Will Saudi Arabia Cause More Destabilization in thr Middle East?

Deputy Crown Prince Mohammed bin Salman.

One hears constant blather from Republicans about the danger that Iran and/or radical Islamic extremists pose to America, yet they continue to ignore perhaps the largest source of extremism and unrest in the Middle East: Saudi Arabia.  All but one of the 9-11 hijackers were Saudis and no nation spends more supporting the export of extremist Islamic belief than Saudi Arabia.  Why the blindness?  Sadly, because America and to a mach larger extent is European allies still are dependent on Saudi oil.  If the Middle East is a threat to American and western interests, the fastest way to end the issue overall is to find alternative energy sources that would make the Saudis and their oil irrelevant. Then, rather than backing the international export of extremism, the Saudi royals would have to contend with a popular uprising as revenues plunged.  A piece in the Washington Post looks at a Saudi royal whose visions - or more likely delusions - of grandeur could spell more trouble for the world.  Here are highlights:

Late last year, Germany’s intelligence service issued a stern warning about Saudi Arabia: King Salman and his 30-year-old son, Deputy Crown Prince Mohammed bin Salman, want to become “the dominant rulers of the Arab world,” it claimed.

The entire region could be destabilized by their quest and the internal power struggles under way in the kingdom, the memo said.

When King Salman’s reign began a year ago, Mohammed quickly began accumulating “more power than any prince has ever held, upending a longstanding system of distributing positions around the royal family to help preserve its unity,” the New York Times reported.

The prince was appointed defense minister in January and was named deputy crown prince in April, “putting him second in line to the throne and ensuring that the kingdom’s future rulers will come from Salman’s own branch of the extensive royal family,” The Washington Post reported at the time.

Despite the fact that Saudi Arabia does have some elections  — last month, women were allowed to vote and run for office for the first time in municipal elections — the country remains an absolute monarchy.

As defense minister, Mohammed is overseeing a troubled Saudi-led coalition in neighboring Yemen that has been battling Iranian-aligned rebels since March. “The war is draining the Saudis militarily, politically, strategically,” Farea al-Muslimi, a Yemen analyst at the Beirut-based Carnegie Middle East Center, told The Post’s Hugh Naylor.

The Saudi-led coalition “has repeatedly struck houses, schools, and hospitals where no military target was in sight,” wrote Joe Stork, deputy Middle East director for Human Rights Watch.

As oil prices plunge, the Economist noted that the prince’s “most dramatic moves may be at home. He seems determined to use the collapse in the price of oil … to enact radical economic reforms.”

The lifestyle of the young prince — and that of many of the kingdom’s young royals — has apparently annoyed some Saudis. Reports of his “lavish parties in the Maldives and the crown prince’s house-hunting for a Sardinian villa worth half a billion euros are fodder for social media, of which Saudis are keen users,” the Economist also wrote.

Ford M. Fraker, the president of the Middle East Policy Council and a former United States ambassador to Saudi Arabia, told the New York Times that the “The king has put his son on an incredibly steep learning curve, clearly.”

The main rivalry between Saudi Arabia and Iran stems from a longstanding curse of mankind: religion.  It's a case of Sunni versus Shia - a rivalry and hatred that goes back over 1000 years.  Iran has a long history of empire going back over 2300 years - perhaps not coincidentally, the greatest periods were prior to Islam - while the Saudis were impoverished nomads until oil changed the calculation.  Population wise, Iran has some 81 million people versus the Saudis' 31 million.  Which nation is the better to court as a friend and ally?

Oil Price Drops Raise Fears of Unrest From Venezuela to Iraq to Russia

For years - actually decades - oil producing countries (think OPEC) have played a game of economic blackmail on non-oil producing nations, worked to keep oil prices high and enjoyed power and influence that under any other standard they did not deserve.  The side effect that they seemingly never thought through was that over time, such blackmail (i) made exploration and production feasible in places it had never existed, (ii) made secondary and tertiary recovery economically practicable, and (iii) made alternate fuels attractive and more competitive.  The end result has been more worldwide production and falling oil prices - and revenues that have often propped up failed regimes.  As a piece in the New York Times notes, the chickens could be about to come home to roost as falling prices are setting the stage for possible political unrest.  Here are article excerpts:

Oil, the lifeblood of many countries that produce and sell it, appears to be rapidly turning into an ever-cheaper economic curse.

