.25% in double quick time and is expected to lop another quarter off next week. The Bank of England is trying to ease too, though in a much more sedate fashion as suits the Old Lady of Threadneedle Street, while she squints in alarm at the potential wrecking ball of food and energy inflation.

Who'd want to be a Monetary Policy Committee member today? For the past decade a tweak here a tweak there, some good lunches and plenty of kudos. Today, a full blown crisis on your leather-bound desk. Stuttering growth in the blue corner. Pugnacious 'flation in the red corner. The MPC as referee looking for a fair fight according to its own Queensbury rules. The problem is you need to help your old fighter in the blue corner back on his feet, but that is only going to wind up the bruiser in the red corner. That help is principally interest rates. But if you keep cutting them while a loaf of bread is £1.20 and rising and a litre of petrol is £1.09 and rising - £1.12 is anticipated next month - then that escalates the risk of 'flation going berserk and flattening all in sight.

But if you don't cut rates to choke inflation you risk a '70s style housing crash, says Edmund Conway of The Telegraph. This dilemma is taxing the nine member MPC and has created an unusual split in their thinking. Last time around, the majority voted on a quarter point cut, one voted for a half point cut and two voted to keep on hold. The good news is Lombard Street Research note is that although food/fuel prices are on the march, this has not yet shown up in higher wage growth. To us, the key caveat there are the two words 'not yet'. Today there's a teachers strike today for the first time in 21 years as they bid for an inflation-proofed pay deal. Will more follow their example?

As for the era of cheap food, its return looks unlikely unless there's a catastrophic reversal of the long-term economic and demographic growth trends in place. Or agricultural production revives once again confounds global warming and the Malthusians. China will one day boast a middle class whose numbers will equal the entire population of the US. Will they want to subsist on a bowl of rice a day? No. They'll be wanting hamburgers, pizza, steak and sushi... or the cultural equivalent thereof. The rich world will just have to learn to share with the nouveau riche world and bid more for it. Food rationing in the east. Food rationing in the west. Mighty US retailer Walmart is limiting the purchase of rice, reports Bloomberg, and another US retail giant, Costco, is considering a similar move. Elsewhere, Irish Banana importer Fyffes reports higher import costs are accelerating fruit price inflation.

And then there's cheap energy... Well, maybe one day we'll be saved by science, but the quest for an alternative to finite hydrocarbons remains a live one. And until that day comes we'll continue to be pay close attention to the oil price, now retreated to $117 from its recent relentless march up to $120 high. And on the idea mentioned recently of what price oil has to hit before people start giving up on the car, a reader writes...

"Oil at 200 bucks within the next five years? Quite probable, but down to 80-85 first as this spike runs out of steam. Overall when peak oil ( maximum daily supply exceeded by minimum daily demand - not the stuff in the ground ) hits us then the price will go as high as it can ($400) before the global transportation infrastructure grinds to a halt and with it the global economic infrastructure . Global warming just doesn't stand a chance because we won't see 2100 as a civilised planet."

*** An item of business news catches the eye this morning...

Britain 's largest housebuilder, Persimmon plc. reports sales have slipped by 24% this year and warns it faces the worst mortgage market since the '70s. News that has had investors running for cover and sent the shares more than 8% lower together with the broader market, down more than 100 points. But what did they expect? If you can't get a mortgage how can you buy a house even if you're brave enough to want to. The sector is facing a "triple witching" says Merrill Lynch:

"Worryingly, it is clear that the UK housebuilders are entering a new and potentially volatile period characterised by significantly constrained mortgage availability, buyers deferring purchases in anticipation of price falls, and, most recently, their growing concerns about employment security."
Finally, a chart tracing the decline of an ancient habit quite possibly making a comeback. It's called saving for a rainy day...

Though it's possible the data might be missing something. One in ten prefer to stash cash under the mattress, according to the latest findings from the Newcastle Building Society.
Regards,
Rob Mackrill
The Daily Reckoning

[BachQ]

U.S. gasoline theft on the rise along with prices
Thu Apr 24, 2008 9:08am EDT

NEW YORK (Reuters) - U.S. motorists, angered by soaring gasoline prices, are resorting increasingly to theft -- a trend that could worsen heading into summer driving season, a national association of fuel retailers said Thursday.
"It is getting bad. When the price of gasoline goes up, the number of drive-offs goes up," said Dan Gilligan, president of the Petroleum Marketers Association of America, which represents about 8,000 retailers.
Drive-off means a motorist pulls up to a gas station's pump, fills the car's tank, and then speeds off without paying for the fuel.

