Who is Making the Oil Fume ?

Re: # 92
Jayp...
Yes. Pig is best red-meat producing animal as per as txing nature is concerned....

Re: # 98
Vengat...
Surely...
You can learn driving and get license within 2 months. The reverse is not true.

An interesting review of the meeting on Jun 22nd has been published by "Dawn". According to the report there has been a decrease in oil demand but the increased production could not arrest the price surge so far. There has also been increase in the investment in commodities and speculators are trading contracts all the way out to 2016.

The original report captioned " Saudi action fails to cool heating oil market" can be accessed at

http://www.dawn.com/2008/06/29/ebr5.htm

Re: # 98

All that I was trying to focus on is the wide income disparity even in teh cities, let alone in villages. It will take a very long time for india to have income levels comparable to the west. Essentially, if it is going to take 30 years, well we have no clue about teh type of employment, food habits, you name it. The ford, the maccers and the kfcs , the type of cars etc may not be there

" In Balgalore, you can still get a full time driver for Rs 5000 a month. If As I recall, a new graduate engineer in a public sector is paid only 10,000 a month as starting salary."


Are you implying drivers job is inferior to an engineer's job?

Re: # 96
Jayp...
Oh No sir...Starting salary of many of the MNCs are bellow the Graduate engineers in Govt. organisations...
The Basic Pay INR8000 is merged with DA. Grad engineers, basic pay is now INR 12000 + HRA..... After new pay commission, the difference will reduce drastically.
In BLR, IT sector salary hike(this year) is single digit. It may come bellow inflation someday of other....

Leaden....
After leaving SUN, Vinod Khosla was behind bio-fuel.

Re: # 95

That will take a very long time. At present, it is only teh It and a few sectors that are paying well. In Balgalore, you can still get a full time driver for Rs 5000 a month. If As I recall, a new graduate engineer in a public sector is paid only 10,000 a month as starting salary.

The good part is that in india, it is really multi dimensional, several income levels can co-exist, thanks to teh karma concept. One can get a biriyani on brigade road for 300, a street away, you can get may be taster one for 50, on the road side. It is amazing that even today, in a city like bangalore, one can get a good veg meal for Rs 15 in teh city.

Jayp,

(The good part is that India is unlikely to follow the west, except for the rich.)

What if India becomes rich?

Regards

Re: # 93

The good part is that India is unlikely to follow the west, except for the rich. In teh west people associate obesity with eating fast food like mac and KFC etc. In india such fast food are so expensive taht it is unlikely many eat it so often. In the west, it is food of the poor, while in india maccers is the food of the rich, occassionally.

Further, now that many are increasingly aware of teh negatives of meat based on data from the west, meat consumption is unlikely to increase rapidly.

In my frequent visits to india, I did not see much of hard core westernisation, except some pretenses in terms of dressing, language and a few drinks. The positives of punctuality, gender equality, professionalism etc are heartening.

Jayp,

You are right, India's meat production is very low scale and does not involve too many inputs. In fact waste is converted into foodstuff. But if India was to start consuming meat at Western levels all this would change.

Regards

Re: # 89

As I recall, for teh beef it is 7 KG, for the pig it is around 4 Kg and for chicken it is lower. However, this type data is relevant only for the intensive meat production of the west, where human consumption quality grains are used for animal feed. This is happening to some extent for increasingly for chicken in india.

For igs and cattle in India where they roam the streets, these animals eat what is not fit for human consumtion and to that extent, at the present levels of low meat consumption, non- vegetarianism adds to the total available food. Further, in India, it is the old milch cattle that are killed to produce meat unlike in the west, such animals are used for pet food.

All I can say is western solutions for our problems necessarily need not be successful. We have a different social set up where people behave differently from that of the westerners. Behaviour/Reaction of people to a problem constitute a large portion of the solution.

Majumdar, NKg, Anil,

Inordinate emphasis on productivity is the cause of many of the problems in the Indian agri. We've killed the soil. Nobody understands that the soil holds many more living things that help grow plant life.

India has had drought resistant seed/less resource requiring varieties in the past. Thats very natural similar to our(Indians) capacity to withstand hunger. Those seeds did not have a menacing effect on the soil and the ground water table. The modern seeds showed an increase in output for the initial few years but they started demanding more fertilizers, pesticides and water to keep up the output, which over a period of time exacted its toll on the soil, the organic life that helped to grow plant life and the water table.

Thats the reason we hear about farmer suicides in India.

We have chosen to call Agri graduates who do not step out of their offices as researchers. They just regurgitate foreigners findings. We dont have accurate empirical data with us. I believe academic excellence or even qualification should not be implemented as an eligibility criterion to be called a researcher and given ears to.

The problem is Indian farmers sell their work very cheap in comparison to any other profession. India has to go back to their multi cereal diet.

I suggest you to take a tour of the following sites:

http://en.wikipedia.org/wiki/Masanobu_Fukuoka

http://en.wikipedia.o rg/wiki/Do_Nothing_Farming

Masanobu implemented this long time back. Our farmers know more about this practice than our government.

Anil,

It is true.I will try to locate some sources. It has something to do with effiency of conversion of food. An animal does not convert the entire energy it consumes from plant food into useful products (meat, milk or egg) for humans. Some of it is used for its own survival and gets used up as parts which are not suitable for human consumption/

If my memory serves me right about 3-4 kg of cereals are required to produce 1 kg of poultry or pig meat.

Regards

Re: # 87

Majumdar:

"...But for producing the same amount of nutrition thru animal food, the land required is several times what can be obtained thru plant food..."

Is it true?

Anilji,

Re: 83

Good point that the way the whole Indian food chain works needs to be completely overhauled.

Re: Indian eating habits

(but don't you think that it may make India more land dependent for its food?)