A year ago, the international price per barrel of oil was about $103. By Monday, the price was about $42, roughly 6 percent lower than on Friday.

In oil-endowed Iraq, where an Islamic State insurgency and fractious sectarian politics are growing threats, a new source of instability erupted this month with violent protests over the government’s failure to provide reliable electricity and explain what has been done with all the promised petroleum money. 

In Russia, a leading oil producer, consumers are now paying far more for imports, largely because of their currency’s plummeting value. 

In Nigeria and Venezuela, which rely almost completely on oil exports, fears of unrest and economic instability are building. 

In Ecuador, where oil revenue has fallen by nearly half since last year, tens of thousands of demonstrators pour into the streets every week, angered by the government’s economic policies.

Even in wealthy Saudi Arabia, where the ruling family spends oil money lavishly to preserve its legitimacy, the government has been burning through roughly $10 billion a month in foreign exchange holdings to help pay expenses, and it is borrowing in the financial markets for the first time since 2007. Other Arab countries in the Persian Gulf that are dependent on oil exports, including Kuwait, Oman and Bahrain, are facing fiscal deficits for the first time in two decades.

[N]ew anxieties about frailties in China, the world’s most voracious consumer of energy, have raised fears that the price of oil, now 30 percent lower than it was just a few months ago, could remain depressed far longer than even the most pessimistic projections, and do even deeper damage to oil exporters.

Although the price drop has most directly hurt oil exporters, it also may signal a new period of global economic fragility that could hurt all countries — an anxiety that already has been evident in the gyrating stock markets.

The price drop also has become an indirect element in the course of Syria’s civil war and other points of global tension. Countries that once could use their oil wealth as leverage, like Russia, Iran and Saudi Arabia, may no longer have as much influence, some political analysts said. Iran, which once asserted it could withstand the antinuclear embargo of its oil by the West, appeared to have rethought that calculation in reaching an agreement on its nuclear activities last month.

[W]hile lower oil prices stimulate economies of consuming countries, a protracted decline carries many unanticipated consequences — starting with the economic weakness in developing countries that buy increasing amounts of goods from the United States and others in the industrialized world.

A supply glut has been evident for some time, driven partly by a vast increase in Saudi production and a growing energy self-sufficiency in the United States, which was once heavily reliant on Middle East oil.

Saudi Arabia not only is producing a record amount, but also is increasing the number of rigs drilling for future production. And its Gulf allies, the United Arab Emirates and Kuwait, are following suit. . . . all the exporters in the Middle East are struggling with each other to protect Asian markets, now that the United States is using much less of their oil.

The global glut is likely to worsen if the nuclear deal with Iran is approved, potentially releasing as much as one million more barrels onto the 94-million-barrel-a-day global market in a year or so.  Iran’s oil minister, Bijan Namdar Zanganeh, has made no secret about his country’s intentions. “We will be raising our oil production at any cost, and we have no other alternative,” he was quoted Sunday in Iran’s state-run news media as saying.

The big change in recent years has been the surge of United States oil production, adding more than four million barrels a day to global supplies. But in recent months the oversupply has been driven primarily by the Saudis, who have flooded the market in what economists regard as a deliberate attempt to drive down the price so that other high-cost producers can no longer compete — most notably the Americans.

“The hemorrhaging of government budgets reliant on oil will force dramatic cuts in spending or dangerous increases in borrowing, if not both,” Mr. Goldwyn said. “The countries without significant foreign exchange reserves are most at risk, and they include Nigeria, Angola, Algeria, Venezuela and Iraq. The countries which need to sustain investment to maintain political legitimacy need to be worried, and that’s Brazil, Russia and even Iran.”

