Hurricane Gustav Threat Pushes Oil To $117 In Asia

September 1, 2008 6:34 a.m. EST
Ed Sutherland - AHN Editor

Tokyo, Japan (AHN) - As Hurricane Gustav moves through the Gulf Coast dotted with oil rigs and refineries, the threat has Monday pushed the price of crude oil in Asia close to $117 a barrel. In Singapore, oil reached $116.85 a barrel after closing at $115.46 Friday in New York.

Stung by the 105 Gulf Coast oil rigs destroyed during the 2005 Hurricane Katrina, producers such as Exxon Mobil and Valero Energy Corp evacuate platforms - shutting down about 15 percent of U.S. production.

Hinting at higher gas prices sparked by the Gulf Coast weather, the price of gas as the pump rose to $3.687 a gallon, according to the AAA. For days, the price of gasoline has retreated as crude oil prices fell.

Along the Gulf Coast, more than 1.9 million people have evacuated ahead of Gustav's landfall, expected around middat Monday. Prior to reaching the U.S., the hurricane reportedly killed around 94 people in the Caribbean.

Hurricane Gustav Threat Pushes Oil To $117 In Asia
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Deal Signals Return of Foreign Firms to Iraq's Oil Fields

China National Petroleum Corp. Signs $3 Billion Agreement

By Amit R. Paley

Washington Post Foreign Service
Thursday, August 28, 2008; 3:51 PM

BAGHDAD, Aug. 28 -- Iraq and China signed a $3 billion deal this week to develop a major Iraqi oil field, the first major commercial oil contract here with a foreign company since the 2003 U.S.-led invasion.

The agreement calls for the state-owned China National Petroleum Corp. to begin producing 25,000 barrels of oil a day, then gradually increasing to 125,000 a day, according to Asim Jihad, a spokesman for the Iraqi Oil Ministry.

The contract revamps a deal the Chinese company had inked in 1997 with Saddam Hussein to develop an oil field in Wasit province, south of Baghdad near the Iranian border. But unlike that deal, which called for China to share in the revenues, the current contract is based on a fixed-fee structure.

The announcement of the deal comes two months after Western oil companies came close to an agreement with the Oil Ministry to return to Iraq. Those deals were for technical contracts that involved supporting production. The China agreement is a so-called service contract that is much more lucrative.

Jihad said the technical contracts, which were originally to be finalized June 30, have been postponed because of disagreements with the Western concerns, including Shell, BP, Exxon Mobil and Total.

Most of the major oil contracts are to be awarded in the next year and a half through a process with 35 companies identified by the Oil Ministry, he said.

The deal with the Chinese company came early because of the pre-existing deal before the U.S-led invasion and to rebut concerns that the U.S. government was manipulating the process to benefit American corporations, he said.

"We hope this will refute all the rumors that say the American companies are the only ones benefiting from the American occupation," he said.

The contract requires China to build a major electrical station in the area to boost Iraq's overworked power grid.

The deal still requires the approval of the Iraqi cabinet, which the Oil Ministry hopes will come as early as next week.

source: Deal Signals Return of Foreign Firms to Iraq's Oil Fields Washington Post, United States

As Gustav nears, oil companies shut down rigs

New York - With tropical storm Gustav threatening to become a monster hurricane, the oil and gas industry is starting to batten down the hatches on its giant rigs in the Gulf of Mexico.

Already, many of the companies have evacuated roughnecks and geologists and are preparing to turn off the oil and gas deep under water.

On Thursday, Shell Oil Company, which produces about one third of the oil in the Gulf, said it had evacuated 400 workers with another 600 due out on Friday and Saturday. It was in the process of turning off the equivalent of 510,000 barrels of oil.

Any disruption of the oil and gas flow could eventually result in higher prices at the pump much as it did after hurricane Katrina. In recent days, the price of oil has moved up in anticipation of the storm but fell back on Thursday after some governmental organizations said they would release oil from stockpiles if there were disruptions.

"I think we are better prepared than when Katrina hit," says Phil Flynn, an energy analyst at Alaron Trading in Chicago. "The industry should be able to get production back up quicker."

The oil industry produces about 1.5 million barrels of oil per day from the Gulf, about the same as it did in August 2005 before Katrina hit. The month after the hurricane, production dropped to 450,000 barrels per day.

"When Katrina hit, we lost almost all our production for several days," recalls Rick Mueller, an energy analyst at Energy Security Analysis, Inc. in Wakefield, Mass. "They are now closing everything up and it will take a while to bring it back up again."

In case of delays getting oil flowing again, the Department of Energy said on Thursday that it could release oil from the Strategic Petroleum Reserve. "The Strategic Petroleum Reserve is a key safeguard to provide an added layer of protection for the American people during the event of a severe disruption of oil supply," the agency said in a statement.

After Katrina, the DOE opened up the spigots at the SPR and released about 21 million barrels of oil. At the same time, the International Energy Agency, a coalition of 26 member countries, had set a goal of delivering 60 million barrels of oil.

On Thursday, the IEA said it, too, would be ready to release stockpiles.

However, Mr. Flynn is not sure it will be needed. He remembers immediately after Katrina there was a significant drop in demand with people canceling vacations and watching the devastation on television. "I think people are beginning to realize with this storm there could be more damage on the demand side than the supply side," he says.

"What I am hearing is that some 1.1 million barrels of oil per day could be shut down," says Flynn. "Demand in the US is off by about 1 million barrels per day so we have a little more wiggle room for a short-term loss of production."

However, some oil companies drilling for offshore oil are still recovering from Katrina. British Petroleum's massive Thunder Horse drilling platform was badly damaged. "They are still waiting to bring it back on. It should happen by the end of this year," says Mr. Mueller.

Chevron's BP Thunder Horse, another huge platform, flipped upside down and was written off.

Shell has a giant rig, Mars, which also suffered damage from Katrina. It is back in operation and is one of the platforms being shut down now.

Shell says it learned a lot from the Katrina damage. The company says it made mooring system upgrades and design changes including the use of suction pads instead of anchors to reduce damage to pipelines from anchor dragging.

Once the storm comes ashore, Flynn worries there could be damage to the refineries that dot the region. The US is currently producing a little over 7 million barrels a day of refined products at Gulf Coast refineries. "I am more worried about flooding and refinery damage," he says.

Energy analyst Sander Cohan of ESAI says some refiners still may not have recovered from Katrina. "Other are just back on line in the last six months or so," he says.

Many of the refiners are now in the process of shifting production from gasoline to heating oil. Others are closing for maintenance. "Stockpiles are good but not great," says Mr. Cohan. "We could lose a week of production of home heating oil, so this storm has the potential to be very disruptive."

source As Gustav nears, oil companies shut down rigs
Christian Science Monitor, MA

Oil, Natural Gas Rise as Gustav Threatens U.S. Gulf Platforms

By Grant Smith

Aug. 28 (Bloomberg) -- Crude oil and natural gas rose on a forecast Tropical Storm Gustav will be the most damaging since Hurricane Katrina, forcing Royal Dutch Shell Plc and BP Plc to begin pulling workers from the Gulf of Mexico.

