The Naked Truth of Oil Crisis

The current oil crisis that has been sweeping almost everybody who live, eat and travel using the black gold and had caused a massive setback to all people. In Malaysia itself, we have been bogged down with emotional and politicized issue regarding the oil crisis. Bulk of the argument was due to the abandonement of subsidy which have amounted around RM50 billion.
By continuously championing this issue using populist reasoning, most Malaysians will fall into the trap of the politicians who normally do not think far enough in analyzing this crisis. Hopefully the article below could serve some understand of the big picture we are facing. For sure, the Age of Oil is rapidly declining and we need to prepare a mat to land comfortably and safely.
Why are oil prices soaring so high, and will they ever return to Earth? Fatih Birol, chief economist at the International Energy Agency in Paris, explains why peak oil is real, why biofuels are indispensable, and how China determines what you pay at the pump.

Foreign Policy: The Wall Street Journal recently reported that your agency is preparing to revise its estimate of future oil supplies. Can you tell us a little bit about your preliminary findings?

Fatih Birol: We publish a book every year, World Energy Outlook (WEO), that lays out strategies related to energy and climate change. For this year’s WEO, we wanted to look at oil-supply prospects, as there are a lot of question marks. So, we are looking at 400 top oil fields, on a field-by-field basis, asking how much oil we can realistically expect to come to market. We not only look at the geological part of the issue, but also the economics. We are going to publish our study on the 12th of November, so I don’t know the results yet. What I can tell you is that what we are experiencing in the last few years—high prices, lack of investment in many areas, and the significant decline rates, especially in the North Sea, Gulf of Mexico, and elsewhere—will be considered.

We are entering a new world energy order. Today, demand for oil is dominated by China, India, and even by the Middle East countries themselves. The main actors of the recent past—namely the OECD countries, rich countries, the United States, Europe, Japan—their time is passé. It’s over.

FP: Why aren’t more new supplies coming online, given the current high prices?

FB: The bulk of the oil has in the past been produced by the international oil companies, so-called Big Oil. But their existing reserves are declining in what they have under ownership. They have no access to new reserves, the bulk of which are in Middle East countries. In most of these countries, only the national oil company can, by law, invest. So, even though the international oil companies may have the capital and the technology, they don’t have access to the reserves. Therefore, the bulk of the growth in the future needs to come from the national oil companies, and perhaps price will no longer be the main determinant when they make their [production] decisions, because for many countries, oil is their only natural endowment. And those countries legitimately value and want to leave their one and only natural endowment for future generations.

FP: Do you believe in peak oil?

FB: Of course, but the question is when? Global oil resources are limited. We have conventional oil; we have unconventional oil. We have oil in the North Sea, in the Gulf of Mexico. We have more oil in the OPEC countries. What I can tell you is that one day global conventional oil will peak. This will depend on many factors, including the role of technology, investment, and production policies. When we look at oil outside of the OPEC countries, when you put all of them together, I think it is going to peak very soon. But we have unconventional oil, and we have oil in the Middle East as well. How much will come to the market from unconventional oil?

FP: As we’re seeing at the United Nations’ food crisis meeting in Rome, biofuels are becoming a huge source of controversy. What impact would a backlash against biofuels have on energy prices? How important are biofuels to the oil market?

FB: Biofuels, in the last two years, played a crucial role. When you look at the numbers, almost one third of the growth in liquid [fuel] production came from biofuels. If we didn’t have that one third, the prices today that we are experiencing could be much higher.

FP: How much of the current oil price is explained by financial speculation? Is there an “oil bubble,” as George Soros and others are claiming?

FB: There is definitely financial speculation, but the main reason for the high prices is the growing perception in the markets that the future demand growth may not be met by the supply growth. This provides fertile ground for speculators, and they play a triggering role in increasing prices.

FP: Will prices stay at this level for the next, say, 12 months? Do you believe the Goldman Sachs estimate that oil will hit $200 a barrel next year?

FB: As the chief economist of the IEA, I cannot by law make any predictions about prices. But what I can tell you is that I expect that for the next years to come, we will have a high price trajectory. There may be zigzags, but I would be very surprised if prices go down to the levels we saw three or four years ago, in the long term.