All food except fish comes from the land. My point was that West, Japan and China consume much higher animal food compared to India. But for producing the same amount of nutrition thru animal food, the land required is several times what can be obtained thru plant food (cereals etc). So India's existing land can be enuff to feed its people and possibly even export.

Regards

Out of curiousity .. Do muslims believe in genetic science or are they like creationists ?

and also ..

http://www.ls9.com/

to inspire any upcoming Pakistani genetic engineers ?

http://www.timesonline.co.uk/tol/news/environment/article4133668.ece

worth a read...

Vengat, NKG and Majumdar:

Subsidies soon become cretch, and inefficieny sets in while competition is removed. India cannot change the ground reality of smaller land ownership. NKG's point that it is difficult to create higher productivity in smaller land ownersip may have merit. Subsidies make it only worse and, do not lend themselves to let real problems come out in the open for the market to address. Even worse, politicians step in and use it to get votes.

For the last 18 mos., I have been involved to automate their financial settlement and quality processes for one of the largest potato marketers in the U.S. This involvement has been educational for me. I discovered that growerers are exempt from the U.S. anti-trust laws to organize themselves together and negotiate prices from larger buyers of their products, suppliers of fertilizer and even get financing. Otherwise these buyers, suppliers and bankers could dictate their terms.

They, thus, create manageable "middlemen" who are owned by farmers.

In the process some of these "middleman" have been able to develop huge brand names like "Land-O-Lakes", "Ocean Sprays". They are able to take their branded products directly to the shelves and bring in greater profits in their hand. These "middlemen" work on a fix percentage to cover expenses, rest is distributed among the members. In many cases "middlemen" smoothen out income peaks and valley in a year, and provide regular monthly income to farmers, even when their supplies are seasonal.

AMUL butter is an Indian example.

More profits in farmers hand has been a key driver in the U.S. This has been a balancing force in the agri-Industry, where farmers still rely on farm subsidies.

The U.S. farm subsidies are not as bad as they are in Europe and Japan. Europe uses subsidies as a barrier against outsiders to enter. In Japan, farm subsidies are almost like drugs, which have made their smaller farms addicted to subsidies.

I think entire food supply chain in India is inefficient. Even though it now caters almost billion people market. One of the largest markets in the world. Methods and organization has changed very little.

The land has not increased, the distribution / PDS has not changed. I do not know about financing of farm business part in India.

Increasing productivity up and down the food chain is the only way out. Please correct me if I am wrong that the last increase in farm productivity was due to better seeds and fertilizers.

Indian PDS is too bureaucratic to be an efficient market maker and set prices, but it does. India can re-examine, its "Mandi" market to make it more efficient through application of technology to automate many processes.

Majumdar's point that Indian food habit is different, but don't you think that it may make India more land dependent for its food?

There is no easy answer for India, this should, therefore make it more urgent to take a fresh look.

A strong case can be made to allow market forces to play a role.

Granted land ownership cannot change, but water rights may possibly be organized to increase farmer coordination. In San Luis Valley in Colorado water rights are controlled by the state and local government.

I realize that this can potentially bring corruption and organized violence in Indian farms. Therefore, India may need to find its own solution.

Market making / price neogtiations can be removed and given to farmers to organize themselves, instead to single PDS. Farmers can play an active role in the making of "Mandi".

PDS rather than being vertically integrated into a single bureaucracy can be re-organized to make movement of grain and food related items more efficient.

Current PDS, as I understood, came into existence because food was not moving fast enough to the consumers. Let them get back to the basics.

Increasingly government will be poorer in India, and market will be richer. Thus subsidies would be like asking a poorer cousin to pay. There may be a need to bring this back to the market from the Government.

Majum, Veng...
I am also from farmer family(Large/Medium Land Owners of pre-communist era of West Bengal). My Great Grandpa was owner of 1/3 of a village in two different places (total around around 3-4 square KMs). Anyhow that has changed.

Nkg,

Farming doesn't need subsidy, its the consumers who need the farmers to get subsidies. If the government would stop indulging in correcting the prices of farm produces, farmers will do good.

Maju Anna, Nkg

The problem with us is we expect farming to gratify us the same way modern professions does. Fyi, my dad is a graduate Engineer, he chucked the government job early in his career and got into farming.

Nkg,

Re: 78

You can discuss this with Vengy Garu on PM/UP/email. His family actually farms.

Regards

Re: # 64
Majumder...
The solution is not so simple. Sometimes high productivity takes toll on nature and costs very high subsidised input. You reduce subsidy from farm inputs, farming is not at all lucrative. Furthermore, high productivity is mostly realted large organised farming (though in West Bengal, CPI(M) tried to project in different way). I feel, India can not improve farm productivity like developed world...

Re: # 59
Now Saudi Arabia is blaming USA for oil price rise.....
There is no severe cut is supply line, which can create such a price hike. US commodity cartels are manipulating price...

We are yet to hear from Russia....

Couple of years back, on Sunday Times, noted economist Swaminathan Aiyar opined that, ONGC should not go for bilateral agreement to purchase oil fields in Africa. Africa is prone to political turmoil, when they find new natural resource ("Blood Diamond"). It may be very unreliable (Nigeria and Chad). It is better to purchase middle east oil with current market rate....
If Saudi accusation is true, then ONGC approach looks better than the open one....

Re: # 74

{Oil producing countries would certainly protect their asset values from deflating to keep inflation out of the world economy.}????


{I do think these countries will bear the most burden of the cost of Iraq war. America will sell them peace dividends of longivity in their control over oil assets.}

Possible but speculative.

Re: # 73

(Euro's launch price was 89 US cents.)

Wrong, go check again starting January 1999.