Gustav may strengthen to become a hurricane and reach the Louisiana coast, home to the U.S.'s highest concentration of offshore platforms, on Sept. 1, the National Hurricane Center said. Shell will evacuate 870 workers in the next two days, on top of 400 already moved. Exxon Mobil Corp. is preparing refineries along the coast for storms.

``It's the most dangerous storm of the season,'' said Carsten Fritsch, a Commerzbank AG analyst in Frankfurt. ``The question will be the strength of the hurricane. Some say it will be as serious as Katrina, but that's the worst case scenario.''

Crude oil for October delivery rose as much as $1.10, or 0.9 percent, to $119.25 a barrel on the New York Mercantile Exchange. It traded at $119.14 at 11:34 a.m. London time.

Prices, 66 percent higher than a year ago, have dropped 19 percent from a record $147.27 a barrel on July 11. Oil has gained 3.3 percent since Gustav formed in the Caribbean Sea on Aug. 25.

Natural gas for September delivery gained as much 4.3 percent to $8.755 a million British Thermal units in New York. Gasoline futures rose 0.6% to $3.0855 a gallon.

The storm may become a ``hurricane rivaling Rita and Katrina,'' Joe Bastardi of AccuWeather.com in State College, Pennsylvania, said in an outlook yesterday.

Halt Production

Gustav may halt 1.2 million barrels a day of crude oil production if it strikes the U.S. Central Gulf Coast, CNBC reported, citing forecaster Weather Insight. There is a 70 to 75 percent chance of it reaching this region, by which time it will likely be a Category 3 hurricane, according to Weather Insight.

The system was 80 miles east of Kingston, Jamaica, and heading southwest at 8 mph, the National Hurricane Center said in its latest advisory. It's expected to turn west-northwest tomorrow and regain hurricane strength over the next 48 hours.

``If stocks were at high levels, the threat of a supply disruption wouldn't matter as much,'' said John Hall, managing director of London-based consultants John Hall Associates Ltd. ``But inventories need to build up further in the OECD, and in the U.S. they're low.''

Energy producers planned to evacuate ``several thousand'' employees from offshore rigs yesterday because of the storm, said Ted Falgout, the director of Louisiana's Port Fourchon. Exxon has initiated ``preliminary safety procedures'' at its Gulf Coast refineries, the company said on its Web site.

The Gulf accounts for about 14 percent of U.S. gas output. The coast along Louisiana and Texas is home to 42 percent of U.S. refining capacity.

Hurricane Katrina

In August and September 2005, U.S. crude oil and fuel production plunged and prices rose to records when hurricanes Katrina and Rita struck the Gulf Coast. Katrina closed 95 percent of offshore output in the region. Almost 19 percent of U.S. refining capacity was idled because of damage and blackouts caused by the storms.

Prices also rose today after a government report showed that U.S. gasoline supplies dropped for a fifth week. Gasoline stockpiles fell 1.18 million barrels to 195.4 million barrels, the Energy Department said in its weekly report.

Crude-oil inventories dropped 177,000 barrels to 305.8 million barrels, the report showed. Expectations were for a gain of 1.1 million barrels. Imports fell 9.2 percent to 9.9 million barrels a day.

Brent crude oil for October settlement rose as much as $1.13 cents, or 1 percent, to $117.35 a barrel on London's ICE Futures Europe exchange. The contract was at $116.89 at 11:19 a.m. London time.

source: Oil, Natural Gas Rise as Gustav Threatens US Gulf Platforms
Bloomberg

Malpass: Russia Gains at Our Expense

David Malpass, the former chief economist of Bear Stearns, says that the dollar, not high oil prices, is the real problem with the U.S. economy.

Malpass blames former Federal Reserve Board Chairman Alan Greenspan for starting the current easy money policy in Washington that Malpass says is responsible for the problems that companies and consumers are facing today.

"Banks lost a lot of money, but that hasn't stopped the global community. And I don't think it will," says Malpass, now senior economist at Encima Global.

"The dollar is strengthening, that's good news. But, 1 percent interest rates didn't make sense. We built a bubble," said Malpass, referring to unusually low interest rates under Greenspan.

"The problem is that the dollar has been flat on its back. That causes inflation and oil prices to be high, and makes Russia a strong global power. They keep gaining profits and wealth at our expense."

Malpass told Bloomberg Television that the Fed still hasn't completely changed its "dovish" policy. As a consequence, "we face significant hurdles" in the coming months.

Malpass says he, and other economists, have learned many lessons during the last year.

"I've not been shaken in the idea that the global economy is a pretty stable system. It was faced with a strong shock to the system. A hurricane if you will, a financial hurricane."

He is worried, however, that the interventions that Washington made in the economy, propping up Bear Stearns, for example, when it "got caught up in a violent run," will continue.

"Washington is constantly expanding. It has one of the fastest growing residential communities in the U.S. because they (the government) expand their powers in all areas," he says.

"The Fed is just one of the agencies. The Constitution did not set up checks and balances to check the Fed. The Fed is newer than that. It's hard to know where they will stop."

source: Malpass: Russia Gains at Our Expense
NewsMax.com, FL

Takeover talk, oil-price drop spur rebounding stocks

NEW YORK — U.S. stocks rallied Friday but still fell on the week, with sentiment boosted by falling oil prices and talk that Lehman Brothers may be acquired, while a speech by Federal Reserve Chairman Ben Bernanke confirmed that the Fed sees inflation moderating this year.

The Dow Jones industrial average jumped 197.85 points, or 1.7 percent, to end at 11,628.06, with 28 of its 30 components gaining ground, led by financial stocks JPMorgan Chase, American Express, Citigroup and Bank of America.

The Dow posted a 0.3 percent weekly drop after being battered earlier in the week on concerns about the fate of mortgage giants Fannie Mae and Freddie Mac, and about distress at investment firm Lehman Brothers.

But Friday, shares of Lehman leapt 5 percent after a Korean bank in talks with the troubled Wall Street firm was quoted as saying that one of the options on the table was an outright acquisition.

"The market is rising not so much on Mr. Bernanke's speech but renewed hope that Lehman Brothers may have a buyer," said Peter Cardillo, chief market economist at Avalon Partners.

Adding to the upbeat market sentiment, investment guru Warren Buffett told CNBC he thinks stocks are more attractive than they were a year ago and that he wouldn't bet against the dollar.

Among Dow components in the spotlight, Boeing shares rose 3 percent after The Wall Street Journal reported that the company may withdraw its bid for a tanker contract if it's not given more time by the Pentagon to prepare. A venture between Northrop Grumman and EADS is the rival for that contract.