U.S. gasoline prices struck a record $3.56 per gallon on average Thursday, bringing them more than 24 percent higher than a year ago amid a surge in the cost of crude oil, according to travel group AAA's daily survey of up to 100,000 service stations. Energy experts have said gasoline could top $4 a gallon in many parts of the country heading into summer, when demand for the fuel typically peaks with road travel as Americans go on vacation.
Gilligan said that some state fuel dealer associations were pressing lawmakers to make it easier to prosecute motorists who fill up and then drive off without paying, while many service stations were starting to require payment up front. "The last time we had a spike up in gasoline, lots of retailers switched to requiring payment before fill-up," said Gilligan. "But many retailers still want to preserve the trust relationship they have with their customers."

[BachQ]

Thai rice hits new record, feeding food fears
Thu Apr 24, 2008 7:51am EDT
By Apornrath Phoonphongphiphat

BANGKOK (Reuters) - Rice prices in Thailand, the world's top exporter, surged to $1,000 a tonne on Thursday as concerns about food security first triggered by a handful of Asian export bans spread as far as the United States.

This week's five percent jump takes prices to nearly three times their level at the start of the year, intensifying fears of social unrest in Asia as millions of the region's poor find themselves struggling to pay for staple goods.

The surging price of fuel and food, which some analysts attribute to panic buying by both consumers and governments rather than a dire shortage of supply, has so far sparked riots in Africa and Haiti, but not Asia.

Having started with India's imposition of export curbs to protect domestic supplies last year, the crisis was felt in the United States this week, with major retailers saying they had started to notice signs of panic buying.

Sam's Club, a unit of retail giant Wal-Mart, said on Wednesday it was capping sales of 20-pound (9 kg) bulk bags of rice at four bags per customer per visit to prevent hoarding.

The previous day, rival Costco Wholesale Corp said it had seen increased demand for items such as rice and flour as customers, worried about global food shortages, stocked up.

"Everywhere you see, there is some story about food shortages and hoarding and tightness of supplies," said Neauman Coleman, an analyst and rice broker in Brinkley, Arkansas.

NEW ERA?

In Bangkok, some traders said Thai 100-percent B grade white rice, the world's benchmark, could hit $1,300 a tonne due to unsated demand from number-one importer the Philippines, which fell well short of filling a 500,000 tonne tender last week.

Manila said on Thursday it had increased the size of another tender on May 5 to 675,000 tonnes from 500,000 tonnes, putting yet more heat under the price of a grain that for decades moved sedately between $200 and $300 a tonne.

There is also a big question mark over Iran and Indonesia, two countries that normally buy as much as 1 million tonnes of Thai rice each year but which have bought nothing so far in 2008 because of the soaring prices.
Indonesia's trade minister said on Thursday her country can meet domestic demand for rice this year, avoiding the risk of social unrest, thanks to a bumper rice harvest, curbs on rice exports and subsidies for the poor.

"If the production of rice is as planned for this year, I think we can feel pretty okay that it's going to be stabilized," Mari Pangestu said in an interview.

Even though some analysts say the price, part of a wider global rally in crop prices, is based on jittery governments rather than fundamentals, Thailand's top exporters say the world is now set for an era of expensive food.

"Prices will remain firm for the rest of the year," Chookiat Ophaswongse, head of the Rice Exporters Association in Bangkok, told Reuters.

Asian rice prices could rise another 10-15 percent as African importers step up buying, but the market might be set for a sharp fall nearer year's end, a grains trader said on Thursday.

"You might not see a correction in prices in the next two to three months. But when crops kick in, you could see a 30 to 40 percent correction in prices towards the end of the year," said Vijay Iyengar, managing director of grains trader Agrocorp International Pte Ltd.

Rice futures on the Chicago Board of Trade climbed 2.5 percent on Wednesday to an all-time high of $24.85 per hundredweight.

However, grain futures tumbled four percent to a five-month low due to expectations of a large global wheat crop in 2008.