[A] longer-term worry about possible miscalculations by Saudi Arabia, on both the duration and magnitude of the oil price drop.

“With a burgeoning population looking for jobs, education and health care every day,” she said, “the expensive social contract between the royal family and Saudi citizens will get more difficult, and eventually impossible, to sustain if oil prices do not recover.”

Past greed, arrogance and shortsightedness may well upset the political apple cart in many countries, especially Saudi Arabia and Russia.  

The New Oil Crisis: Exploding Trains

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As the residents of Lynchburg, Virginia, recently found out, there is a dangerous side to America's surging oil production: trains carry large cargoes of oil in often aging tank cars that set the stage for a fiery conflagration in the event of a derailment.  Thankfully, no one died in Lynchburg, but in other places not everyone has been so lucky.  While Virginia is investigating the cause of the Lynchburg crash the trains continue to roll raising the specter of other possible disasters.  With refineries in the area and its large port facilities, Hampton Roads is often a destination for these potentially catastrophic cargoes.  A lengthy piece in Politico looks at the growing danger.  Here are highlights (read the entire piece):

Communities throughout the U.S. and Canada are waking up to the dark side of North America’s energy boom: Trains hauling crude oil are crashing, exploding and spilling in record numbers as a fast-growing industry outpaces the federal government’s oversight.

In the 11 months since a runaway oil train derailed in the middle of a small town in Quebec, incinerating 47 people, the rolling virtual pipelines have unleashed crude oil into an Alabama swamp, forced more than 1,000 North Dakota residents to evacuate, dangled from a bridge in Philadelphia and smashed into an industrial building near Pittsburgh. The latest serious accident was April’s fiery crash in Lynchburg, Virginia, where even the mayor had been unaware oil was rolling through his city.

These dangerous moments on the rails raise questions about the safety of transporting increasing amounts of oil in mile-long chains of tank cars, some of them decades old. Community leaders and activists from Oregon to Alabama to Albany call the trains a disaster waiting to happen — despite the Department of Transportation’s efforts to play catchup through a series of emergency orders, agreements with industry and proposed regulations being reviewed by the White House.

A POLITICO analysis of federal data from more than 400 oil-train incidents since 1971 shows that a once-uncommon threat has escalated dramatically in the past five years:

• This year has already shattered the record for property damage from U.S. oil-train accidents, with a toll exceeding $10 million through mid-May — nearly triple the damage for all of 2013. The number of incidents so far this year — 70 — is also on pace to set a record.
• Almost every region of the U.S. has been touched by an oil-train incident. These episodes are spreading as more refineries take crude from production hot spots like North Dakota’s Bakken region and western Canada, while companies from California and Washington state to Missouri, Pennsylvania, Virginia and Florida build or expand terminals for moving oil from trains to barges, trucks or pipelines.

“The boom in domestic oil production has turned many railways and small communities across our country into de facto oil pipelines, and the gold-rush-type phenomenon has unfortunately put our regulators behind the eight ball,” said Sen. Chuck Schumer (D-N.Y.), who has been pushing for stricter safety and disclosure rules. “It has become abundantly clear that there are a whole slew of freight rail safety measures that, while for many years have been moving through the gears of bureaucracy, must now be approved and implemented in haste.”

Like the oil boom itself, the surge in oil-train traffic has come much faster than anyone expected. Meanwhile, the trains face less onerous regulations than other ways of moving oil, including pipelines like TransCanada’s Keystone XL project.

Keystone, which would carry oil from Alberta to the Gulf Coast, has waited more than five years for a permit from the Obama administration while provoking a national debate about climate change. But no White House approval was needed for all the trains carrying Canadian oil into the United States. In fact, freight railroads in the U.S. are considered “common carriers” for hazardous materials, meaning they can’t refuse to ship it as long as it meets federal guidelines.

