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Saudi Arabia urges oil safeguards

RIYADH, Saudi Arabia

A top Saudi official urged fellow Gulf Arab countries on Wednesday to develop their armed forces to provide security to the region and safeguard oil resources.

"Because of the threats we face, we have to work hard to develop our armed forces to make them capable of providing regional stability and safety for the energy resources," the Saudi Press Agency quoted the country's deputy defense minister, Prince Abdel Rahman bin Abdel Aziz, as telling a meeting of defense ministers of the six-nation Gulf Cooperation Council.

The Saudi official did not name the source of the threats, but it appeared he was hinting at Iran when he talked about the importance of developing defense capabilities.

"This side, which you well know should be looked at within the strategic neighborhood, the change of the origin of threats, the emergence of the terrorism danger and the rise of effective regional powers in the area," he told the one-day meeting.

The GCC secretary-general, Abdel Rahman al-Attiyah, also spoke about "dangers and challenges" facing the region that "call on us to be more vigilant and exert joint efforts and coordination of the capabilities of the Council's countries," according to SPA.

The GCC countries -- Saudi Arabia, Kuwait, United Arab Emirates, Qatar, Bahrain and Oman are wearily following the escalating standoff between the West and Iran over Tehran's nuclear program. They fear the consequences of a military confrontation between Tehran and the United States, as well as the effects of any nuclear accidents in Iran.

The U.S. accuses Tehran of secretly trying to develop nuclear weapons -- a claim Iran denies, saying its program is for peaceful purposes including generating electricity.

Source: Business Week

The Empty Threat Of $100 Oil

Paul Maidment, 11.07.07, 9:18 PM ET

It doesn't much matter to the world economy if a barrel of crude oil sells for $101 or for $99, but there is shock value to the headline of $100 oil.

It doesn't even matter overly much if that barrel is selling for $80 rather than $100. The rule of thumb is that every 10% rise in the price of oil cuts global economic growth by a third of a percentage point over the following year. So if oil is at $100 a barrel in 2008 rather than $80, the projected global GDP growth rate of 5.2% would be cut to 4.4%. A hit to growth, yes, but not a plunge into recession.

Even in the 1970s, it took a quadrupling of oil prices (from $3 a barrel to $12) to do that. Adjust for inflation and that would be $50 oil in today's prices. Yet we stand now at the threshold of oil twice as expensive.

After an eight-year bull run in commodity prices, the world has simply gotten used to living with expensive oil.

And oil hasn't risen as much to some as it has for Americans. The recent fall of the dollar is in itself one of the reasons that oil is selling today for what it does: The dollar price of oil may have risen 30% since August, but it is up only 21% in euro terms.

It is not only the value of the dollar that has changed. In the past 35 years, technology and the shifting patterns of global industrialization have helped the world and its largest oil consumer, the U.S., wring more economic growth from each barrel of oil consumed.

Part of that is conservation and the development of more energy-efficient technologies. Part is the structural change in developed economies from being driven by manufacturing to being driven by services and information technology (though don't ever underestimate how much power a data center can chew up). Those countries no longer have as many energy-guzzling factories and mills.

Much rich-country manufacturing has relocated to developing economies like China. It is China's voracious appetite for energy to power its fast-growing economy that is the swing factor for oil prices. The International Energy Agency forecast Wednesday that China would surpass the U.S. as the world’s largest consumer of energy within three years.

Despite this change, the overall supply-demand balance hasn't changed from when oil was trading at $75 a barrel. Every dollar in the price above that is the result of fear. So finely balanced is supply and demand that oil traders react nervously whenever there is a political threat to supply being disrupted, pushing up prices. These days, there is a perennial threat to supply, be it from Iran, Saudi Arabia, Nigeria, Venezuela or a host of other oil-producing countries.

The question is if and when the resilience of the developed world to high oil prices will crumble, and especially that of U.S. consumers, who are providing the market of last resort that is sustaining global economic growth. When oil prices doubled between 2003 and 2005, cutting U.S. consumers purchasing power by 1% of GDP, the expected downturn never materialized -- though pessimists will point out that consumers then took equity out of their homes to sustain their spending power, a luxury many won't be able to enjoy this time.

But the optimists have counters. Refiners in the U.S, and Europe have held down the prices of gas and other refined products, at the cost of taking a hit to their margins, as the quarterly earnings results from Exxon Mobil and Chevron bear witness. And at this point, Americans are spending 6% of their disposable income on energy. There is some headroom there given the 8% peak for that statistic in the 1980s.

OPEC, whose members are getting rich off the rise in oil prices ($650 billion from oil sales in 2006, compared with $110 billion in 1998), could help, too, by announcing another production increase at the cartel’s next meeting, in Riyadh, Nov. 17-18.

Or the fear could just subside.

Source: Forbes

Oil fuels Iran’s confidence on nuclear ambitions

Bronwen Maddox: World Briefing

Iran is giving not an inch in the stand-off over its nuclear ambitions. Two reports next week are likely to accuse it of breaking international agreements, but with oil at $98 a barrel boosting its confidence, it is not showing any inclination to yield.

Yesterday President Ahmadinejad implied that Iran had 3,000 centrifuges enriching uranium. This is the most controversial work, because it can produce weapons grade material as well as low grade fuel for reactors.

His phrasing was imprecise on the crucial point of whether this tricky technology is actually working. “We have now reached 3,000 machines,” he said, describing the enrichment project at the Natanz underground site.

He has used the 3,000 figure before, and it meant less than it might seem. In April, the first time that Iran claimed to have 3,000 centrifuges, the International Atomic Energy Agency, the United Nations watchdog, said that only 328 were up and running. At the end of the summer it said that nearly 2,000 were probably running but it was unsure that the efficiency was all that Iran claimed.

Its next report, expected next week, will give its new reckoning. A separate report, by Javier Solana, the European Union foreign policy chief, on his own negotiatons with the Iranian nuclear team is due at about the same time.

It is not surprising that Iran has run into these technical problems. Mastering enrichment - specifically, getting a chain of centrifuges to spin extremely fast and feed increasingly enriched uranium gas through to each other - is the biggest hurdle between any country and nuclear self-sufficiency. It has given a cushion of comfort to those trying to stop Iran achieving this. But it is only a matter of time before Iran does.

The point of Ahmadinejad’s noisy claims about its capability, it seems, is to force other countries to accept enrichment as a fact in any talks. So far, Britain, the US, France and Germany have insisted that any enrichment, even in a so-called pilot scheme, is unacceptable.

The next fortnight will show if this demanding goal is sustainable. A tough report from the IAEA, listing Iran’s failures to comply with international obligations to be open about its work, plus a caustic account from Solana, will test whether China and Russia will back new sanctions, and whether Iran might then give way.

In the five years since Iran’s 20-year hidden programme came to light, there have been endless rounds of IAEA reports, threats and unsatisfactory Iranian responses. It rises to a peak of tension, ebbs and then starts again.

But this round matters more. It will show whether getting rid of Iranian enrichment capability can still be a goal of the West’s diplomatic efforts, or whether it is a lost cause. If that is the case, talks (if they continue) will switch to trying to set the terms for intrusive inspections by the IAEA, to give some comfort that Iran is not diverting enriched uranium to bombs. But that is a very different discussion and, for the West, would mark the failure of round one.

Source: Times Online