With the northern hemisphere harvest only two months away, officials said planting had started well in Western Australia after good rains, while India said a record harvest and bulging government stocks meant no imports were needed this year.  China's top wheat-growing provinces of Henan and Shandong were also looking at a bumper winter harvest after recent rains, the Xinhua news agency said.

CRITICISM

Brazil became the latest country on Wednesday to suspend rice exports, following in the footsteps of India and its close rival for the mantle of world number-two supplier, Vietnam.
However, Thailand, which accounts for nearly a third of all rice traded globally, reiterated that it would not impose any curbs, saying it had enough stocks to meet its export commitments.
"We don't need to restrict Thai exports because in the next few months, a new crop will come out and we have enough stock for the Thai people and also for exports, according to the agreements that we have signed," government spokesman Wichianchot Sukchotrat told reporters in Kuala Lumpur.
The Asian Development Bank and free-trade advocates have criticized the export curbs as an overreaction that has distorted the market.
"If we restrict trade, we're simply going to add food scarcity to the already large problems of food shortages that exist in different countries," EU Trade Commissioner Peter Mandelson said

[greg]

Yes, on or about December 21, 2012 .......... That's the time when I will stop, along with the rest of the world ........

Probably before then, when you run out of money to pay for an internet connection since all of it is being used for gas.
Btw, I drove the speed limit. I looked back at the several SUVs trying to run me over, and laughed at them. MWAHAHAHAHAHA...... they were going so slow, couldn't go past me. I wonder how those $#*(@) liked that. 

[drogulus]

    The oil price increases are happening because the poor are getting richer faster than ever in the past, putting a huge burden on resources. The proportion of world resources consumed by the richest countries is declining as a percentage of the total as China and India continue to grow at an astonishing pace. Food prices will rise for related reasons. For the U.S. and Europe not much will change. Things get more expensive because of growth within advanced economies or within other economies drawing from the same resource pool. The relative decline of the rich will only be felt over the long term, though Americans are getting a taste of it as the dollar declines.

[BorisG]

ConocoPhillips 1Q profit up 17 pct. on higher oil prices 

 

Thursday April 24, 5:05 PM EDT


HOUSTON (AP) — ConocoPhillips, the third-largest U.S. oil company, said Thursday its first quarter profit rose almost 17 percent as record high oil prices offset disruptions that hurt earnings from its refining operations.

The Houston-based company said net income rose to $4.14 billion, or $2.62 a share, for the January-March period, from $3.55 billion, or $2.12 a share, in the year-ago quarter.

On average, Wall Street analysts surveyed by Thomson Financial expected earnings per share of $2.42.

ConocoPhillips said revenue rose to $54.9 billion from $41.3 billion a year ago.

As expected, soaring crude prices in the first three months of the year gave ConocoPhillips a big lift. Crude prices have neared a record $120 a barrel in recent trading sessions.

 

"Although we delivered solid financial results during the first quarter, unplanned downtime negatively impacted our performance," Jim Mulva, ConocoPhillips' chairman and chief executive, said in a statement.

The company said net income from its exploration and production arm rose nearly 24 percent to $2.89 billion in the first quarter from a year ago, as higher commodity prices offset lower volumes and higher taxes.

Daily production in the most-recent quarter averaged 1.79 million barrels of oil equivalent a day, down from 2.02 million barrels a year ago. The company attributed the decline to the expropriation of its Venezuelan oil projects last year and its exit from Dubai, as well as normal field decline and unplanned downtime in the continental U.S.

Production results include ConocoPhillips' Canadian Syncrude operations but not its Russian Lukoil business.

Earnings fell sharply on the refining and marketing side, to $502 million from $1.14 billion a year ago — a decline ConocoPhillips said earlier this month was not unexpected.

The root of the problem was refining margins, which were squeezed by higher crude prices. Those margins reflect the difference between the cost of crude and what the company makes on refined products such as gasoline.

Lower volumes also hurt, as ConocoPhillips said it encountered unplanned downtime at its U.S. Gulf Coast refineries.

Despite the higher earnings, ConocoPhillips shares fell $1.59 to $82.89 Thursday.