Meanwhile, the oil train business is primed to get bigger. Even TransCanada might start using rail to ship oil to the U.S. while waiting for Keystone to get the green light, CEO Russ Girling said in an interview in May — despite agreeing that trains are a costlier and potentially more dangerous option.

“If anybody thinks that is a better idea, that’s delusional,” Girling said.

Lynchburg Train Derailment/Fire Underscore Need for Regulations

The proponents of unrestricted oil and gas exploration, pipeline construction, and a laissez-faire government approach to regulations of the same - a crowd that includes the Virginia GOP - suffered a possible set back yesterday.   A CSX train carrying fracked oil derailed in downtown Lynchburg setting off a fire storm that cause portions of the city's downtown to be evacuated and dumped 50,000 gallons of the oil into the James River, force the city of Richmond to shift to alternate water supply sources.   The accident is but one of many that highlight the risks associated with pipeline and rail transportation of oil.  The only good news was that no serious injuries or deaths resulted. The Lynchburg News-Advance reports on the mess.  Here are highlights:

About 50,000 gallons of crude oil were unaccounted for late Wednesday after a CSX train derailed in downtown Lynchburg and sent three flaming tanker cars careening into the James River.

The ensuing conflagration ignited oil on the surface of the river, sent flames and smoke hundreds of feet into the air, forced evacuations of downtown businesses and homes and rattled the nerves of hundreds of downtown workers.

Businesses and residences between Fifth and Washington streets and from Main Street to the riverfront had to be cleared for several hours, as firefighters and hazardous materials workers charged toward the blaze.

Evacuees swarmed Main Street, peering around buildings and police barriers, craning for a better view of the disaster that might provide some explanation as to what went so terribly wrong.

City officials said drinking water is unaffected. Lynchburg typically gets its water from the Pedlar Reservoir in Amherst County. Downstream, Richmond began Wednesday afternoon to switch to an alternate water supply.

NTSB Chairwoman Deborah Hersman discussed oil train wrecks last week at a two-day safety forum in Washington.

Hersman said the Obama administration needed to take steps immediately to protect the public from potentially catastrophic oil train accidents even if it means using emergency authority.

The Transportation Department was in the midst of drafting regulations to toughen standards for tank cars used to transport oil and ethanol, as well as other steps prevent or mitigate accidents. But there isn't time to wait for the cumbersome federal rulemaking process - which often takes many years to complete - to run its normal course, Hersman said.

A piece in the New York Times underscores that such derailments are a growing problem.  Here are highlights:

Train traffic carrying crude was relatively rare until four years ago, when oil companies in North Dakota began shipping large quantities of Bakken shale crude out of the state by rail because there was insufficient pipeline capacity to do the job.

Now, much of the production of the Bakken region is sent by rail on trains that can stretch up to a mile long and carry roughly 85,000 barrels of oil.

When a runaway train carrying Bakken crude derailed and exploded last July in the Quebec town of Lac-Mégantic, killing 47 people, the safety issues surrounding the transportation of crude through populated areas rose in importance for both American and Canadian regulators.

Then, in December, an oil train passing through Casselton, N.D., derailed and exploded, sending flames high into the air and forcing some residents to evacuate. That followed an accident in November, when another oil train derailed in Alabama, spilling crude oil.

Many of the trains are destined for refineries on the East Coast, which have a strong desire to replace expensive imported crude from the Middle East and Africa with the high-quality, and less expensive, crude from North Dakota.

In response to the rising concerns, federal regulators and railroads agreed in February to a series of voluntary measures to improve safety, including lower speed limits for oil trains in urban areas, increasing the frequency of track inspections and adding more brakes on trains.

And last week, Canada issued tough new rules requiring emergency plans from railroads on responding to catastrophic accidents and requiring companies to retire older models of tank cars within three years. The new model of tank car, developed in 2011, would effectively set a new standard of safety for rail companies in the United States since many lines cross the United States-Canadian border.