Re: # 73

Zeemax sahib:

All this keep strengthening my point. Oil producing countries would certainly protect their asset values from deflating to keep inflation out of the world economy. I do think these countries will bear the most burden of the cost of Iraq war. America will sell them peace dividends of longivity in their control over oil assests.

#61 Posted by anil,

Euro's launch price was 89 US cents.

Re: # 61

Hi anil,

Euro started trading at US$1.15/Euro and then drifted lower to 90 cents/Euro.

Hi Ijaz,
You know you are talking to a loony in #68.
Having fun in Isloo? Hey what is the rumor mill like in pindi.. Send me an email!

majumdar,
they can if USA decides so.
Regarda

Ijaz sahib,

Isnt the Saudi game dangerous. Can't the Saudi chicken too come home to roost, like they have in Pak?

Regards

Re: # 57 ngk,
A very pointed question and I guess you know the answer.

Saudi interest now is to keep destabilsed muslim countries burning. That is where extremist factions are busy in militancy. This also applies to Afghanistan and Pakistan. If these regions prosper, they may find some reason for stability. Then chickens come home to roost as they have done in Pakistan.

Re: # 66

Majumdar:

You indeed make valuable points.

Anil,

You are forgetting something. India has labour aplenty and with energy costs spiralling organic farming may be almost competiive with chemcial based farming, you may want to chat up Vengatramanan (his family is into it in a big way) sans the subsidy. And surely if India can double its yield and given the large veggie population we can become net exporters not importers.

I think we need to play smart than buy assets at ridiculous prices like Chinese.

Regards

Re: # 64

Majumdar:

"...Look at that as an opportunity..."

No doubt it. It is an opportunity, and the challenge is that land holdings are smaller in India.

However, with 76% land utilization, India will become net importer. Chinese recognize that they too will become net importer, and are buying farm lands in Brazil and Argentina.

There is an excellent special section on Energy in the latest Economist. You can access it on the Internet as well.

Anil,

(India's farm productivity is the lowest among the above countries. )

Look at that as an opportunity, sir!!! Even with productivity being 1/3 to 1/4 of the developed powers, India still feeds its population (just about though). What if it could come to par with the ROW?

Regards

I almost was going to miss this valuable article. Good thing I opened the site today. This informative piece of excellent journalism has created lot of comments as these issues are of great concern to many. (I have not read all -just glanced over) We all know that there are two camps - optimists & pessimist on these matters of environmental degradation and unbridled use of non-renewable resources and now its direct impact on the world economy and politics. I tend to be pessimist because I see that all the solutions are bandage solutions. The only way out is complete change of life style, complete overall of our thinking, complete abandonment of selfish greedy drives, complete listening to old wisdoms. Simplify. Simplify. Simplify. But such words fall only on deaf ears. In front of all sophisticate theories and philosophies, sciences and technologies and political prowess these words may sound ridiculously simple. So what happens? What happens is Noah's flood. It is not a religious fable. It is myth of much more significance. When earth /life / nature (whatever name you want to give it) cannot support the malefaction of our deeds, it let us reap the fruits of our deeds - which is total wipe out - so that life can take a new start. That is what is going to happen - may be in our lifetimes - see the breaking of ice sheets - see the changing pattern of the oceans - see the disappearance of the species - we are marked for the same fate too - but only if we would change.
This is not some sort of sermon - it is writing on the wall for anyone to see - but only if one can see.

Looking from a different perspective the Chinese are under immense pressure from environmentalists and international community alike whereby they are emphatically being asked to detoxicate their effusions. While there are reports that the Chinese are working to make their regulations & implementation stringent that would inturn reduce their consumption.

If the same analogy is applied to India and other developing economies, it may bring some relief in medium term.

Re: # 60

rf786:

"...Treaty was signed in 1992 but Euro was first introduced in 1999...."


Thanks for it. This reinforces my point even more, as it puts the rate of devaluation of dollar against Euro is even higher. Please correct me if I am wrong, that the Euro was introduced at about 92 cents to 1 Euro.

Re: # 58

Treaty was signed in 1992 but Euro was first introduced in 1999.

I agree with your point regarding industrial production driving demand and Chinese adopting the same strategy. Industrial nations have taxes for environmental and demand control purposes whereas the Chinese provide subsidies.

Chinese are focused on the Olympics and are expected to announce major policy shifts post the event which may include softening of subsidies.

Re: # 40

NKG:

"..Anil, India and China may be increasing fuel consumption.."

Indian economic growth model is different than the Chinese. Its industrial and services output is different. It is more service driven than manufacturing driven. Its manufacturing base is not world's production center. It is more service oriented economy than Chinese economy. Chinese oil consumption is distorted to reflect increases due to export oriented manufacturing base.

Indian turtle is quite healthy. Man Mohan Singh should get a Nobel Prize for bringing Indian economy to this stage.

Indian problems will come from its farming (76% of India's land is utilized), about 47% of China's (if I am not wrong), about 35% of America's. Brazil and Argentina land utilization is only 17%. India's farm productivity is the lowest among the above countries. Economists are already saying that India's argiculuture is lagging behind its growth.

Re: # 42

rr786:

"..The euro was established by the provisions in the 1992 Maastricht Treaty on European Union that was used to establish an economic and monetary union..."

The above is from Wikipedia.

My point is not that energy needs will go down. Just the opposite, that there is strongest correlation between the energy needs and industrial output. Therefore as long as the industrial output keeps growing, energy needs will grow. China's economic model (at least the production side) is very close to the West, and hence their energy needs must be satisfied by the oil.

Will Chinese substantially slow down their growth rate to accomodate the transition from oil to other forms, is the question most economists are asking today?

#47 is for Ijaz...

Answer for
Why Arabs will like to see small African producers ( Nigeria, Chad, Sudan) stay out off supply line...