The Journal also reported that Verizon is close to choosing Google as its search provider on mobile phones. Shares of Verizon rose 2 percent, while those of Google rose nearly 1 percent.

The S&P 500 index gained 14.48 points, or 1.1 percent, to 1,292.20, while the Nasdaq Composite rose 34.33 points to end at 2,414.71.

By sector, financials led the gains on the S&P, rising 2.9 percent, followed by consumer discretionary, up 2.4 percent, and industrials, up 1.5 percent. Energy was the only sector ending in the red, off 2.4 percent, as crude-oil futures fell back sharply after a surge in the previous session.

Trading volumes remained light, with 888 million shares exchanging hands on the New York Stock Exchange and 550 million shares trading on the Nasdaq stock market. Advancing issues topped decliners by nearly 3 to 1 on both the NYSE and the Nasdaq.

Concerns about the fate of mortgage giants Fannie Mae and Freddie Mac were cast aside for the moment by the broad market, even as shares of Freddie Mac slumped another 11 percent.

Stocks had ended Thursday with a mixed performance, as a nearly 5 percent rise in crude-oil futures helped energy-exploration firms advance.

But crude-oil futures fell back sharply Friday, with a stronger U.S. dollar weighing on dollar-denominated commodities prices. Crude for October delivery lost 5.4 percent to end at $114.59 a barrel on the New York Mercantile Exchange.

Takeover talk, oil-price drop spur rebounding stocks
Denver Post, CO

US has few economic levers against Russia

WASHINGTON: The United States has few economic levers it can pull to persuade Russia to pull its troops out of areas of Georgia as relations between the two big powers sour, analysts said on Friday.

Republican presidential hopeful, Senator John McCain, has called for tough action against Russia after its troops occupied separatist regions of US-ally Georgia and pushed into Georgian territory in the past week.

US President George W. Bush earlier Friday called on Russia to honor its pledge that it would withdraw its forces from Georgia amid frenzied diplomatic activity.

Russian troops and tanks poured into Georgia a week ago after the Georgian army launched an offensive to regain control of South Ossetia, the Moscow-backed region which broke away from Tbilisi in the early 1990s.

Analysts said, however, that it was unlikely that Washington will use its economic might to pressure Russia to withdraw its forces from Georgian territory.

"It's unlikely that the United States will impose any of the usual sanctions that are sometimes brought to bear on international miscreants," said Stephen Sestanovich, a Russian expert at the US Council on Foreign Relations.

Even if Bush wanted to apply economic sanctions against Moscow, it would be a complicated task with many hurdles, according to Blake Marshall, a senior vice president of The PBN Company, a business consultancy focused on Russia and the former Soviet republics.

"In a globalized economy you have to have uniform agreement across the globe in order for the sanctions to really reach their purpose. That's very difficult to achieve," Marshall said.

"Experience has shown the unilateral sanctions not only don't work, but they rather tend to punish the American companies," he underlined.

Any potential sanctions would also be complicated by the business and trade links between the world's largest economy and its 11th largest economy, and could affect Russia's vast energy exports to the West and the United States.

"The Russian economy overall is about oil. We have been trying to cut our oil-addiction in this country but we are not able to do it, and we could not effectively cut our imports of Russian oil," said Nina Hachigian, an analyst at the Center for American Progress think tank and a former National Security Council staffer.

Russia was the 20th biggest exporter to the United States and the 30th largest importer of US-made goods in 2007. It held around 1.4 per cent of all US foreign trade in June of this year, compared with China which holds 11.2 per cent and the European Union which commands 23.1 per cent.

"Sanctions are really the wrong way to approach the issue, because I don't think we could imagine to have all our European allies to agree those sanctions when they are more reliant on Russian oil and gas than we are," Hachigian said.

She suggested that it could be more effective to target sanctions at individual political leaders as Washington has done with respect to government leaders in North Korea and Sudan.

Garry Kasparov, a former Russian world chess champion, also raised the possibility of targeted sanctions in a Wall Street Journal editorial Friday. "The Kremlin's ruling clique has vital interests, i.e. assets, abroad and those interests are vulnerable," Kasparov wrote.

While economic sanctions are viewed as unlikely, the United States has sought to exert pressure on Iran over its nuclear ambitions, and implemented sanctions against Iranian companies and groups affiliated with the country's military.

Superpower oil war

The war in the Georgian province of South Ossetia is a classic superpower proxy war, pitting an aggressively US-backed regime, a member of NATO’s regional GUUAM (Georgia, Uzbekistan, Ukraine, Azerbaijan, Moldava) military alliance, against Russia. It is being waged over control of the Caspian Sea, the region in which the third largest oil reserves can be found. The control over this region holds one of the most important keys to world power.

The pipelines

While incendiary propaganda, coded rhetoric (claims over South Ossetia, genocide, “democracy,” etc.) fly back and forth, the actual geostrategic agenda, the energy stakes over which the world powers have engaged in mortal superpower combat (as usual, with millions of innocent civilians used as cannon fodder) remain largely unreported and unaddressed.

A look at the map tells the story. It is taking place in the resource-rich and strategically critical Caucasus/Black Sea region, the same region of the 1990s US/NATO war on the Balkans, led by the Clinton administration.

The stakes involved with the current conflict are identical to those of the previous war: control over the oil of the Caspian Sea/Black Sea/Caucasus basin, and the control of multiple key oil pipelines criss-crossing the region, including the Baku-Supsa and Baku-Ceyhan-Tblisi routes through Georgia, the Baku-Novorossiyk pipeline (through Chechnya and Dagestan), and others.

The most critical pipeline, the infamous Baku-Ceyhan pipeline supported by the US government and a consortium of US-allied transnational oil interests (including Royal Dutch Shell, Unocal, and BP) takes oil from the Caspian Sea across Azerbaijan (another US-supported regime), whereby it crosses Georgia (bypassing Iran and Russia), then on to the Black Sea, where the oil is carried to Western Europe, and the rest of the world.

The Baku-Ceyhan pipeline has been viewed by the Bush/Cheney administration as one of its brightest geostrategic successes. All of the Anglo-American empire’s pipelines and oil facilities, including Baku-Ceyhan, are threatened, if the conflict escalates.

Anglo-American machinations around the Caspian Sea

As pointed out by Michel Chossudovsky in his book America’s ‘War on Terrorism,’ (which details the continuum of Anglo-American war policy from the 1990s Balkans/Kosovo/Yugoslavia conflict, to 9/11, to the present), GUUAM, formed in 1999, has been “dominated by Anglo-American oil interests, ultimately purports to exclude Russia from oil and gas deposits in the Caspian area, as well as isolating Moscow politically.”