But despite years of discussion, American regulators have lagged on requiring stronger tank cars, which are generally owned by oil companies and private investors, not by railroad companies.

Safety experts have warned for more than 20 years that the older tank cars, called DOT-111s, are prone to rupture in a derailment.

The Secret of the Seven Sisters - The Cartel That Contols the World's Oil

For newer readers, in my initial years out of law school I worked first for a private law firm that did a huge amount of oil and gas work and later I was in-house counsel for the then largest independent oil company in America out side of the so-called "Seven Sisters" - Exxon, Shell, BP, Mobil, Texaco, Gulf and Chevron - the biggest oil companies in the world.  Hence, I have known the oil industry from the inside - both the good and the bad.  And, despite the rise of OPEC and set backs in some nations where thy saw their assets nationalized, in part often because of poor stewardship, the Seven Sisters (now diminished in numbers due to mergers) still have largely still ended up on top and still wield immense power.   When you hear advertisements lauding the job creation by the oil industry or attack ads against politicians who want to tighten up on the oil industry - often run by the American Petroleum Institute - you are hearing the Seven Sisters at work.  Interestingly  enough,  Al Jazeera is running a four part series on the history of the Seven Sisters and how they continue to control the world's oil supply.  Here are some highlights (go to the article to view a video clip):

On August 28, 1928, in the Scottish highlands, began the secret story of oil.   Three men had an appointment at Achnacarry Castle - a Dutchman, an American and an Englishman.

The Dutchman was Henry Deterding, a man nicknamed the Napoleon of Oil, having exploited a find in Sumatra. He joined forces with a rich ship owner and painted Shell salesman and together the two men founded Royal Dutch Shell.

The American was Walter C. Teagle and he represents the Standard Oil Company, founded by John D. Rockefeller at the age of 31 - the future Exxon. Oil wells, transport, refining and distribution of oil - everything is controlled by Standard oil.

The Englishman, Sir John Cadman, was the director of the Anglo-Persian oil Company, soon to become BP. On the initiative of a young Winston Churchill, the British government had taken a stake in BP and the Royal Navy switched its fuel from coal to oil. With fuel-hungry ships, planes and tanks, oil became "the blood of every battle".

The new automobile industry was developing fast, and the Ford T was selling by the million. The world was thirsty for oil, and companies were waging a merciless contest but the competition was making the market unstable.

That August night, the three men decided to stop fighting and to start sharing out the world's oil. Their vision was that production zones, transport costs, sales prices - everything would be agreed and shared. And so began a great cartel, whose purpose was to dominate the world, by controlling its oil.

Four others soon joined them, and they came to be known as the Seven Sisters - Exxon, Shell, BP, Mobil, Texaco, Gulf and Chevron - the biggest oil companies in the world.

In the first episode, we travel across the Middle East, through both time and space.

"We waged the Iran-Iraq war and I say we waged it, because one country had to be used to destroy the other. As they already benefit from the oil bonanza, and they’re building up financal reserves, from time to time they have to be bled." - Xavier Houzel, an Oil trader

Throughout the region's modern history, since the discovery of oil, the Seven Sisters have sought to control the balance of power.

They have supported monarchies in Iran and Saudi Arabia, opposed the creation of OPEC, profiting from the Iran-Iraq war, leading to the ultimate destruction of Saddam Hussein and Iraq.

The Seven Sisters were always present, and almost always came out on top.  Since that notorious meeting at Achnacarry Castle on August 28, 1928, they have never ceased to plot, to plan and to scheme.

Am I being cynical?  I do not think so.  One need only remember that Dick Cheney's Halliburton before all else was (going back many decades) and is a major oil services corporation totally intertwined with the Seven Sisters.  The America public was played for a bunch of suckers and fools by Messrs Bush and Cheney.

Will Subsidies for the Oil Industry Be the GOP's Next Achilles Heel?

