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Registered Member
Join Date: Aug 2006
Posts: 542
Country: United States
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oil fueling one of the biggest transfers of wealth in history
High oil prices a boon for some
Producers spend lavishly while others face runaway energy costs
By Steven Mufson, Washington Post
Article Last Updated: 11/11/2007
WASHINGTON — High oil prices are fueling one of the biggest transfers of wealth in history. Consumers are paying $4billion to $5billion more for crude oil every day than they did just five years ago, pumping more than $2trillion into the coffers of oil companies and oil-producing nations this year.
The consequences are evident in minds and mortar: Anger at Chinese motor-fuel pumps and inflated confidence in the Kremlin; new weapons in Chad and new petrochemical plants in Saudi Arabia; no-driving campaigns in South Korea and bigger sales for Toyota hybrid vehicles; a fiscal burden in Senegal and a bonanza in Brazil.
In Myanmar, recent demonstrations were triggered by a government decision to raise fuel prices.
In the United States, the rising bill for imported petroleum lowers already-anemic consumer savings rates, adds to inflation, worsens the trade deficit, undermines the dollar, and makes it more difficult for the Federal Reserve to balance its competing goals of fighting inflation and sustaining growth.
High prices have given a boost to oil-rich Alaska, which in September raised the annual oil dividend paid to every man, woman and child living there for a year to $1,654, an increase of $547 from last year.
In other states, high prices create greater incentivesfor pursuing non-oil energy projects that once looked too expensive, and hurt earnings at energy-intensive companies like airlines and chemical makers. Even Kellogg's cited higher energy costs as a drag on its third-quarter earnings.
Unprecedented shift
With crude oil prices flirting with $100 a barrel, there is no end in sight to the redistribution of more than 1percent of the world's gross domestic product. Earlier oil shocks generated giant shifts in wealth, but they faded and economies adjusted.
"There's never been anything like this on a sustained basis the way we've seen the last couple of years," said Kenneth Rogoff, a Harvard University economics professor and former chief economist at the International Monetary Fund.
The benefits, to the tune of $700billion a year, are flowing to oil-exporting countries.
Two of them, Iran and Venezuela, might be better able to defy the Bush administration because of swelling oil revenue. Venezuela has used its oil wealth to dispense patronage around South America, vying for influence with longtime U.S. allies. And Iran could be less vulnerable to sanctions designed to pressure it into giving up its nuclear program or opening it to inspection.
The world's biggest oil exporter, Saudi Arabia, is building four cities. Projects like these are designed to burnish the country's image, develop a non-oil economy and generate enough employment to maintain social stability.
Despite such mega-projects, Saudi Arabia is running a budget surplus. It has paid down much of the foreign debt it accumulated in the late 1990s and is adding to its foreign-exchange reserves.
Russian boom
Russia, the world's No.2 oil exporter, shows oil's impact is political as well as economic. When Vladimir Putin came to power in 2000, less than two years after the collapse of the ruble and Russia's default on its international debt, the country's policymakers feared 2003 could bring another financial crisis. The country's foreign debt repayments were scheduled to peak at $17billion that year.
That now looks like peanuts. Russia's gold and foreign-currency reserves have risen by more than that amount just since July.
"The government is much stronger, much more self-assured and self-confident," said Vladimir Milov, head of the Institute of Energy Policy in Moscow and a former deputy minister of energy. "It believes it can cope with any economic crisis at home."
With good reason. Using energy revenue, the government has built up a $150billion rainy-day account called the Stabilization Fund.
The result: Russia is trying to reclaim former Soviet republics as part of its sphere of influence. Freed of the need to curry favor with foreign oil companies and Western bankers, Russia can resist what it views as American expansionism and forge an independent approach to contentious issues like Iran's nuclear program.
The bonanza of petrodollars has also led to a consumer boom evident in the sprawling malls, 24-hour hypermarkets, foreign cars, new apartment and office buildings that have become commonplace not just in Moscow and St. Petersburg but in provincial cities. Average income has doubled under Putin, and the number of people living below the poverty line has been cut in half.