Concurrent with the formation of GUUAM, as pointed out by Chossudovsky, Washington began its Silk Road Strategy foreign policy, or SRS, designed specifically to promote the “independence” of “breakaway” republics in Central Asia, and undermine and destabilize its competitors in the oil business, including Russia, Iran and China.

As pointed out in the classic 1999 analysis of the Balkans conflict by the late Karen Talbot, “Backing Up Globalization with Military Might,” the New World Order’s onslaught was “related to the drive to extend and protect the investments of transnational corporations in the Caspian Sea region, especially the oil corporations,” while thwarting Russian and Chinese designs on the same energy wealth.

SRS and GUUAM, embraced by both neoliberal and neocon factions in Washington, led directly to 9/11, the “war on terrorism,” and the conquests of Afghanistan and Iraq, under the Bush/Cheney administration.

Georgia: US-created, US-backed proxy

On a more local basis, Anglo-American machinations across the GUUAM corridor have taken place for years under Bush/Cheney, from militarization, covert operations and destabilizations leading to regime changes (CIA-supported “color-coded revolutions,” manipulated elections), to the literal bottom-up construction of pro-US/transnational corporation-friendly “democracy” puppet governments, such as the Saakashvili regime.

As pointed out in the New York Times, “the United States did not merely encourage Georgia’s young democracy, it helped militarize the weak Georgian state . . . At senior levels, the United States helped rewrite the Georgian military doctrine and train its commanders and staff officers. Georgia, meanwhile, began re-equipping its forces -- with Israeli and U.S. firearms, reconnaissance drones, communications and battlefield-management equipment, new convoys of vehicles and stockpiles of ammunition . . . The public goal was to nudge Georgia toward NATO military standards.” Georgia’s leader, Mikhail Saakashvili, came to power in 2004, as a result of US covert operations.

South Ossetia, one of the so-called “breakaway” republics, is claimed by US puppet, Georgia, but has resisted Georgian rule. The Saakashvili government has attempted to seize South Ossetia for some time. In a pattern similar to that set during the 1990s Balkans conflict, each side accuses the other of genocide, atrocities and violations of international law.

What we are witnessing now is an overt and blunt Russian military response to years of Anglo-American encroachment in the region, and the prospect of a US/NATO-supported military force in South Ossetia, giving the West more control of the Caspian Sea/Black Sea oil.

US versus Russia and China, all over the world

Many wonder if this conflict marks the beginning of World War Three. The question itself is flawed. World war -- world resource warfare -- between the Anglo-American empire and its allies, and its main superpower adversaries, Russia and China, and its allies, has been continuous for decades.

This war of empire -- one war, the same war -- has been waged on multiple levels, but it has been fought in absolute earnest during Bush/Cheney, as energy scarcity, or Peak Oil and Gas, has manifested itself in nightmarish fashion, overtly and tangibly. Every geostrategic event since World War II has focused squarely around this paradigm. Analysis by Michael Klare, author of Resource Wars: The New Landscape of Global Conflict, and many others, has clearly spelled this out.

Zbigniew Brzezinski’s imperial war playbook, The Grand Chessboard, and the agendas of PNAC and other neocon groups, have been even more blatant: control the Eurasian sub-continent, the entire geography containing the majority of the world’s known oil reserves, while encircling, blocking and destabilizing Russia and China, and their allies.

The Anglo-American empire’s wars since the 1990s have been sequential and overtly about oil and gas. The 1999 NATO war in the Balkans was fought over the Caspian Sea basin, the location of the third-largest oil reserves. The pipeline politics connected to the control and transport of Caspian Sea oil led directly to the 9/11 event, and the resulting “war on terrorism” into Afghanistan. The attempt to seize and control the second-largest oil reserves led directly to the invasion and occupation of Iraq, and a permanent military foothold in the Middle East.

Conflict (economic, political and military) has broken out over every piece of geography containing, or purporting to contain, oil, or involving oil and energy: Nigeria, Iran, Sudan, the South China Sea, Algeria, Darfur, Somalia, Chechnya, and even Canada. In all cases, the Anglo-American empire has faced off against Chinese and Russian interests.

Nightmare scenarios

What is significant about the Georgian conflict is that for, arguably, the first time since the so-called end of the Cold War, it is not the Anglo-American empire unilaterally bombing, invading or occupying a politically weak nation with a primitive military, such as Afghanistan or Iraq. Russian military might is being unleashed directly on a US surrogate.

Russia is daring the Anglo-American empire to do something about it.

It is currently unclear, in the face of complexities (clouded by the violence, and the incendiary and escalating rhetoric from all sides) what scenario will unfold. What is clear is that it is beyond a nightmare scenario already.

See War in the Caucasus: Towards a Broader Russia-US Military Confrontation? and the blog by Mike Ruppert.

Is this a war that Moscow wanted to start, and finish, at a key moment at which the Anglo-American empire, as a result of its own political and economic self-destruction under the criminal Bush/Cheney agenda, is in the midst of real death throes? Is this Bush/Cheney’s “chickens come home to roost” -- Russia calling the administration’s bluff?

What, if anything, has been China’s role behind the scenes?

Is this a war that the neocons, led by Bush/Cheney, via Georgia, provoked, in order to give themselves a new justification to unleash the “unthinkable” open nuclear war that they have insisted on waging “endlessly”? If Bush/Cheney were genuinely caught off guard, will they now, in neocon panic, pull out the stops, and “blow it all up”?

Would such a war trump all other events, including the upcoming presidential election? Is this war connected in any way to political factions backing John McCain?

With the world economy teetering on the brink of petro-dollar collapse, the US close to a depression, and with the US Federal Reserve and Wall Street engaging in ever more desperate actions to save the empire, is there significance in the timing of this war? Any disruption to the oil supply, in one blow, wipes out the economy, the stock markets, raises oil and gas prices to shocking new highs, and flattens an already discredited Bush/Cheney administration.

The spectacle of the Bush family, Henry Kissinger, Putin, etc., entertaining themselves at the Bejing Olympic Games, while South Ossetia burned, and neocons Dick Cheney and UN Ambassador (and CIA man) Zalmay Khalilzad manning the nuclear button in Washington (warning that “Russian aggression will not go unanswered”), should not only turn stomachs, but raise alarms like nothing since 9/11. Even more stomach-turning, but expected, is the near-total inattention to this gigantic war explosion. The eyes of the hopelessly ignorant and acquiescent public are transfixed on Beijing Olympics fun, and secondarily on the sexual misadventures of John Edwards. Again, the timing of all of this raises questions in and of itself.

Who knew what, and when? Who is in control? Who benefits? What horrific nuclear war scenarios are getting operational green lights?

If Bush/Cheney’s false flag event on 9/11, six horrific years of open criminality, its conquest and occupation of Afghanistan and Iraq, and the “war on terrorism,” have not already made painfully clear, this moment in history should serve as a wake-up call.