[BorisG]

Occidental earnings surge on record crude prices

Thu Apr 24, 2008 3:35pm EDT

By Michael Erman

NEW YORK (Reuters) - Occidental Petroleum Corp (OXY.N: Quote, Profile, Research) said on Thursday its first-quarter earnings rose more than 50 percent as the U.S. oil company reaped the benefits of record crude prices.

Oil prices have surged since 2002 due to demand from emerging economies, supply concerns and the weak dollar. For most of the first quarter of 2008 prices were at or near record levels.

Benchmark U.S. oil prices averaged about $98 a barrel during the quarter, up nearly 70 percent from last year.

The company took in an average of $86.75 per barrel of oil it produced in the quarter, up from $51.67 a barrel in the year-earlier period.

On Thursday on the New York Mercantile Exchange in afternoon trading June crude CLM8 was $116.05 per barrel.

Net income rose to $1.85 billion, or $2.23 a share, from $1.21 billion, or $1.43 a share, a year earlier.

Excluding $27 million in one-time gains from tax refunds and sales, the company earned $2.20 a share, well above analysts' average estimate of $1.94 a share.

"Pound for pound, Oxy generates more profits from production than any other company in the industry," said Oppenheimer & Co analyst Fadel Gheit, who said the company's shares were undervalued.

"They are flush with cash ... They are actually tightening screws and cutting headcount," he said.

Sales rose 50 percent to $6.02 billion.

Natural gas prices were also higher. Occidental's average realized price for the quarter rose 27.7 percent to $8.15 per thousand cubic feet.

The company said it was raising its capital spending for 2008 to $4 billion to drill additional wells in the Rocky Mountains and California. It had previously forecast spending $3.6 billion for the year.

Los Angeles-based Occidental's oil and gas production rose 8.4 percent to 607,000 barrels of oil equivalent (BOE) per day in the quarter, mostly due to new production from the Dolphin Energy gas project in the United Arab Emirates.

It expects second-quarter oil and gas production to rise from first-quarter levels, helped by increases in Argentina, Colombia, the Rocky Mountains, the Permian Basin and Oman.

The company expects oil and gas production in the current quarter in the range of 610,000 to 620,000 BOE per day.

Occidental's shares fell $1.15, 1.4 pct, to at $83.34 on Thursday afternoon. They hit an all-time high of $86.96 on Tuesday.

(Reporting by Michael Erman, Editing by Maureen Bavdek, Toni Reinhold)

[BorisG]

Iraq is expected to reap huge oil-profits windfall

By PAULINE JELINEK
The Associated Press

Apr. 24, 2008

WASHINGTON -- New data on Iraq oil revenues suggests that country's government will reap an even larger than expected windfall this year -- as much as $70 billion -- according to Stuart Bowen, special inspector general for Iraq reconstruction, in his latest quarterly report.

The previously undisclosed information is likely to strengthen the hand of U.S. lawmakers complaining that Iraqis aren't footing enough of the bill for rebuilding their nation -- particularly in light of rising oil production and world prices.

Oil prices Wednesday hovered near $120 a barrel.

Iraq's oil numbers

Monthly exports: Oil export revenue was $5.83 billion in December, according to new figures from the Iraqi government -- more than $1 billion over what it previously reported. That compares with $3.3 billion in July and $2.4 billion in January 2007.

Trend: The latest data "clearly substantiates ... that Iraq is enjoying a record windfall as the result of record oil prices, record oil production and record oil exports," Bowen said.

2008 exports: With the revised December figure, and continued strong production and export figures since then, Iraq's oil revenues could soar to $70 billion in 2008, Bowen said.

Budget projection: Iraq's 2008 budget is about $48 billion with some 84 percent coming from oil, officials have said. That was calculated using a $57-a-barrel price.

Congressional reaction

Legislation: Citing Iraq's oil windfall, Sen. Carl Levin, D-Mich., chairman of the Armed Services Committee, said that he will introduce legislation that would prohibit U.S. money from being spent on reconstruction and possibly other war-related costs. GOP lawmakers have signaled a willingness to back a measure on spending, depending on how it is written.

Other proposals: Lawmakers have suggested restricting future reconstruction dollars to loans instead of grants and asking Baghdad to pay for the fuel used by U.S. troops as well as take over U.S. payments to predominantly Sunni fighters in the Awakening movement.