Jayp, Majumder...
High population is source of all these problems...And if you believe in nature, highest casualties from natural furies are in Asia -Tsunami(India, Srilanka,Thailand...), Earthquake-( Pakistan, India, China). Cyclone-Mynmar, Bangladesh....So, nature is restoring some balance...
If India can reduce population upto 20%, it can sustain without destroying nature too much.

Re: # 51

what we really need is coperation with opec to keep the price at 150 for a decade. Then we can have a smooth energy transition. It is unlikely, teh price will start falling the moment total demand drops. Then the SUVs will be back. What is needed is sustained high price to scrap most of teh SUV plants and a large numbers on teh roads, along with creation of mass transit system. Then it will be a permanent structural change.

I understand that in teh US, ford has only mothballed teh SUV and truck plants, not scrapped them.

Nkg,

There is nothing worng. But society will have to pay a price for it. Which is:

Denudation of rain forests.
Increased food prices.

As long as we are willing to pay the price voluntarily there should be no issue. And states should not have any fiscal discrimination between biofuels or fossil fuels

Regards

In support of opec

http://www.inflationdata.com/inflation/images/charts/Oil/Inflation_Adj_O il_Prices_Chart.htm

The poor arabs, did not get a price increase for teh last fifteen years, see link above, and at least now for a few years they can have some windfall.

The present price rise and the resurgence of opec is due to bad deal they got for so long.

The sad part is that they will get used to this money, they have so many projects started, and in two years time the demenad will drop. Then the opec will become weak, each will try to pump as mush as possible and the price will collapse. That is what happened in the 70s.

Hopefully, that will not happen this time due to cooperation to stabilise teh price so taht new technologies can em,erge.

Re: # 46
Majumder...
Coming to bio-fuel...
If we can use coconut or mustard seed to extract oil for frying vegerables etc... and applying on body, why not to use in vehicles? We have to use bio-fuel sooner or later...

Couple of advanced technologies evovelved to be used for common purpose vehicle engines - MPFI/CRDI with high precision fuel injection system (electronically controlled), high pressure fuel compressor and usage of turbo-chargers to make vehicle very fuel efficient.

The situation is such, we need to use bio-fuel sooner or later...

Jayp,

Re: 50

Fair point. Decentralised generation using biomass, biofuels and mini hydel has a lot of potential which must be exploited but cannot substitute fully for fossil fuels, as yet.

Regards

Re: # 49

At present crude oil and its distillates are used primarily for transportation fuel. Hence the total energy basket is inappropriate. Among the transport fuels, electricity and bio fules and human energy ( bikes) can make an impact, along with mass transport.

The advantage of jatrapha is that it is a hardy drought resistant plant, can grow here food crops cannot. hence the yield is not an issue. Further the plant stops soil erosion. Hence it is a multi-beneficial crop. Hopefully many small extractions palnts will come up and the local level use of jatropha will increase.
In India of course using alcohol as a fuel is total waste, so many mouths to drink and with a strong pharmasuitical industry, the feedstock use is the most economical.

By teh way, edible oil use, at least import to india has stabilised due to all the hype about heart decease and oil.

Jayp,

Biofuel will account for only a small part of the world's energy basket.

The problem with Jatropha is that if you cultivate it in wastelands, the yields will not be high enuff to produce enuff of oil.

Re: Sugar

Bagasse is used in power generation but less than 50% of cogen capacity is being tapped currently in India. Molasses are used for making alcohol which apart from used as booze and industrial alcohol (for chemicals) is used as ethanol for fuel doping as well.

While it is a good crop it must be remembered that this is a water guzzler and with water scarcity being an issue we cannot rely on it too much.

Coco and palm oil are good biodiesels but again acreage can be increased only by detroying rainforests in Amazon or Malay or Indonesia. And by diverting use from edible oil.

Unfortunatley there are no easy solutions in sight.

Regards

Re: # 46

Bio fuel is a good option if it is used wisely. In India, there increasingly there is a bio diesel industry coming up using jatrpha oil. This shrub can grow in marginal lands, and teh railways are planning to use the land along the rail lines for jatropha cultivation. Nearly 40 percent of the diesel consumption in India is by the railways and bio fuel already account for 5 percent and will be boosted to 20 pecenbt in five years. Many small jatrophs oil extraction companies are coming.

It is all a question of fuel pricing. Another good example is sugar mills. In india, most sugar mills are energy surplus, they burn bagasse, ferment teh molasses and use the excess nagasse to make alcohol, or else it burnt to produce electricity to feed into teh grid. While in australia for example, natural gas is use to crystalise sugar while the bagasse is a waste dumped or used as soil conditioner.

Coconut oil is by far the best substitute for diesel, it can be used directly without processing, but cocomut oil has better use as feedstock for high performane lube oils. Most of teh aircraft lube oils are made out of coconut oil. The so called fully sysnthtic oils for cars are actually from vegetable oil base, and is not a petroleum product.

African countries depend on petro money for basic necessaties for the current level of export. So, India, China and european countries can exploit that situation to keep suplier and consumer both happy keeping the price stable. Where as old oil producing countries in Arab like Saudi, Iran, Kuwait... are already rich enough and can sustain with lower sales volume for long period. So, they can easily play with the oil price...

Nkg,

a) is a very bad option. It:

diverts land from food crops to biofuels which jacks up fuel prices.
sometimes uses up almost CO2 as it fixes.

b and c are much better.

Regards

#44
Ijaj....
Natural Oil( Petro) was major source of worry for last few years (at least from 2004/5 onwards). Brazil, US, Europe etc... initiated couple of projects to lower the usage of petro products- specialy in the following line
a) Usage of bio-fuel
b) Use better technology to improve efficiency
c) Improve mass transport system.
Saudi Oil Minister expressed unhappiness on these projects (some time around 2006)...I can not provide you the exact reference....

nkg
'The supply side disturbance is mostly due to sabotage by islamist militias in Nigera, Chad... Hand of Arab countries in these activities can not be ruled out.'