There has never been a more critical time to look past the billowing propaganda smoke.

This really is it.

SHAHRIR: Trial runs for supply system

BANGI: Several trial runs will be carried out to help the Domestic Trade and Consumer Affairs Ministry find the best way to supply essential items at low cost to the public.

Minister Datuk Shahrir Abdul Samad, who said this, added that the first study would be in Seberang Prai Utara this month, and two more were planned for an urban and a rural location later on.

The direct distribution mechanism would be implemented nationwide by next year if the tests proved it to be effective, he told reporters after opening the Malaysian Consumer and Family Economics Association’s 12th national conference at Universiti Tenaga Nasional yesterday.

Shahrir said the results from the trial runs would enable the Government to find out the most efficient way to distribute price-controlled essential items and food supplies to the public, especially low-income consumers in the rural areas.

Among subsidised items that would be included in the study were ST15 Super Tempatan 15% broken rice, flour, cooking oil and bread, he said.

Shahrir said a bread company has been asked to help transport the items from the manufacturers to the shops.

“My theory is that the bread-distribution method is the most efficient supply system for both the urban and rural areas,” he added.

“If distribution costs can be reduced, consumers will be able to purchase subsidised goods at controlled prices, and have adequate supply.

“The new system will help address the problems of uneven supply and price fluctuation of such items, especially in the rural areas.”

On fuel prices, Shahrir welcomed a suggestion to implement a fortnightly review.

However, he said, the Government would allow the monthly review of the pump prices to go on first before implementing other measures.

“The monthly review is the first mechanism to keep up with price fluctuations in the oil market,” he said. “If we can resolve technical problems or fine-tune the system, maybe we may use the fortnightly system after that.”

Shahrir was commenting on the call by Gerakan acting president Tan Sri Dr Koh Tsu Koon on Monday for a more frequent fuel price review.

CLICK HERE: Trial runs for supply system
Malaysia Star, Malaysia

Oil up as Georgia conflict disrupts shipments

* Oil rises on fighting between Georgia and Russia

* Some oil shipments suspended from Caspian producers

* Repair at BTC pipeline may take 1-2 weeks or longer

(Updates prices, adds comment)

By Alastair Sharp

LONDON, Aug 11 (Reuters) - Oil edged above $116 on Monday, after fighting between Russia and Georgia disrupted exports from the Caspian region, helping to stem a steep selloff on the crude market.

U.S. light crude for September delivery was up $1 at $116.21 a barrel by 11061 GMT, off highs of $116.90. London Brent crude rose 90 cents to $114.23.

Oil had fallen more than $5 on Friday, when it largely ignored the outbreak of hostilities in the Caucasus region, a key transit route for oil and gas from the Caspian, to focus on concerns about global economic growth.

"Even with what is a serious situation in Georgia, with pipelines threatened perhaps, we haven't had much of a bounce back," said Simon Wardell, an analyst at Global Insight.

"All it seems to have done is halted the speed of the fall."

Oil has shed about $31, or 21 percent, from its peak of over $147.27 struck on July 11 on concerns of a slowdown in demand.

Analysts said oil's gain was also tempered by the rising U.S. dollar, which vaulted to a six-month high against a basket of currencies on Monday.

Georgia's oil ports of Supsa and Batumi, used to export Azeri crude oil, are operating only partially, while the Georgian port of Poti is not operating, a shipping agent said on Monday. Kazakhstan also stopped shipments of its crude from Georgia's Batumi port. Both Azerbaijan and Kazakhstan also use crude pipelines for export.

A major oil pipeline exporting Azeri crude passes through Georgia but was disabled last week on Turkish territory before the conflict erupted.

A fire in eastern Turkey on the Baku-Tblisi-Ceyhan (BTC) pipeline halted loadings of Azeri Light crude shipped to the Turkish port of Ceyhan.

The blaze was extinguished on Monday and repairs may take one to two weeks or longer, a source at the pipeline consortium said.

BP has also cut output by at least 400,000 barrels a day at the Azeri-Chirag Gunashli oilfields because of the fire.

Russian warships have been dispatched to Georgia's Black Sea coast, but Russia has denied targeting oil pipelines.

Analysts said investors were refocusing on supply and demand fundamentals, with OPEC's next move and U.S. inventory levels eyed in the months ahead.

"(U.S.) inventories are indicating that the market is a little bit tighter than people think, and that it isn't a one-way bet," said Michael Lewis, global head of commodities research at Deutsche Bank.

"The forward curve is quite a good barometer of fundamentals in the market, obviously barring these geopolitical events," he said.

The crude forward curve has been in contango -- when prices are higher further out -- for most of the last two years, but briefly dipped into backwardation last week.

OPEC President Chakib Khelil, speaking on a visit to Iran, urged members of the oil exporters' group to stick to agreed targets on output.

OPEC is overshooting its informal output target, with Saudi Arabia leading the way after the kingdom pledged to meet rising demand and help tame runaway oil prices. OPEC meets on Sep. 9. (Additional reporting by Santosh Menon in London, Fayen Wong in Perth; Editing by William Hardy)

click here: Oil up as Georgia conflict disrupts shipments Reuters South Africa, South Africa

Oil and inflation to set the trend

Mumbai: Oil and inflation will be the twin factors that will set the trend for Indian shares this week, with any further decline in energy prices bound to spur a rally and raise expectations for foreign portfolio inflows.

Momentum indicators on the charts point to strong short-term upswings, supported by rising volume and improving sentiment. But lingering concerns about growth, both domestic and global, and the prospect for slowing corporate earnings should keep gains on a tight leash.

"We have had an unexpected boost from falling oil prices, but the jury is undecided on the outlook," said equity trader Anmol Mehta.

Huge relief

India, which imports 70 per cent of its oil, has been grappling with 13-year high inflation for months as crude prices climbed to record highs. So the drop in oil prices to below $115 a barrel from highs of nearly $148 last month was a huge relief for the market.

"If you think the oil price is going down, then that's a great positive thing for India in the context of Asia, and I think we have seen the worst," Mark Matthews, chief Asia equity strategist at Merrill Lynch, said in Mumbai earlier this month.

He forecast oil prices to drop to $110 by the end of the year.

Stock trader Deepak Patel said if the fall in energy prices was maintained, it would cool inflation concerns and help set the stage for lower interest rates in the coming months.

"Any sign of inflation losing momentum will be a signal for the bulls to get their tails up," he said. "Battered financials and auto stocks should breathe easy."

However, inflation, which topped 12 per cent in late July for the first time since 1995, is unlikely to come down in a hurry and the Reserve Bank of India (RBI) may not be over with its iron-fisted monetary policy.