Iraq's reaction

Samir Sumaida'ie, Iraq's ambassador to the U.S., sought Wednesday to assure members of Congress that Iraq was doing what it could.

"I assured them that the Iraqi government is not only willing, it is actually stepping up and taking [on] as much of the financial cost of reconstruction as possible. And we're doing it as fast as we can."

Online: www.sigir.mil

[BorisG]

Many Mexicans see oil as last frontier against US invasion

By JULIE WATSON – 1 hour ago

MEXICO CITY (AP) — Even with oil prices at record highs, Mexico's state-run oil company is managing to lose money. But a presidential plan to fix Petroleos Mexicanos by inviting foreign help is stirring deep-seated emotions over sovereignty — and causing a paralysis that could doom America's third-largest oil supplier.

Leftist legislators have padlocked the doors of Congress, camping out in the chambers for two weeks in protest. Opponents on the right have attacked them in a national TV ad, invoking images of Adolf Hitler.

Everyone in Mexico — from top leaders to housewives — seems to be swept up in the fervor.

While President Felipe Calderon's administration calls the congressional lockdown an international embarrassment, Fernanda de Jesus Arriola gives up her afternoon soaps and takes her young children to march in Mexico City.

"Calderon is a right-winger who is going to take away our way of life," said Arriola, 35, pulling her 6-year-old daughter's pink Barbie suitcase as her family walked with hundreds of protesters. "It's the same as strangling us because foreign oil companies are exploiters who will enslave us."

Pemex is rapidly running out of the oil that provides more than one-third of Mexico's federal budget. Finding more will require drilling thousands of feet below the surface of the Gulf of Mexico — an exceedingly difficult challenge. Nearly everyone agrees that Pemex lacks the capacity to accomplish this without serious reforms.

The trouble is, Mexico's Constitution bans Pemex from joint ventures with private and foreign companies that have the technology and expertise to find oil in such deep water.

Calderon has backed off the politically explosive idea of changing the Constitution, proposing merely to ease some state restrictions on involvement by private companies.

His plan still retains much more state control than other Latin American government oil monopolies do. Even Cuba is working with outside companies to drill in the Gulf. Brazil's state-owned Petroleo Brasileiro SA has used joint ventures with private oil companies to become an industry leader, recently discovering what could be the world's third-largest oil field off its coast.

But while Mexicans may shop at Walmart and eat at McDonald's, oil is a birthright. The sentiment dates back to March 18, 1938, when President Lazaro Cardenas kicked out the American and European oil companies that refused to pay union wage demands while reaping Mexico's oil profits.

Every year on that day, school children learn about the bold eviction of foreign companies, especially those from the United States, whose annexation of half of Mexico's territory after the 1846 Mexican-American War still hurts.

Women offered their jewelry to help pay to establish the national oil company. Arriola says her grandparents gave their chickens and pigs, and she is hell bent on protecting the company 70 years later.

"We are defending our resources, our patrimony, our dignity," she said.

Arriola snarls traffic and waves banners daily with hundreds of other women, who call themselves the "Adelitas" based on a famous folk song about a female soldier who took up arms in the Mexican Revolution.

They are spurred on by leftist leader Andres Manuel Lopez Obrador, who still refuses to concede the 2006 presidential election he narrowly lost to the conservative Calderon.

Lopez Obrador had receded into the background until Calderon made his Pemex proposal. Now he's back to commanding tens of thousands of protesters in the streets.

But oil expert Justin Dargin says Mexicans' passion for their oil could doom the company — and possibly the country.

The national turmoil is keeping anyone from dealing with declining production, leaky pipelines and a lack of technology to tap into potential reserves in the Gulf, where U.S. companies are busily preparing to drill.

Mexico's Cantarell oil field — discovered in 1976 and one of the world's largest — is drying up. Pemex reported a 2007 net loss of US$1.48 billion (euro98 billion) this week, as its revenues are drained to fund schools, hospitals and public works. Meanwhile, every other major oil company is reinvesting unprecedented profits in oil exploration.

Mexico could lose its standing as a major oil exporter in five years if it does not find more oil, experts say.

"We're talking about the vitality of the Mexican state. That's how important this issue is," said Dargin, a research fellow at Harvard University.