I think they had their day in 1973. No more

Re: # 41
IjaZ...

India-
Already inflation crossed double digit and industrial output slumped...All auto majors ( M & M , Tata, A L ) shares are gowing down rapidly. Indian billionares lost INR $3Tns in last couple of months...


China- Inflation is very high. They have increased fuel price more than 15%. Wait for another 1-2 months. Chinese inflation will definitely jump like other Asian Countries.

Part of Europe may be little bit insulated (consumption growth in Russia may keep European factories running)...

The supply side disturbance is mostly due to sabotage by islamist militias in Nigera, Chad... Hand of Arab countries in these activities can not be ruled out.

Re: # 35

anil sahib

Euro was not in existence in the mid nineties thus the lack of proper comparison an dmore importantly US Dollar had suffered much bigger drops starting mid-eighties all the way to the ninteies yet oil demand kept rising both in the US and Europe.

As for India,
Thanks to Long Term sound economic policies and a sustainable growth,no major effect.
Import based consumerism in India is well hedges by low prices. Moreover Indian Foreign Exchange reserves are capable of taking a shock and then growing rapidly.
BanglaDesh,
With a High poverty graph and export based on value addition, effects will be pronounced. However small industries being productive and state protected, will help out wading the crisis.
Pakistan
Import based comsumerism on the high, value addition exports on the decline, balance of payments serious, local indistries not hedges and protected, a skwed Sales Tax adding to inflation, will make the bubble burst.

Logically, European consumption should go down. France is taking large amount of steps towards that. They are enhancing public transport system and constantly upgrading their high speed trains (like TGV) (best alternative to fuel guzzler Passenger Jets). For Asian countries solar and wind power is nice alternative for electricity generation, which can be used for public transport.

Though the petro price hike is basically used for financing islam/terrorism (mosques, madressas in India and Bangladesh are increasing in rapid rate for last couple of years), the positive fallout should be very good if Govt. puts heavy duty on oil, rather than reduce it.
Petro products pollute environment. No country puts pollution realted tax on petrol, diesel or kerosene (every budget, you see Govt. hikes Tax on tobaco products). Furthermore, this resource, like coal is not recyclable. Unless we find some ways to convert wood to coal and vegetable oil to petro product, Govt.s should discourage people from using petro products. Anyhow, democracy works in different way (what people think about next 5 years matters most). Unless and until people are forced, they will still go for petro products.
Some stupid comments about bio-fuel (can not be used for defence equipment and jets). Any hydrocarbon (whether you get it from animal fat or plant fat or any other source) with proper air compression, can be burned in any rate. With recent developments in genetic engineering, it should not be very difficult to create better alternative fuel than ethanol or jatropa oil. A380 can be run on mixed fuel. Future passenger jet engines from RR or GE will be able to use all types of fules.

Anil, India and China may be increasing fuel consumption, but that is mostly due to productivity increase for some section of society (of these countries). So, it is almost inevitable. If an engineer working in GE/Motorola in USA drives Ford F-150 to reach office, an Indian engineer working in GE/Motorola should not hesitate to use Santro/Alto/Indica...

Ijaz gul sahib,

If these developing countries collapse wouldnt their energy consumption suffer as well thus affecting energy prices. Even if their total share of the basket is small even a small swing in consumption can sometimes affect prices.

Same ways, if these countries economy collapse wouldnt it turn have adverse impact on Chinese/American exports to these countries.

Where do you place India, Pak and B'desh in this matrix- in the list of developing countries, would they collapse like dominos as you suggest or they can tide over.

Regards

HP and Masadi,
Oil prices will continue to surge and many developing economies of the third world will collapse like a bubble.

Cheap Chinese stuff has soffocated small scale domestic production and un regulated markets. It has swept away the un noticed competetive parralel economies and made them consumers of cheap imports.

So when the bubble bursts, these countries will be on their knees. Thats when the IMF and WB of Bretton Woods will march in with their dictates of subsidies, market forces, revaluation of currencies and effect the coup de grace. Then uncle Sam will decide who to revive and who not to.

ijaz.gul@gmail.com
ijaz_gul@yahoo.com

Chinese can come in and increase their oil purchases from the same sources and drive the prices up. Energy consumption has one of the strongest coorelation to the industrial growth. When Chinese cut subsidy, last week, oil prices in the spot market dropped.

Anilji,

What exactly do you mean by China disturbing the economic order? What would that imply?

Regards

Majumdar:

That would certainly be an exercise. Wasn't 1 Euro was 92 cents in mid 90s? Also, this would only give relative impact, and not eliminate weakness in European economy.

To eliminate currency distortions in oil prices, Iran is trying to propose an "oil bank" with pledged oil reserves. This asset would be valued against a basket of currency to eliminate devaluation of oil assets.

I do not know the exact mechanism but this was the gist as I understood of Iranian proposal. I doubt it can be successful, as oil is an essential commodity and volatile with demand in the countries which would be in the basket.

Key is to watch Chinese moves, personally I do not think Chinese can go independent of the rest of the world. If they disturb the economic order, Zeemax had once eluded to it through induction of inflation, their production base as manufacturer for the world will be severely affected. I think America has two aces, Europe and China have one each. ME/Iran may want an ace, but their economies are incomplete due to limited local markets, and hence have limited ability to play.

Anilji,

Maybe you can chart how the oil prices have moved in Euro terms over the last 5 years or so. To remove the impact of dollar weakening.

Regards

Rise in oil prices and food products are linked more to the weakening dollar. Oil prices have gone up to prevent devaluation of oil as the asset. Whereas, farm and agri-business a large consumer of energy and petro chemicals is allowed to go up in price, the asset America owns.