"I think inflation could moderate to 8-9 per cent by March-end," C. Rangarajan, a former RBI governor who headed the prime minister's economic advisory panel, said last week, adding softening global crude prices would help ease domestic prices.

But he cautioned the tight policy stance of the central bank would continue unless there was a significant change in the price situation.

The Sensex rose 3.5 per cent last week to 15,167.82, led by financials such as ICICI Bank, carmaker Maruti Suzuki and engineering conglomerate Larsen & Toubro. It was the highest close in nearly two months, and the stretch of gains for five consecutive weeks was the best this year.

"The market is well poised to extend the rally (this) week," said Patel. "I expect foreign interest to start kicking in."

Foreign funds have been sellers of about $6.7 billion of stocks this year, but in one day last week they bought more than $400 million of equities indicating money managers would grab opportunities when they come by.

However, worries the global credit problem could spread to more countries and the US economic downturn could persist longer pose a threat to equity markets. Growth in India will be lower than earlier estimates, said Rangarajan, just before he stepped down as the head of the prime minister's panel last week.

"We are looking at a growth rate between 7.5-8.0 per cent this fiscal," he said. Last month, the RBI cut its growth forecast to 8 per cent from 8-8.5 per cent previously, but its prediction was above many private banks' outlook for the Indian economy.

- The writer is a journalist based in India.

Bourse plan: Investment shelved

Bombay's stock exchange scrapped a plan to buy a 26 per cent stake in the National Multi Commodity Exchange, the Hindu Business Line said, without saying where it got the information. The exchange's board made the decision on Friday after previously agreeing to buy the stake in the Ahmedabad-based bourse for Rs1 billion ($24 million), the newspaper said on Saturday.

click here: Oil and inflation to set the trend
GulfNews, United Arab Emirates

South Africa: High Food Prices Has Left Rural Communities Vulnerable

POOR people, especially in the rural areas, are finding it difficult to cope with the rocketing high food prices on their thin wages or social grants.

Higher food prices are leading poor people to shift to unbalanced diets, leaving them vulnerable to disease.

In the recent past months, food-price inflation has seen the price of basic foodstuffs increasing by 14 percent in South Africa, mostly due to increased prices of commodities such as fuel.

Chief Executive Officer National Agricultural Marketing Council, Ronald Ramabulana said this had lead poor people to shift to unbalanced diets leading them vulnerable to diseases and infections.

According to Mr Ramabulana, impoverished households are spending up to 50 to 60 percent of their overall budget on food.

Their earnings go firstly towards food then non-alcoholic beverages, followed by housing, water, electricity, gas, fuel and transport.

Government has noted with concern the plight of the poor in this regard and has changed its focus on strengthening the agriculture industry and giving more support to emerging farmers.

Government Spokesperson Themba Maseko said on Thursday the current situation was presenting an opportunity to develop a vibrant and sustainable agricultural programme to meet the country's food requirements and to make South Africa a net exporter of food.

Government will implement medium to long term strategies to deal with rising food prices.

These include measures to increase the country's food production capabilities through support and strengthening of small and emerging farmers and cooperatives; the development of agricultural trade and tariff policies; enhancing freight rail infrastructure to support the movement of agricultural products; implementation of the Llima/Letsema campaign and the creation of food gardens by communities and households.

These are some of the measures needed to increase food production and strengthening the value chain with a view to reducing reliance on food imports.

The national chairperson of the National Emergent Red Meat Producer's Organisation (NERPO), Wilson Muvhulawa said investment in agricultural infrastructure as part of local economic development could also assist in supporting farmers.

"Rural and agricultural development is crucial to combat national unemployment and poverty since the majority of people live in remote areas," he said.

Mr Muvhulawa said there was a need for investment in skills within the commercial agricultural sector, to improve management and entrepreneurial skills both of farm workers and managers in the primary sector and develop skills related to global food safety and quality standards.

A large percentage of employees are semi-literate and a need exists for Adult Based Education and Training programmes to improve their educational base as a platform for further learning. Courses currently exist, but are under funded and a sustainable funding model for providing such courses needs to be found, according to Mr Muvhulawa.

Agriculture and Land Affairs Minister, Lulu Xingwana, said recently that rising input costs globally seriously threatens the sustainability and the ability of the sector to supply enough food at affordable prices.

According to the minister, there are many reasons why input prices soared over the past year, but she singled out three factors.

"These are the ongoing hikes in oil and natural gas prices, high demand for fertiliser due to increased production for food and bio-fuel and high demand for food across the world," she said.

Between January 2006 and May 2008, maize and wheat grain prices rose by 114.1 and 107.1 percent, meanwhile, soybean and rice prices increased by 114.7 and 218.4 percent respectively.

Last week, the department held a three-day national agricultural consultative conference in Limpopo focusing on the increased productivity, optimum utilisation of agricultural, food security and rising food prices.

It was an opportunity for the agriculture sector to get together to thrash out ideas on how to further support farmers and fight the high food prices.

The proposed National Food Control Agency announced by President Thabo Mbeki in July, following the Cabinet Lekgotla will deal with issues such as strengthening the agro-processing industry, food safety, sanitary and phyto-sanitary certification and promote industry exports.

The agency will not regulate food prices, however, and the legislative framework will be finalised by the end of March 2009, after consultation with the relevant stakeholders.

The agency will not regulate food prices, however, and the legislative framework will be finalised by the end of March 2009, after consultation with the relevant stakeholders

High Food Prices Has Left Rural Communities Vulnerable
AllAfrica.com, Washington

Aviation Industry: Fuel Costs Force Airlines to Close Operations

From Aloha in Hawaii to Alpi Eagles in Italy, from promising upstarts like Silverjet to legends like Aeropostal of Venezuela, more than two dozen airlines have fallen off the international radar screen this year.

Some filed for bankruptcy protection. Others have sharply reduced operations or limp along as charters.

While each struggled with its own set of circumstances, the toll of 25 airlines - three to four times the number that the International Air Transport Association normally registers in a year - has mounted as oil price shocks roiled the industry. Among them, 17 have ceased operations altogether.

"Each region has its own challenges but the common denominator in the last six months is the price of oil," said Anthony Concil, a spokesman for the association.

"If the business is not doing well, the price of oil is the critical factor in pushing these carriers out of business."

Even airlines on firm financial footing are running into problems. Soaring fuel costs have driven Cathay Pacific Airways, based in Hong Kong, to a first-half loss, and the two main Japanese carriers are considering cutting routes.

Last month, the Australian flag carrier Qantas announced plans to shrink its workforce by 4 percent and canceled growth plans in what amounts to its fifth effort to rein in costs in three months. It has already increased fares and reduced capacity twice.

The second-biggest Australian airline, Virgin Blue, has also announced plans to cut capacity by about 3 percent, on top of a 6 percent reduction already planned for its 2008-9 financial year as rising fuel costs hurt business.