I'm not one to demonize the oil industry in a knee jerk reaction. I was in-house counsel for an oil companies some years back so I do understand the high stakes nature of the industry. Add to that and and I currently own stock in Exxon I recently inherited from my late mother who never sold it (my parents originally owned Mobil stock, which had gay friendly policies which Exxon ended - something I voted to restore on my proxy) because they wanted to allow their heirs to decide what to do with the stock. Nonetheless, obscene greed at some point becomes simply unconscionable. Moreover, not paying one's fair share in taxes is in my view, un-American. Apparently, other voters feel the same way and at town hall meetings the GOP members of Congress are finding themselves under attack for their support of subsidies to the oil industry. That is when they aren't under attack for the GOP plan to kill Medicare for all practical purposes. Think Progress looks at one GOP Congresswoman who has broken ranks and will oppose continued oil industry subsidies. Here are highlights:
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As ThinkProgress has been documenting, conservative lawmakers have been facing the ire of Main Street America at town halls all over the country. These Americans are demanding fair sacrifice rather than budget cuts that unfairly saddle the poor and middle class with the burden of deficit reduction.
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Rep. Jaime Herrera Beutler (R-WA) came face to face with this growing movement at a town hall in Vancouver, Washington last night. Dozens of protesters encamped outside the meeting, waving signs like “Save Medicare: Tax the Rich.” When she tried to defend her vote on the GOP budget that would effectively privatize Medicare, “a chorus of boos and catcalls and shouts of ‘liar’ erupted in the auditorium.”
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Yet at one point — perhaps understanding that her constituents were already upset with her enough — she did endorse a position that put her on the opposite side of most of her House GOP colleagues. She told the audience that she favored ending subsidies to oil companies like Exxon and BP:
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Herrera Beutler did not directly address why she has supported making the Bush-era tax cuts for the wealthy permanent. But she said she does favor taking a hard look at military spending and supports ending subsidies for big corporations like Exxon and BP.
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Of course, Beutler voted, along with the rest of the House GOP caucus, to protect billions of dollars in taxpayer subsidies for Big Oil more than once in the past few months.
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Her flip-flop may be evidence that American anger at Big Oil is forcing hesitant conservatives to switch sides. A number of GOP congressmen have told constituents in recent days that they now oppose the subsidies. These include Reps. Joe Walsh (IL), Tom McClintock (CA), and Dan Webster (FL)

Myth That Offshore Drilling Will Solve the USA's Energy Problems

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The chart above shows the ridiculousness and disingenuousness of those who support "drill baby drill." Are you listening Bob McDonnell?

Oil Spill to Foul Entire East Coast?