Dollar, the preferred currency for both international trade, cross border capital flow (both debt and deposits), almost as if by policy, is allowed to float downwards to absorb almost three trillion dollar Iraq war bill. Three trillion dollars is the number per a Nobel Prize winning economist, instead of official Bush numbers. When dollar goes down, international trade and cross border capital flow are devalued. It indeed helps America, provided its economy can sustain the negative impact on economy. The U.S. has to remain the most competitive and most innovative economy in the world to maintain its dominance. This time it might be hard, as oil countries have alternate buyers in China and India.

Increase in oil and food prices are going to have two effects. The heavy energy consuming sector, except farming, will be severely affected; and faming and agri-business will see fresh injection of capital. Farming’s reliance on energy is being offset by increasing food prices.

In capital surplus market driven economies, such disruptions have healthy effects of pruning out old and inefficient.

HP Mian, please draw a time line, and you will find that oil started to come to the front and center after the great depression and around Second World War. Automobiles and jet engines, hence transport industry, were put together less than 100 years ago, America more than Europe became more oil dependent.

The change, now with many advances in place, can happen in shorter time. China, more than any other nation can seriously impair the transition because Chinese economy emulates the western consumer – producer model. Indian model is not as much energy consumer. Major question is who is going to pay for this change. Brazil and Russia – other of BRIC are either not as dependent or are self sufficient, why will they sock in, Oil producing countries are in no mood. It is going to be interesting how America navigates this time. In 70s, oil producing countries socked it, in 80s it was Japanese yen appreciation. One thing for sure is good, is that Bush is leaving.

Re: # 31

Delirium

Oil from shales is by way of extraction compared to the conventional drilling process. As a process it is far more difficult, costly and requires infrastructure that is beyond the scope of meeting normal demand. Drilling on the other hand is far more economical and practical thus the surge in historical production.

Subsidies are a sensitive issue but such is the situation that requires drastic and non-conventional actions. We really cannot make judgments regarding its impact since there are no parallels but given the state of global economy heading for a slowdown led by US probability of serious impact on demand is high. Problem is Inflation turning into hyper-inflation with slowing economies that of course is the ultimate worst case scenario.

You also talked of energy sector approaching the 25% weight in S&P 500, that too is debatable but given the current trends its quite possible. Personally, I would prefer to play the market as a contrarian, selling oil futures and buying the worst hit sectors (financials and consumer discretionary).

Finally, your comment regarding coal losing its importance is not 100% correct since it still occupies 50% and more of the global power generation needs. Point being, even though oil may become expensive and world starts to move towards alternative methods, oil will continue to be a important source of energy.

Re # 23

Thank you for your comments.

Since oil is essentially a utility (necessity) product, the removal of subsidies remain a sensitive decision. Considering the subsidies are removed, the decision would only be effective if we have the economically viable substitutes available that entice the consumer to switch. In case there are no other choices (of fuel and energy), we should only expect a marginal decrease in the demand of oil.

The world’s largest untapped oil reserves have reportedly been discovered in Northern Canada. (1.7 trillion barrels of oil approx.). Colorado, Utah and Wyoming are reportedly carrying approx. 1.5 trillion barrel of oil equivalent in the form of “shale� oil. According to another report published in NY Post
“The U.S. Minerals Management Service (a branch of the Interior Department) estimates 102 billion barrels of oil and 635 trillion cubic feet of gas beneath federal lands and coastal waters. By way of comparison, the reserves lying beneath the North Sea, a major source of oil for Europe, are believed to contain a total of 18 billion barrels of oil. “

While the direct and indirect (environmental) costs for extraction of oil from such sources are high, with technological improvements and now when the oil sails at its all time high, recovery of oil from certain such sources may become viable.

masadi, g'night already..man...can't you see you are counting sheep..and wolves and shit now. pagal insaan!!

The author writes "25 oil company CEO’s and 7 global energy organizations assemble at Red sea city of Jeddah today in a bid to explore ways to cool things down.."

Like farmers inviting wolves to a conference on how to reduce the number of sheep being butchered every night by wild animals....

g'night

By the way in continuing this oil and "democracy" link, when democracy or a democratic leadership comes in to use a country's oil resources for the development of that country instead of giving them to the "bretton woods" authors, like Mosaddeq did in Iran, those countries have always propped up dictators to loot those resources, so much for the Army apologist Leadenwinter's assertion for deception that democracy is what helps those neo-colonials loot the developing nation's wealth, similar is the case with the ME where they work with dictators and discourage any semblance of democracy to emerge....

HP writes "This consultant appears to be completely clueless. The oil demand is not going down in the next fifty years."

True, the consultant is clueless, Oil could lose its importance, how? when it is most profitable as a commodity with demand that has matured, as per design, growth in which is also managed and on the supply side, existing supplies that can be controlled through wars and potential supplies kept off through strategic reserves and undeveloped oil fields, and wholesale purchase of patents of alternatives to it by the major oil compaines who have major says in political directorates around the globe, not to mention the manipulation through hedge funds....and just because Al-Gore comes along and has a major impact on causing global food shortage and sky rocketing price people suddenly come to believe that oil will lose importance....

Mian, when countless diplomacy, wars and fates of entire nations have been managed to convert a commodity into one whose demand is inelastic and whose supply is managed by manipulation to result in tens of billions in profit (i.e. regardless of true demand and supply), you think it will be allowed to become unimportant and at this time after those barbarians have put in so much effort???

Army apologist Leadenwinter writes "Today the World still suffers from the Bretton Woods conspiracy and its bastard democracy: the willing surrender of your nation's resources and markets to your betters.