Among the severely devastated carriers is Aeropostal, a South American airline with a nearly 80-year history of surviving everything from a hijacking, fatal accidents, a three-month strike and the Depression.

But this year, Aeropostal, the Venezuelan airline whose predecessor's daring flights over the Andes inspired a 1939 movie by the American director Howard Hawks, ran into severe financial difficulties, a casualty of business regulations that tied its hands while fuel and other costs inexorably rose. It now operates a handful of domestic flights.

Descended from the airline founded by the French in 1929 to carry mail across the Atlantic, Aeropostal this year became one of 25 carriers that International Air Transport Association, or IATA, said could not pay their bills to an IATA clearing system have ceased scheduled operations since January.

The IATA financial system clears ticket sales for 450 carriers - most of the world's major scheduled airlines. About half of the global aviation industry's $480 billion turnover passes through the settlement system. Most of the rest is managed directly between airlines and passengers.

When an airline ceases payments or discontinues operations, it is removed from the IATA network, giving the association the best overview of the industry's health.

The IATA list does not include airlines like Oasis, a long- distance budget carrier that sold tickets directly to the public without IATA's involvement. Oasis, based in Hong Kong, went into bankruptcy in April. Such examples suggest that the roll call of grounded airlines could be longer still.

As for Aeropostal, "we just couldn't get out of the hole quickly enough," Nelson Ramiz, the former chief executive and a leading shareholder of Aeropostal, said by telephone from Caracas.

After cutting its fleet from 28 planes to 5, and halting all international flights except to Miami and a trio of Caribbean destinations, Ramiz gave up.

In January, 12 years after his family bought the airline from the Venezuelan government, he negotiated its conditional sale to new managers for $23 million.

Ramiz said that the airline - made famous by the French aviator Antoine de Saint Exupery, author of "The Little Prince," and immortalized in Hawks's movie "Only Angels Have Wings" - had been hamstrung by currency controls and was not making enough in dollars to cover the cost of refueling in Miami when he made the decision to sell.

While Air France-KLM has raised fares more than 17 times since 2004, fares on Aeropostal's domestic routes have not increased since 2005 even though landing fees, navigational charges and fuel and labor costs have climbed.

Carriers in an oil-rich country like Venezuela, where fuel prices paid by consumers and some businesses are controlled by the government, Ramiz said, are no more immune to the effect of the global oil price surge than other airlines.

"The price of fuel," he said, " goes up here every week based on the price of Brent," a standard oil price benchmark.

Oil prices that reached a peak of $147 a barrel in mid-July have recently fallen below $120, but are still about 60 percent above levels from last year. This, plus a credit crunch that is slowing economic growth and demand for aviation, particularly in the United States and Europe, has produced a whole new operating environment for airlines and put fragile balance sheets under enormous strain.

No region or type of airline has been spared. Trans-Atlantic business class-only operators like EOS, MAXjet and Silverjet have gone under alongside national flag-carriers like Cameroon Airlines in Africa.

Giovanni Bisignani, the IATA chief executive, warned this week that the aviation industry could lose $6.1 billion this year, compared to the $5.6 billion profit it made in 2007.

"Falling demand and rising costs," he said, "are reshaping the industry."

Originally published by The New York Times Media Group.

(c) 2008 International Herald Tribune. Provided by ProQuest Information and Learning. All rights Reserved.

Fuel Costs Force Airlines to Close Operations
RedOrbit, TX

The War for Oil - Saturday 2nd August 2008

The energy-supply challenge now facing the United States...

BACK IN THE blustery winter of 1950, US Major General Oliver Smith and his elite 1st Marine Division came under a surprise attack from some 3,000 Chinese troops, writes Main Katusa for Casey Energy Opportunity.

The Americans were attempting to take control of the mountainous eastern coast of North Korea. Suffering 1,500 casualties and over 4,000 wounded, Smith withdrew his force and delivered his now-famous quote:

"Gentlemen, we are not retreating. We are merely attacking in another direction."

Smith then reassessed strategy, regrouped, and, with fresh supplies and ammunition, drove the Chinese off in one of the most heroic struggles in military history.

There's a powerful lesson that investors in today's volatile market can take away from Major General Smith. Namely, that when the going gets tough and you feel backed into a corner, there is a way to come out on top. But, like Smith, you need to continually reassess your approach and have the conviction to go in a new direction.

Some might say the United States now finds itself backed into in a foxhole when it comes to meeting its energy needs. Although we have the highest rates of energy consumption in the world, it's no big news that our traditional sources of oil are either tapping out or have become "No Trespassing" zones, leaving us dependent on foreign sources for 70% of the oil needed to keep the lights on. It behooves us, then, to better understand the nature of the foreign sources.

To do so, we are going to use an approach usually found in a military context, dividing the sources into Allies vs. Axis – an appropriate model given the current war being waged for global resources.

To better understand the reliability of America's oil imports it's helpful to see who America's faithful oil-suppliers are – and who they aren't. The chart shows that 54% of US crude imports come from countries we consider Allies willing to work with the United States (shown in black and grey).

Some 31% of imports come from Axis countries (shown in shades of red,) that have demonstrated hostility to America. Another 15% are from Saudi Arabia, a Wildcard we believe could go either way. It's unsettling to note that almost half of US imports come from countries that are either unfriendly or have potential to be
First, let's take a look at the good half. Although these oil exporters have been willing enough to work with America, they face their own internal challenges. For example, the US has powerful competition for both Canada and Mexico's oil; and it's from these countries' inhabitants themselves. Canada already consumes 90% of the crude it produces, while Mexico consumes a growing 60% of its production. Further, both face challenges with their reserves.

The only abundant reserves Canada has are the oil sands – expensive and difficult to extract. And Mexico, with its reserves dropping quickly, is likely to become a net importer of crude in about six years. Read that last sentence again, because right now Mexico is the third largest source of oil to the US...just after Saudi Arabia.

Shifting farther away from home, the stability of exports from Nigeria and Iraq is challenged by internal unrest. Nigeria is destabilized by ethnic battles, ongoing supply scares, kidnappings, sabotage, clashes with militants and election unrest. In addition, resource competitors, including China and India, are both making inroads in that country. Meanwhile, Iraq's reliability is largely dependent on a long-term US presence in the area, a presence that is in doubt.

And these are the good guys! Now let's touch on the almost-50% of imports that come from considerably less reliable sources.

The stability of US relationships with both Venezuela and Russia is questionable. Venezuela, under Hugo Chavez, has already reduced exports to the US And Russia has shown dubious motives. Its recent tap-twisting with natural gas exports to the Europeans reinforces that it sees energy as a tool for gaining geopolitical power.

Angola, Algeria and Ecuador are very willing to sell oil to the US right now, because they need the money. But, they have also ramped up exports to other countries. Over time, they may pick and choose to whom they sell their increasingly precious commodity.