FP: The price, or even the price trajectory of oil, is notoriously hard to predict. What are the biggest uncertainties in trying to make forecasts?

FB: On the demand side, I think the biggest uncertainty is how much the Chinese economy will grow in the next 10 to 15 years. If the Chinese economy grows at 7 percent level or 9 percent, there is a huge difference for global oil demand growth. This two percentage-point difference has implications on oil demand that are higher than all OECD countries’ oil demand growth.

On the supply side, when we look at how much money we need to invest to increase production, we mainly look at how much oil demand will grow in the future. But this is only the tip of the iceberg. The main problem here is that the existing fields, many mature fields, are declining. So we have to increase production, not only to meet the growth in demand, but also to compensate for the decline in existing mature fields outside of OPEC. These decline-rate issues are not really taken into consideration, which is much more important than demand growth when it comes to production prospects. Our book, World Energy Outlook 2008, will provide a lot of data on that.

This interview is taken from the Foreign Policy magazine website:

Fatih Birol is chief economist at the International Energy Agency.


Why World Bank can never be trusted as long it runs by the Western leaders.

 It is a distress to read the news below. Even though Wolfowitz have been kicked out, yet the ‘wolf in the sheep skin’ still lurking inside the World Bank albeit promising reforms by Robert Zoellick. These Neo-Cons can never be trusted. Never!

 World Bank pledges to save trees… then helps cut down Amazon forest

By Daniel Howden

A month ago it vowed to fight deforestation. Now research reveals it funds the rainforest’s biggest threat.

The World Bank has emerged as one of the key backers behind an explosion of cattle ranching in the Amazon, which new research has identified as the greatest threat to the survival of the rainforest.

Ranching has grown by half in the last three years, driven by new industrial slaughterhouses which are being constructed in the Amazon basin with the help of the World Bank. The revelation flies in the face of claims from the bank that it is funding efforts to halt deforestation and reduce the massive greenhouse gas emissions it causes.

Roberto Smeraldi, head of Friends of the Earth Brazil and lead author of the new report, obtained exclusively by The Independent on Sunday, said the bank’s contradictory policy on forests was now clear: “On the one hand you try and save the forest, on the other you give incentives for its conversion.”

There are now more than 74 million cattle reared in the Amazon basin, the world’s most important eco-system, where they outnumber people by a ratio of more than three to one. Fuelled by massive illegal ranches, the South American giant has become the world’s leading beef exporter, rearing more cattle than all 25 EU members put together. This industrial expansion comes despite international agreements to combat deforestation, and claims from the government of Brazil that it is succeeding in slowing the destruction of the world’s largest standing forest.

“Land-use change in the Amazon is first and foremost a product of ranching. It is on the hooves of cattle, out on the forest fringe, where the repercussions are being felt,” said Mr Smeraldi.

The new report, “The Cattle Realm”, comes after a year in which deforestation was acknowledged as the second leading cause of carbon emissions worldwide and was included in the plan for a new global treaty to fight climate change. But the catastrophic destruction of the Amazon to make way for ranches is being funded by the same international institutions that have pledged to fight deforestation.

The World Bank, which unveiled a new programme to fund “avoided deforestation” at the UN climate summit in Bali last month, is at the same time pouring money into the expansion of slaughterhouses in the Amazon region. The new report estimates that the internationally funded expansion of Brazil’s beef industry was responsible for up to 12 billion tons of CO2 emissions over the past decade – an amount comparable to two years of emissions from the US.

The World Bank, which British taxpayers help to fund, lent its backing to the inclusion of deforestation in the Bali “road map” signed by 180 countries last month. At the summit the bank unveiled its Forest Carbon Partnership Facility (FCPF), aimed at reducing deforestation by compensating developing countries for carbon dioxide reductions realised by maintaining their forests. The pilot programme has received more than $160m (£82m) in funding from donor governments.

The World Bank’s president, Robert Zoellick, claimed that the project “signals that the world cares about the global value of forests and is ready to pay for it. There is now a value to conserving, not just harvesting the forest.” But the institution, set up to provide loans to developing countries aimed at reducing poverty, has been accused of hypocrisy as it talks up relatively low levels of funding on “avoided deforestation” while spending millions more on the industries – such as cattle ranching and soya production – that are the acknowledged drivers of forest destruction.