Even what Calderon has on the table may not be enough. Boxed in politically, Calderon proposes merely easing bureaucratic barriers and letting Pemex pay outside contractors "bonuses" — not a percentage cut — for any oil they find. Analysts say that's a good start, but won't likely entice major oil companies to invest billions in deep-water drilling.

The impasse isn't likely to be resolved any time soon.

Congress remains under lockdown with Lopez Obrador's allies demanding a 120-day national debate on the issue. Legislators from the ruling National Action Party and the Institutional Revolutionary Party have proposed 72 days.

In an interview with The Associated Press, Lopez Obrador said Thursday that his protests had already succeeded by preventing what he called "el fast-track" for Calderon's reforms.

"They couldn't do what they wanted, which was to pass it quickly in the pre-dawn hours when no one was watching," said Lopez Obrador, who plans another mass rally on the issue Sunday in Mexico City's central square.

On the other side, a conservative group that supports Calderon's bill ran television spots comparing Lopez Obrador to Hitler. The spots were pulled this week after they outraged some viewers.

For Maria Elena Hernandez, 53, much more is at stake than Mexico's image, which wasn't helped when the congressional takeover forced the cancellation of an official state reception for India's president.

The retired secretary joined demonstrators singing the national anthem to police guarding an office building where legislators have fled in hopes of getting some work done.

"If we let down our guard, the Americans would come in and install their oil workers," said Hernandez, wearing a white baseball cap and T-shirt emblazoned with "Defend Pemex." "Soon they would be telling us that we have to pay rent to live here."

[bwv 1080]

Oil Squeeze

With this winter's sudden spate of gasoline shortages now beginning to disappear, can motorists count on a hassle-free spring and summer on the highway? Hardly. By Memorial Day or shortly thereafter, shortages may start appearing all over again.

The problem this time is the Iranian oil shutoff. At first, U.S. officials dismissed the Iranian oilfield strike as a temporary phenomenon of no great consequence. But the strike has been dragging on since late October, and for the last month virtually no crude at all has been pumped out of the ground. Last week, in fact, the U.S. faced the bizarre situation of having to rush an emergency shipment of 200,000 barrels of diesel fuel and gasoline to Iran because local refinery output is insufficient to meet domestic needs.

Washington brows are beginning to furrow at the prospect that the U.S. might wind up with not even enough oil for itself, let alone anyone else. The nation depends on Iran for only about 5% of its petroleum needs, but other countries are nowhere near so lucky. Worldwide, Iran normally supplies about 20% of the total petroleum imports of all the consuming nations. Japan usually relies on Iran for 15% of its needs, and Western Europe generally is heavily dependent on Iranian oil, as is Israel, whose oil needs the U.S. has pledged to fulfill in the event of shortages. If the flow of Iranian oil remains stopped up for very long, the industrial nations will have to begin sharing the still available supplies. If that happens, the U.S. could suffer much more than a 5% drop in its normal supply and availability of crude.

So far, Saudi Arabia has helped to make up for the loss of Iran's oil by boosting its own output nearly 30% to some 10.3 million bbl. a day, close to the maximum that it is presently possible to pump from the Saudi fields. Iraq, Nigeria and Kuwait have also increased production somewhat. Right now, total world production is off by about 2 million bbl. a day. That is roughly equal to about 4% of global petroleum consumption, or more than enough to supply all the daily needs of Britain or Canada.

The oil companies are presently filling the gap by drawing upon their inventories, but that cannot continue for long. Even if all of Iran's striking oilworkers were to go back to their jobs this week, it could take as long as six months to bring the country's production back to an acceptable level. Oilmen actually say that if shortages of gasoline and other refined products are to be prevented from developing later this spring, the Iranian fields must start coming back on stream in the next six to eight weeks—a highly questionable prospect, given the country's political situation.

Occasional gasoline shortages this summer would merely foreshadow inevitable and worse dislocations next winter. Usually, the oil companies draw down their inventories steeply during the winter months anyway, then use the spring and summer to replenish their stocks. But U.S. inventories are already 10% below what they were this time last winter; they now stand at some 298 million bbl., or about a one-month supply. So if Iran's production is not resumed soon, says Energy Secretary James Schlesinger, "we would face much larger drawdowns next winter than we will have the resources to maintain."