The wild card? Saudi Arabia – source of an impressive 15% of exports to the US – is holding its dance card close to the chest. It either could supply the US reliably over the next few decades, or, through its OPEC power, increase the price of crude even more.

Despite the relatively stable relationship between the US and the Saud family, rising regional tensions, increased Islamic militarism and ongoing Israeli-Palestinian tensions could threaten exports. And, the US presence in Iraq has implications for the stability of Saudi Arabia's supplies, too. Should the US pull out of Iraq, any implied chance of US troops supporting Saudi Arabia, should push come to shove, disappears. (How likely would the US be to send troops back to Vietnam?) This could leave the Saud's looking elsewhere for security guarantees – guarantees that would invariably be purchased with a realignment of oil sales to suit the new benefactors.

With such vulnerability in our supplies, America's quest for new oil is vital. The single most important conflict of this war will be replacing declining reserves. But for war profiteers – or investors – profiting big starts with betting on the right army.

The unexpected victors of one early American military conflict come to mind as an example of the right type of regiment to back. Remember that famous 1775 battle of Lexington and Concord, the "shot heard round the world" that kicked off the Revolution and culminated in our freedom to pursue our way of life? It wasn't the British Redcoats, trained to fight the old-fashioned way, lined up and advancing in unison, who won that one. They ended up scrambling for cover, tripping over their coattails as they hightailed it all the way back to Boston Harbor.

It was the Minutemen, the rebellious, nimble scrabblers, who knew the terrain, left business-as-usual behind and, sniper-like, came out on top. So it will be in the search for new oil today. This time, the major oil companies are wearing the red furry helmets and buttoned up uniforms and are ending up the casualties of war. That's because the old world army, including players like ExxonMobil, Royal Dutch Shell, BP, Chevron, ConocoPhillips, must cost effectively replace their flagging oil reserves and maintain production or face a quick retreat...in their share prices.

And these days, finding large new pools of oil that can be cost-effectively developed is no easy task. Plus, they're facing stiff competition from China, Russia and others who are cashed up with plenty of fresh ammo – namely trillions of US dollars thanks to the historic trade deficits of the last decade or so.

These new, nationally-sponsored competitors, who aren't constrained by prohibitions against handing over suitcases of cash to win concessions, are quickly signing long-term off-take agreements where price is hardly discussed in the negotiations. In the war for new oil, the business-as-usual army has little chance of advancing in the right direction.

So, if not "big oil", where should an energy investor look to deploy their capital? We'll place our bets on the Minutemen, or the small, more agile oil explorers targeting under-explored areas in the US, Canada, and more remote areas of the globe. Rather than being caught up in layers of bureaucracy, and hindered by the negative associations of big oil, these smaller companies can act swiftly and have grass-roots connections with local politicians to help push their projects forward. Plus, they can operate in areas that are less populated by environmental protest groups that can challenge progress.

Most importantly, when a small company makes a large discovery it can have a huge impact on its share price...where even a large discovery, by today's standards, will barely move the dial on a multinational giant.

Investing in one of these companies early is one of the best ways to not only insulate yourself against the personal inconvenience of steadily increasing energy prices, but also to make you one of the few real winners in the war now being waged.

The global energy squeeze threatens to empty your gas tank – but it can more than fill up your wallet. You just have to know where to invest.

The War for Oil - Saturday 2 nd August 2008
BullionVault (press release), UK -

Brazil Starts to Plan How to Use Its New-Found Oil Riches

Brazil's minister of Planning, Paulo Bernardo, confirmed that the Brazilian government intends to change the current regulations and the model in effect in the country for the petroleum sector. "We want a change. Now, what the change is going to be, it is too early to tell," stated the minister, during a meeting with businessmen in Rio de Janeiro.

The commission for studying alternatives for the oil discoveries in the pre-salt layer, of which Paulo Bernardo is a member, should start meeting next week. A proposal should be forwarded to the Presidency of the Republic within 90 days.

During a meeting promoted by the Brazilian Sales and Marketing Directors Association (ADVB), the minister said that there is going to be a substantial rise in revenues from pre-salt oil, "because the reserves are very large."

According to him, what needs to be defined is how to use these revenues wisely. "Are we just going to spend it on everyday things, or are we going to make them into a means for funding the future of the country," he questioned.

According to the minister, the pre-salt is still a promise, which is about to happen, and it remains to be known whether the petroleum may be explored. He asserted that the government does not wish to export crude oil, it wants to process it domestically, and that the aim is to replace imports.

"That entails a development model that is going to be strengthened with the pre-salt. Which means that we are going to need investment in labor force formation, and in education."

The debate regarding the need to adjust the regulation without changing the Law of Petroleum (# 9,478) for these new technologies, as some analysts claim, is just beginning, stated Paulo Bernardo.

According to him, the discussion started in July 17, during a meeting with president Luiz Inácio Lula da Silva. "We reached the conclusion that, before conducting a detailed study of the current legislation, any information disclosed would be inconsistent."

Regarding the possibility of establishing a new state-owned company specifically turned to management of the pre-salt, which would compete with Petrobras, the minister of Planning asserted that first it must be defined whether that is the kind of model that the country wants to adopt. "We are not sure about that yet."

Created by a presidential decree on the 17th this month, the commission for studying alternatives for oil discoveries in the pre-salt layer is comprised of five ministers, plus the presidents of the Brazilian Development Bank (BNDES) and the National Petroleum, Natural Gas and Biofuel Agency (ANP).

Brazil Starts to Plan How to Use Its New-Found Oil Riches
Brazzil Magazine, Los Angeles

Venezuela agrees to sell Spain oil at $100 a barrel

LONDON (Thomson Financial) - OPEC member Venezuela agreed Friday to sell Spain 10,000 barrels of oil per day at $100 a barrel in exchange for medicine and other goods, a Spanish government source told AFP.

The agreement was reached during a meeting between Venezuelan President Hugo Chavez and Spanish Prime Minister Jose Luis Rodriguez Zapatero in Madrid, the source said.

Oil prices hovered around $125 a barrel on Friday after reaching a record high of over $147 on July 11.

Spain would make up the difference between the market price for oil and the price charged by Venezuela, a former Spanish colony, by providing the country with building material, new technologies and medicine, the source said.

No date for the start of the sales of Venezuelan oil at reduced prices was announced.

Venezuela already provides oil at reduced prices to several Latin American countries including Cuba.

Earlier on Friday Chavez said the price of oil should stabilise at around $100 per barrel.

'The price according to our interpretation should be lower and stabilize at around $100 per barrel,' he told a joint news conference with Zapatero.

Chavez's visit to Spain was the last stop of a tour of Europe that has already taken in Russia, Belarus and Portugal.

Venezuela agrees to sell Spain oil at $100 a barrel
Forbes, NY