In a single project last year, the IFC – part of the World Bank group – handed $9m to Brazil’s leading beef processor to upgrade its slaughterhouse operations in the Amazon, despite an environmental study, carried out for the IFC, which showed that expansion of a single slaughterhouse in Maraba would lead to the loss of up to 300,000 hectares of forest to make way for more cattle.

The project was signed off despite angry resistance from up to 30 NGOs in Brazil and the intervention of the influential US lobbying group the Sierra Club, all of which pointed out that the high-risk agricultural project contradicted the bank’s stated aim of reducing greenhouse gas emissions.

In the past three years Brazil’s National Development Bank and the World Bank have poured funds into the southern Amazon, fuelling the expansion of the cattle industry with new slaughterhouses and four million additional head of cattle. “While governments insist they are doing their utmost to stop deforestation they have been putting in place incentives for the destruction of the forest. It is taxpayers’ money fuelling this,” said Mr Smeraldi.

Only the US rears more cattle than Brazil, which since 2004 has led the world in beef exports. The endangered eco-system of the Amazon basin has accounted for 96 per cent of all growth in the country’s cattle industry. The ranchers are expanding as meat consumption soars both in Brazil and the rest of the world. Britain is the sixth largest importer of Brazilian beef, buying more than 80,000 tons in the year to November 2007.

The Amazon basin is home to one in 10 of the world’s mammals and 15 per cent of land-based plant species. It holds more than half the world’s fresh water, and its vast forests act as the largest carbon sink on the planet, providing a vital check on the greenhouse effect. This vital resource faces three main dangers: the expansion of the soya industry, driven by high prices for animal feed; the surge in sugarcane plantations to feed the sudden and insatiable global appetite for bio-fuels; and the traditional threat of cattle ranching, underestimated in recent years as soya and sugarcane have received more attention.

Since the “Save the Amazon” campaigns of the 1970s the role of illegal ranchers in the destruction of the rainforest has been widely known. Virtually non-existent government control has allowed ranchers to clear large areas of remote forest for pasture. But the land – while initially fertile – quickly erodes, spurring the need for new pasture and driving the chainsaws further into the forest, in a vicious cycle largely unchecked for decades. Carbon dioxide emissions from the fires set to clear the trees have helped to propel Brazil into the top four carbon polluters in the world, exceeded only by the US, China and Indonesia.

At the end of each dry season, in anticipation of the first winter rains, farmers and cattle ranchers throughout South America set fires to “renovate” pasture land. But this process has spun out of control as deforestation and climate change have created a tinderbox, leading to ever-larger blazes. Last October a record area of the rainforest went up in flames, choking vast areas of not just Brazil but Paraguay and Bolivia.

There are increasing signs that the strain placed on the Amazon’s eco-system could lead to an irreversible breakdown Last month the WWF predicted that the combination of drought and fire could wipe out the Amazon by 2030, with disastrous consequences for the world.

The Eastern Neo-Colonialism


The cover from The Economist depicts the ‘saviour of Capitalism’.

One of the biggest heist the Americans currently facing is no longer a secret. I’m not talking about those Neo-Conservatives government led by Mr Bush and Co. but I’m referring to the other 300 million Americans who have been duped alive by so-called Bushenomics ( a nickname given by economist for Bush admin’s economic thinking) which favoured the filthy rich corporations rather than people who votes for him. Oh, I forgot, those corporations is his sleeping partner. I dont know how much Mr Bush being funded by those corporations in his rally for White House few years ago, but I’m pretty sure it’s a big one.

As Muslim, we do share the same paradigm of thinking with our fellow conspiracy theorist brothers and sisters who have done so much to expose the fiasco of using fiat money in daily economic scheme. Plus, usury is greatly forbidden in Islam and that strengthen my believes upon the just Islamic Economic system which have not come out in the broad day light yet. Yes, the malaise of economic injustices today is largely being influenced by the capitalistic-usurious economics system.