Having spent a couple of years as in-house counsel I have been holding off any verdict on the oil spill catastrophe in the Gulf of Mexico until now. The scenario continues to look worse and worse and it increasingly appears that an as yet unexplained policy change during the Bush/Cheney regime may ultimately explain why the shattered well failed to have a costly type of blow out preventer such as is required by many other nations for wells drilled in their waters. A New Republic story looks at this issue as to why the BP well did not have this - in retrospect - incredibly crucial piece of equipment. Here are some highlights:
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Thanks to The Wall Street Journal’s terrific reporting last week, there are two important things we already know.
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First, an oil-drilling procedure called cementing—which is supposed to prevent oil and natural gas from escaping by filling gaps between the outside of the well pipe and the inside of the hole bored into the ocean floor—has been identified as a leading cause of well blowouts. Indeed, a 2007 study by the Minerals Management Service (or MMS, the division of the Interior Department responsible for offshore drilling) found that this procedure was implicated in 18 out of 39 blowouts in the Gulf of Mexico over the 14 years it studied—more than any other factor. Cementing, which was handled by Halliburton, had just been completed prior to the recent explosion.
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Second, the oil well now spewing large quantities of crude oil into the Gulf of Mexico lacked a remote-control acoustic shutoff switch used by rigs in Norway and Brazil as the last line of defense against underwater spills. There’s a story behind that. As the Journal reports, after a spill in 2000, the MMS issued a safety notice saying that such a back-up device is “an essential component of a deepwater drilling system.” The industry pushed back in 2001, citing alleged doubts about the capacity of this type of system to provide a reliable emergency backup. By 2003, government regulators decided that the matter needed more study after commissioning a report that offered another, more honest reason: “acoustic systems are not recommended because they tend to be very costly.” I guess that depends on what they’re compared to. The system costs about $500,000 per rig. BP is spending at least $5 million per day battling the spill, the well destroyed by the explosion is valued at $560 million, and estimated damages to fishing, tourism, and the environment already run into the billions.
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There’s something else we know, something that suggests an explanation for this sequence of events. After the Bush administration took office, the MMS became a cesspool of corruption and conflicts of interest. In September 2008, Earl Devaney, Interior’s Inspector General, delivered a report to Secretary Dirk Kempthorne that has to be read to be believed. One section, headlined “A Culture of Ethical Failure,” documented the belief among numerous MMS staff that they were “exempt from the rules that govern all other employees of the Federal Government.” They adopted a “private sector approach to essentially everything they did.” This included “opting themselves out of the Ethics in Government Act.”
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So here’s my question: what is responsible for MMS’s change of heart between 2000 and 2003 on the crucial issue of requiring a remote control switch for offshore rigs? What we do know is that unfettered oil drilling was to Dick Cheney’s domestic concerns what the invasion of Iraq was to his foreign policy—a core objective, implacably pursued regardless of the risks. Is there a connection between his infamous secret energy task force and the corrupt mindset that came to dominate a key program within MMS?

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As for how bad will the spill get, the Washington Post has a VERY, VERY frightening story that, if the predictions are true, could mean disaster for much of the east coast of the USA. Yes, all the way up to the Virginia coast and beyond. If Bush and Cheney had a hand in allowing this well to be drilled without equipment that could have averted this disaster, in addition to being tried for war crimes, we have another indictment against them. Meanwhile, Virginia Gov. Bob McDonnell continues to favor drilling off the Virginia coast. Here are highlights:
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[W]ith each day that the leaking oil well a mile below the surface remains uncapped, scientists and energy industry observers are imagining outcomes that range from bad to worse to worst, with some forecasting a calamity of historic proportions.
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Three scientists in separate interviews Tuesday said the gulf's "loop current," a powerful conveyor belt that extends about 3,000 feet deep, will almost surely take the oil down through the eastern gulf to the Straits of Florida, a week-long trip, roughly. The oil would then hang a sharp left, riding the Florida Current past the Keys and north again, directly into the Gulf Stream, which could carry it within spitting distance of Palm Beach and up the East Coast to Cape Hatteras, N.C.
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For the moment, the oil flowing from the blown-out well in what the industry calls Mississippi Canyon Block 252 is still many miles north of the loop current. . . . The oil so far has barely touched coastal islands and hasn't come ashore, but environmentalists are poised for a catastrophic impact that could last decades.
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At a news conference Tuesday, Louisiana Gov. Bobby Jindal (R) said he had asked federal officials to look for ways to increase the Mississippi River's flow to keep the slick at bay. "Let's make no mistake about what's at stake here," he said. "This is our very way of life."

Brazil Dances With OPEC

Wearing my former oil company in-house counsel hat, I blogged last year about the huge oil discovery off shore from Brazil and the production potential which would allow Brazil to become a major player in the world economy. Obviously, there will be a significant development period before Brazil will be able to ramp up production from the new discoveries, but whether or not Brazil joins OPEC is significant because it will decide whether or not Brazilian production will exist as a counter weight to OPEC and Middle Eastern oil. Regardless of Brazil decides to do via-a-vis OPEC, the USA needs to finally get serious about finding ways to decrease its dependence on imported oil. The chatter has been going on since the early 1970’s and very little has actually been done. The one time trend to smaller fuel efficient cars died years ago as soccer moms [yes I disdain them for many reasons, not the least of which is their political idiocy as they worry about insignificant matters in the grand scheme of things] drive about in gas guzzling four wheel drive behemoths like Suburbans, Tahoes, and Hummers to name a few. Brazil’s increased economic clout also shows why the USA needs to start developing a responsible policy towards South America. Here some highlights from a new CNN story (http://money.cnn.com/2008/02/22/news/international/brazil_opec/index.htm):