In today's World particularly when considering the more "ethnically challenged" nations there are literally hundreds of examples of the direct co-relation between democracy and national poverty Democracy is White imperialism and Iran now may be the last bastion of civilisation left in the world. "

The Bretton Woods agreement was for dictatorship and proxy control of the developing nations it had nothing to do with "democracy" other than its use as slogan. These new types of dicatorship supporters have read a book or two by the confused Left in the USA and based on those their new tactic is to push that confusion into a support for military dictatorship. Having not a clue about social structure that is non democratic and neo-colonial they rail against the failure of these countries whose democracy (and not dictatorship) is punished by the West, as if democracy is the failure that keeps them poor, not so. Having the deceptive morals of a snake and the minds of retards they try to make big claims like "correlations between poverty and democracy" not knowing what correlations are nor having a clue (like I proved when this fool wrote by the name of Mukhtar Ameer) of how to interpret data. With stop gap "democracy" within an establishment structure that is dictatorship to the core, which is then punished by the neo-colonial power by sanctions and withdrawl of aid and foreign investment (because the major looting and selling of the nation is done by the dictators that this fools supports), you expect such a correlation (even though it is not as he says without corresponding evidence).

If we can locate fools like this sellout and other supporters of the dicatators like the Q-wannabes, and get rid of them from this nation, democracy and the people will fluorish after an initial correction period and the Neo Colonials and their supports (like the snake Leadenwinter the hypocrite) will suffer.

“ Perhaps we are on the verge of a new era in which oil could lose its importance, exactly as coal did 100 years ago�

This consultant appears to be completely clueless. The oil demand is not going down in the next fifty years. The US is the largest consumer of abt 25% of the world production. Only 28% of the petroleum products used in automobiles in US the rest is in airline, construction, and other large defense producers. The US military is also a major consumer. The Biofuel and other shits are meant for automobiles and are not expected to make a big dent in the US demand for petroleum products. You simply can’t run industries, airlines, military, construction machinery etc on biofuel. By 2025 the US demand would go from 25% of the world production to about 28% so the US is not a problem. The problem is the emerging Chinese demand which is expected to hit anywhere from 18% to 25% by 2025. Indian demand would be about 4.5% by 2025 so India is not a major issue. There is not much change expected in the European demand also.

We have three major players US, China and Europe. The current production is almost on its peak and unless the prices go up, the exploration for new fields just will not happen. Two areas that will contribute significantly to the gas production Canada and Central Asia are held up now because of the cost issues.

Calgary in Canada is already an oil boom town and expected to grow even faster after the prices hit a certain threshold and stabilize at that price. However, the exploration and extraction will take time and expect prices to stay up forever.

The US and the Europeans are doing everything to control the current oil supplies. The US and UK were already together on this and France and Germany have joined the US. France suffered a major loss of contracts in Iraq and they would not let that happen again.

The higher prices are hurting consumers now but that is the only way to boost the oil production. Higher prices will force some countries like China or perhaps India too to start thinking about reducing their gas consumption. In India and China more than 50% of the Petroleum products are used for automobiles, they have to control that. Chinese have to be aggressive in developing some strategies to deal with the emerging problems.

However, if the prices are not high enough to meet the cost for exploration in new areas, the oil wars would breakout between China and the Western countries. The current high prices will hurt developing countries. Do The Western nations care for the developing countries? Nyah!

Ijaz, I have a great study recently done by the US oil companies about the future of oil. If you would like to look at it, I can email that to you. I am not sure I have your email address.

Mr. Bashir,

Nice article, where have I read this before?

You have made some very good arguments regarding demand but failed to highlight the real issue which is Peak of oil production, the main reason of price increases followed by subsidies in oil consuming countries such as China and India.

There is increased pressure on users of oil to remove subsidies which is expected to reduce demand but will also have the effect of higher prices particularly in emerging economies.

And where are the trillions of untouched oil reserves?

Re: # 19

you are over-reacting... beating up your friend for owning an i-pod is simply stupid... :)

you should still support local industry, globalisation doesn't prevent you from doing that... in fact, it helps the process - after all, "local industry" in china which are billed as the "manfacturing powerhouse" today have come up via globalisation...

In contrast - we all know with all the "support" - local industry in india went nowhere...

Re: # 18

And where, if not on Wall Street, do these speculators sit? The stage is set to make the rest of the world help bail out the sinking US dollar.

The dollar be damned, forever....

Re: # 4 Ijaz Gul sahib,
Why discuss what is known!

The WW-III started way back in 1973. Research the history of gold and how price hikes are linked to important war moves and banking (usury) sector decisions. Amazing!

Too bad, the Arabs wasted God-given 'liquid gold' that flows under their feet for free!

Majumdar sahib,
Yes, they were dumb enough to do that because they cared more for the continuation of their dynasties than anything else.

#18 It might be fair to say that high fuel prices and food prices are the US indirectly offloading its post-war deficits on to the rest of the World. We're actually paying to let them steal Iraq's oil and inevitably from us as well.

This is the price of globalisation and the purpose of American promotion of democracy across the World. This is the cost of the vastly immoral, pro-democracy middle-classes and their hankering for Levi's and Mcdonalds.

Have some morality ....Go to PapaSallis instead ..buy Tops and Pakcola.. Support local industry.. don't talk to Americans .... insist on a nationalised Sui....beat up your friends if you find them showing-off their latest purchase of imported goods... the list goes on and on..

This high oil price is because of speculation and nothing else... this is yet another bubble... no way demand has gone up two times in one year...

Any the higher demand because of rise of oil usage china and india would be gradual... this sudden price rise makes no sense... it's just like the housing price rise where house prices went up 30% each year, purely on speculation... it's fkin self-propelling spiral...

Are you telling me that US starting consuming 2wice as much oil in the last year or china and india quintipled their consumption to have the per barrell price of oil double in the last year?

where is the largest market for oil futures trading...?