I bet many of Muslim intellectuals (plus Tun Mahathir Mohamad) are expecting the meltdown of dollar and the Western economic system. It will decay first in their own backyard (read: United States) than it will engulf the rest of the world that stupidly being loyal towards the Greenbacks.

I don’t know why on earth most of the developing countries or even the developed one from Asia the likes of Japan, China, UAE, Singapore and Saudis willing to give their reserve to ‘save’ America. I mean, should we just let the Consumerist Nation the likes of United States rot slowly in order for them to wake up and smell the real deal of their greed. This mad nation need to be taught a lesson of starvation, and poverty in order for them to realise their sin upon the Third World nations.

Well, The Times of India wrote a wonderful piece of article regarding the current debacle of this mess in the context of EASTERN NEO-COLONIALISM! Nonetheless, like I said before, before we accept this notion blindly we need to ask why one earth those Asian countries try to save the usurious Western bank rather than their fellow Third World comrades? Strange.

Strange rise of Eastern neo-colonialism

by Swaminathan S Anklesaria Aiyar

For 60 years, the International Monetary Fund has bailed out distressed economies, imposing onerous conditions aimed at ensuring that the loans are repaid. The borrowers have often complained that loan conditions violate their sovereignty. The IMF is dominated by rich countries, and always has a European chief. So, leftists have long accused the IMF of being a tool of western imperialism, controlling the Third World through financial muscle.

Today, a remarkable transformation has taken place. Very few developing countries are borrowing from the IMF, which therefore cannot meet its running costs and is retrenching 400 of its staff. Meanwhile, developing countries have amassed trillions of dollars of foreign exchange. They are using these funds to bail out Western financial institutions hit by the housing collapse in the US. In the process, they could acquire more influence over those they rescue than the IMF could ever dream of. This can with only modest exaggeration be called Eastern neo-colonialism, in financial, though not military, terms. It is already giving the shivers to Western governments.

Last week, Citibank — the world’s biggest commercial bank — received $ 14.5 billion from investment funds in China and Kuwait, over and above the $ 7.5 billion it got last November from the Abu Dhabi Investment Authority. Merrill Lynch got $ 5.6 billion from Temasek of Singapore last November, and is now negotiating another $ 6.6 bn. The top Swiss bank, UBS, suffered mortgage losses of $ 10 bn and was rescued by investors from Singapore and the Middle East. The list of distressed Western financial institutions keeps growing, and many will need repeated injections of billions. In the process, they are increasingly becoming owned by Asian government funds.

These flows from Asia to the West now dwarf anything the IMF ever gave. Most IMF loans were well below $ 1 bn, and virtually none exceeded $ 4 bn. Never has the world witnessed such a remarkable reversal of financial roles and muscle. Western countries are now the ones worrying about loss of sovereignty, and of neo-colonial subjugation by the new financial overlords of Asia.

Historically, Third World countries have depended on dollars from the West. But after the Asian financial crisis, many Asian countries decided to run big current account surpluses, and so accumulated billions in forex reserves. Meanwhile, the sharp rise in oil prices gave oil exporters unprecedented surpluses, estimated at $ 300 bn per year. So, the balance of financial advantage shifted from the West to the East.

Countries with long-term financial surpluses have placed part of their forex reserves in what are called Sovereign Wealth Funds (SWFs), to make long-term investment for future generations. These funds today control a mighty $ 2,876 bn, almost thrice the GDP of India. The lion’s share belongs to oil and gas exporters. India too should enter the fray, with a modest kitty of say $ 30 bn.

What are the main differences between the old and new rescue outfits, the IMF and Sovereign Wealth Funds (SWFs)? The IMF provides loans to distressed governments, while SWFs invest in equities, including those of distressed MNCs. The IMF imposes onerous conditions on borrowers. SWFs don’t impose conditions, but become part-owners of the distressed corporations, with obvious implications for influence and control. The IMF takes many months to draw up detailed loan agreements with conditions, whereas SWFs make money available almost instantly.

This makes SWFs more attractive to those in distress, but also more dangerous in a long-term sense. Successive injections of equity by SWFs may enable them to not just influence but take over western MNCs. This is the new fear stalking western governments.