NEW YORK (CNNMoney.com) -- OPEC, the 13-nation cartel that has a huge influence over oil prices, may be expanding farther into South America. News that the largest economy in Latin America (see correction below) was considering joining OPEC began to swirl late last year shortly after Brazil announced the discovery of huge offshore oil and gas deposits that could turn the country into a major oil exporter. Politicians, including President Luiz Inacio Lula de Silva, said the country would consider membership in the Organization of Petroleum Exporting Countries as soon as the export potential from the new fields is evaluated. Analysts say Brazil is serious about joining, and its membership could push crude prices higher as more oil would be under OPEC control, but that membership and significant crude exports from the country won't happen anytime soon. Brazil's interest in joining OPEC is the political clout that membership brings.

"To the extent they are able to present themselves as an international powerhouse, that plays favorably at home," said Christopher Garman, head of the Latin American division at Eurasia Group, a political risk consultancy. OPEC membership would also give Brazil a tremendous boost in clout on the world scene, with a seat at the table of an organization that controls some 40% of global oil production. If oil prices fall, Brazil could help prop them up by voting to cut production in all OPEC countries, a far more powerful lever than simply cutting production on their own.

Brazilian membership would also bring more oil to OPEC, at a time when oil resources from non-OPEC sources - such as Mexico and the North Sea - run dry. The new discoveries could turn the country into an export powerhouse. The Tupi oil field off the country's central coast is thought to contain 5 to 8 billion barrels of oil and gas, and would boost the country's total reserves by about 50%. And Brazilian officials have said other offshore fields could ultimately leave the country with 80 to 100 billion barrels of proven reserves, one of the largest in the world.

Huge Oil Discovery Rocks Brazil

I missed this last week, but this story is welcomed in that it has the potential to reduce world dependence on Middle East oil and, therefore, pressure the Arab world to conform with international law and standards. I am all for higher oil prices which will force the suburban soccer moms in their tank-like SUV's and other irresponsible consumers to conserve resources. Therefore, as Brazil brings these reserves online, I hope that it will be done in a manner that will not flood the market and reduce the price of oil. Here are story highlights from CNN (http://www.cnn.com/2007/WORLD/americas/11/08/brazil.oil.ap/):

RIO DE JANEIRO, Brazil (AP) -- A huge offshore oil discovery could raise Brazil's petroleum reserves by a whopping 40 percent and boost this country into the ranks of the world's major exporters, officials said. The government-run oil company Petroleo Brasileiro SA, or Petrobras, said the new "ultra-deep" Tupi field could hold as much as 8 billion barrels of recoverable light crude, sending Petrobras shares soaring and prompting predictions that Brazil could join the world's "top 10" oil producers.

Petrobras President Sergio Gabrielli said Thursday the oil from ultradeep areas, including the Tupi field, would give Brazil the world's eighth-largest oil and gas reserves. "Brazil's reserves will lie somewhere between those of Nigeria and those of Venezuela," Gabrielli said at a news conference. Petrobras says the Tupi field, off Brazil's southeastern Atlantic coast, has between 5 billion and 8 billion barrels -- equivalent to 40 percent of all the oil ever discovered in Brazil. Brazil's total oil reserves currently rank 17th in the world, with 14.4 billion barrels of oil equivalent, Gabrielli said.

"If the best-case scenario happens, this discovery would make Petrobras' reserves overcome those of Shell and Chevron and put Petrobras behind only Exxon and British Petroleum," Cunha said. Petrobras has a 65 percent operating stake in the field, Britain's BG Group PLC holds 25 percent, and Petroleos de Portugal holds the remaining 10 percent.