Unwise spending
But many economists have called petroleum reserves a bane, saying they enable oil-rich countries to avoid taking steps that would diversify their economies and spread wealth more equally. Russia, for example, has rising inflation, soaring imports and a lack of new investment in the very industry that is fueling the boom.
The problems are worse in Nigeria, which is battling an insurgency that has curtailed output in the oil-rich Niger River Delta. The central government has been disbursing its remaining oil revenue, though the country's ever-present corruption has undermined the program's effectiveness. The government has also cut domestic gas subsidies, raising prices several times over in the name of improving health, education and infrastructure.
"Our oil wealth is a curse rather than a blessing for our country," said Halima Dahiru, a 36-year-old housewife, as she waited for a bus near a Texaco station in Kano, the commercial capital of northern Nigeria.
"You go to bed and wake up the next morning to hear the government has increased the price of petrol, and you have to live with it," she said. "The only sensible thing to do is to adjust to the new reality, because nothing will make the government listen to public outcry."
Newer oil-exporting countries such as Sudan and Chad and the companies operating there — including Malaysia's Petronas and France's Total — are winners. Sudan's capital, Khartoum, is booming, with new skyscrapers and five-star luxury hotels, despite U.S. and European sanctions aimed at pressuring the country to halt attacks against people in the Darfur region.
Chad's government has used some of its oil revenue to buy weapons rather than develop the country's economy. In eastern Chad, there are hardly any gas stations; people buy their gas — often for motorcycles, not cars — from roadside stands that sell it out of glass bottles.
Importers hit hard
Oil-importing countries face their own challenges. The hardest hit are the poorest. Last year, Senegal's budget deficit doubled, inflation quickened and growth slowed. The cash-strapped state-owned petrochemical business had to shut down for long periods.
In China, the government increased domestic pump prices on Oct.31 by nearly 10percent amid shortages, rationing and long lines throughout the country. Violence broke out at some gas stations; last week in Henan province, one man killed another who chastised him for jumping to the front of the line.
A scarcity of diesel fuel even hit China's richest cities — Beijing, Shanghai and trading ports on the east coast — which in the past have been kept well-supplied. In Ningbo, a city south of Shanghai, the wait at some gas stations this week was more than three hours long, and lines stretched more than 200 yards.
Rumors circulated that gas stations or the government was hoarding fuel in anticipation of further price increases, prompting the official New China News Agency to warn that anyone caught spreading rumors about fuel-price increases will be "severely punished."
Since shedding orthodox Maoist economic policies, China's leaders have unleashed decades of pent-up demand. China now consumes 9percent of world oil output, up from 6.4percent five years ago, according to the International Energy Agency. Yet it still subsidizes fuel. As a result, consumption this decade has skyrocketed at an 8.7percent annual rate.
Japan adapts
Highly developed consumer nations have adapted better. In Japan, which relies on imports for nearly all its fuel, nearly everyone is a loser — with the big exception of Toyota, maker of the hybrid Prius.
Yet Japan has been weaning itself off oil for years. It now imports 16 percent less oil than it did in 1973, though the economy has more than doubled. Billions of dollars were invested to convert oil-reliant electricity-generation systems into ones powered by natural gas, coal, nuclear energy or alternative fuels.
Japan now accounts for 48percent of the globe's solar-power generation, compared with 15percent in the U.S. The adoption rate for fluorescent light bulbs is 80percent, compared with 6percent in the U.S.
Still, rising fuel prices are pushing up the prices of raw and industrial materials, as well as for food, which relies on fertilizers and transportation. Because of rising wheat prices, Nissin Food Products, the instant-noodle industry leader, will increase prices 7 to 11percent in January, the first price hike in 17 years.
Britain's national average gasoline price topped 1pound per liter, or about $8 a gallon, for the first time this week. But the government is gaining revenue, said Chris Skrebowski, editor of Petroleum Review, published by the Energy Institute in London.
About 80percent of the cost of gas in Britain is tax. Because the country produces almost all the oil it uses, its economy has been cushioned against increasing prices, Skrebowski said.
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I just added a homemade 10W halogen headlight as the time change has made more of my commute in darkness/twilight... Holy crap is it nice 
I just need to sort out this 12v battery I'm using (or rather, have not really used in over a year).
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