Already France and Germany have said that they will not allow backdoor takeover in this manner. No backdoor takeovers have been attempted so far. But given the sheer size of SWFs, it will happen in some cases. In Thailand, Singapore acquired control of a Thai telecom firm owned by former Prime Minister Shinwatra, and caused a full-blown political crisis. J Sainsbury, one of the biggest British retail chains, has been acquired by Qatar’s SWF.

The US in 2005 refused to allow the Chinese to take over Unocal, a big oil corporation. When Dubai Ports acquired P&O, the British–based ports MNC, it acquired several port operations in the US. This led to an outcry about security in the US, and Dubai Ports had to sell all its US operations.

Western countries want SWFs to provide money but not exercise any influence. Exactly as Third World borrowers from the IMF wanted money, but without conditions. Alas, there is no such thing as a free lunch in finance. Up to a point, SWFs may be passive investors. But as their stakes rise, they will demand additional seats on the boards of MNCs, as befits part-owners. This could provide them with long-term influence, exceeding anything the IMF acquired through loans. Ultimately, it could lead to complete takeovers, something the IMF could never do.

So, the balance of world financial power has changed, probably forever. Eastern neo-colonialism is combating the western variety, and India needs to become a small part of it. This will transform global relationships.

source; The Times of India

FTA: Malaysian government should walk away


This is another form of neo-colonialism which I dearly despise since 2 years ago. The struggle to end this negotiation is still in the pipeline. Sadly not many of the political parties the likes of PAS, DAP and Keadilan are serious enough to engage in this matter. Only few NGOs that are being spearheaded by Jerit, Parti Sosialis Malaysia and CAP putting this agenda as one of the serious cases to fight against. Remember, this is not about narrow minded political issues but a matter of this nation survival. I bet Pak Lah and co. are clueless about the impact and the one who going to taste this is my generation ( including Khairi’s newborn son) in the future! I will not let MITI sell off our country so cheaply to the giant capitalist who can never be trusted! Check out this press statement made by S.M Idris, president of Consumer Assoc. of Penang:

On Jan 14, the US and Malaysia resumed formal negotiations on the proposed Malaysia-US Free Trade Agreement (FTA) after talks were deadlocked early last year over 58 contentious issues.

Among the contentious issues were government procurement and financial services. Policy space on these issues is important for Malaysia’s development. Government procurement is a valuable macro-economic development tool that can help address socio-economic imbalances. And in light of the Asian financial crisis, Malaysia has been very careful in the sequencing and timing of financial services liberalisation, making decisions at its own pace and in national interests.

A news report quoted US ambassador to Malaysia James R Keith as saying: ‘A bottom line for us [the US] on government procurement is transparent and reciprocal market access … We have to have that. If we don’t have that, then it would become a deal-stopper’. Moreover, Keith has admitted that the US is seeking ‘substantial market access’ in areas including financial services.

Previously, the government has made assurances that it will not sacrifice our national interests in order to forge a deal with the US. International Trade and Industry Minister Rafidah Aziz has said that the government would not be moved on its bumiputera policies nor on liberalising the country’s financial services sector.

Unless the government has reneged on its promises, it appears that the US and Malaysia are irreconcilably at odds on fundamental issues. Given this, why is Malaysia even persisting in negotiating with the US?

The proposed FTA will have far-reaching impacts on the economic and social well-being of Malaysians and we are likely to emerge as a net loser. Up till today, despite numerous requests, no comprehensive cost-benefit analysis of the FTA has been made available to the public.

Instead, negotiations have not been transparent and there has been little consultation with the public. In fact, the level of transparency has even decreased. There has not been any feedback on whether the 58 contentious issues have been resolved or whether any concessions were made by the Malaysian government in order to reach an agreement.

The government appears to be prepared to give in to US demands on intellectual property rights that will harm consumers, patients in need of medicines and the local industry including generic medicine manufacturers. Even if the FTA negotiations were to fail, the US will continue to press for unilateral changes in Malaysia’s intellectual property laws knowing already what the government is willing to give up in spite of public objections.

We strongly reiterate our deep disappointment at the government’s blatant disregard for the nation’s long-term interests. The right thing for the government to do is to walk away from these negotiations.

The writer is president, Consumers Association of Penang.