Re: # 11
If you look at the pattern of the producer consumer graph of Crude oil, major producion countries are minor consumers (Vene..., Arabs...). Unless and until these countries feel internal pressure, they will not reduce price.

Re 12

majumdar sahib,

Thank you for enlightening me.

Re 14

The world is feeling the pinch now.Hybrid cars and fuel efficient vehicles are now better positioned to penetrate the markets.

Regards

The required structural changes are slowly taking place. Several SUV and truck plants in teh US have been closed. Ford company is shaky. More SUVs will be scrapped for smaller cars. Public transport usage will increase. Once there is a decline in oil demand, the prices will fall.

It will take a year to achieve this, and the US has the most dominant effect. US consumes 8 times more oil than india. A .5 percent reduction will be phenomenal.

The required structural changes are slowly taking place. Several SUV and truck plants in teh US have been closed. Ford company is shaky. More SUVs will be scrapped for smaller cars. Public transport usage will increase. Once there is a decline in oil demand, the prices will fall.

It will take a year to achieve this, and the US has the most dominant effect. US consumes 8 times more oil than india. A .5 percent reduction will be phenomenal.

Delirium sahib,

You could have a point that this price increase may be driven by speculators rather than fundamentals. At the same time I must point out that even small supply-demand imbalances can cause prices to swing drastically even in commodities other than oil.

Regards

Plain economics yes; But how does that explain the doubling of the price during a period of just 1 year without any abnormal increase in the corresponding demand and some increase in supply as well?

Nkg,

Re: #9

Correct.

Regards

To stabilize oil price, Govt.s have to stop subsidizing it. Let the market decide the price. The oil price id increasing and the consumers are not paying it directly. So, how the supply-demand balance be maintained?
With current consumption level in West and no new major oil discoveries energy prices will soar....Plain economy, no politics....

Ijaz gul sahib,

(Lesson learnt by USA was never ever allow it to happen again. )

I am glad that USA has learnt its lesson. I hope so have the oil exporting countries.

Regards

"Else are we going to see a big improbable change?"

If that happens all the established modeling will crumble before our eyes. In a way it would mean "no knowledge better than knowledge".

Do we have any probable improbables...

Yes I am saying that in a way.
I teach International Political Economy at the Post Graduate Level. Oil Crisis of 1973 is one of my preferred research subject.

This is exactly what happened. Saudi Arabia, Kuwait, Iraq, Iran and Libya spent huge amount of so gained petro dollars to meet the ends of threat perspectives. Lesson learnt by USA was never ever allow it to happen again.

In the final analysis this huge sum of over 123 Billion Dollars as it was in 1978 was converted largely into the third world debt.

Ijaz gul sahib,

Are you saying that oil exporting countries were basically dumb enuff to spend their windfall gains on buying useless products from the West, sub-optimal investments in Western assets or financing their wars (incl. on hardware purchased from the West) ?

Regards

A good essay.
I too have been sceptic of Bretton Woods for a long time and mentioned it occasionally at chowk. Nice to see some one who shares the thoughts with me.

I feel that to understand the present crisis and find an explanation, we must study in detail the Oil Crises nof 1973.This crisis generated an entirely new trend in borrowing, military spending amongst oil producing countries and eventually, the entire boom landing in USA's kitty. Hence a new paradigm of global domination by USA was created and Oil resources became the principal focus. Very few countries realised that the paradigm had shifted and continued to adhere to the Post WW2 order.

Its worthwhile to also find an explanation for the relationship between the oil prices and value of US Dollar.

Awiting discussion responses.

Cheerios

"Perhaps we are on the verge of a new era in which oil could lose its importance, exactly as coal did 100 years ago�

I sincerely hope it does. The adverse outcomes of the oil-hegemony have already afflicted this planet beyond relief. Solar power is the only way to the future, and as long as oil is there, it will remain undermined.

A very interesting and informative read Adnan. Thanks

According to Chomsky (and another work by Hill and Wang called Deterring Democracy 1992 p47-49) of the $13 billion of the US Marshall plan aid, $2 billion was given directly to US oil companies.

In terms of inflation this would be the princely sum of nearly $16 billion in today's money.

The purpose of this investment (by the US Public sector in US private companies (?free markets?) was to allow for them to compel Europe to become dependant on oil (sourced by the US who have since sought to develop total control over World oil) as compared to coal which the Ruhr (France and Germany) was rich in.

Henry Kissinger had exactly this in mind in 1970 when he said "Control oil and you control nations; control food and you control people".

This was exactly what Churchill said in 1919; "We must become.. the controllers at the source, of at least a proportion of the supply (of oil) which we require....and obtain our oil supply, so far as possible, from sources under British control, or British influence."

By the mid-20's Britain controlled most of the World's oil .

Post WW2 following the Bretton Woods conspiracy, Britain had been reduced to America's lapdog for its very foolish misadventures against the Nazis. The US swiftly sought to destroy all European energy independence, in particular Italy's which perhaps foresaw the coming of the beast.

Today the World still suffers from the Bretton Woods conspiracy and its bastard democracy: the willing surrender of your nation's resources and markets to your betters.

In today's World particularly when considering the more "ethnically challenged" nations there are literally hundreds of examples of the direct co-relation between democracy and national poverty Democracy is White imperialism and Iran now may be the last bastion of civilisation left in the world.

Glad to see it on FP - first read on your iLog. This is an informative and useful article on this issue. It is worth publishing in any international magszine of highest quality. Keep up the good work man.
Me think world is at the brink of a big disaster. In our lifetime we are going to see many structures, social, poliitical, economic coming tumbling down like a house of cards - men only make cobwebs !!! There is no alternative than to complete change of life style - listen to prophets -Even Brazilain experiment with Ethonol has proved to be a hoax. See CNN's recent investigative report 'OUT OF GAS'