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forwarded: WWN: Worldwatch Issue Alert #8 OPEC Time for Change

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  • J.H. Crawford
    ... ### J.H. Crawford Carfree Cities postmaster@carfree.com http://www.carfree.com
    Message 1 of 1 , Sep 9, 2000
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      Thought list members would find this interesting:


      > NEWS FROM THE WORLDWATCH INSTITUTE
      >
      > From the Office of the Chairman
      > Worldwatch Issue Alert
      > Alert 2000 - 8
      > For Immediate Release
      > September 8, 2000
      >
      >
      > OPEC HAS WORLD OVER A BARREL AGAIN
      >
      > Lester R. Brown
      >
      >
      > On Thursday, September 7, oil prices on the spot market climbed to $35.39
      > per barrel, their highest since November 1990, just before the Gulf War. This
      > latest oil price escalation not only threatens a worldwide recession, it also
      > marks another adverse shift in the international terms of trade for the United
      > States, one that will widen further the already huge trade deficit.
      > On Sunday, OPEC (Organization of Oil Producing and Exporting Countries)
      > ministers will meet at OPEC headquarters in Vienna to consider a request from
      > oil importing countries to boost daily oil output by at least 500,000 barrels.
      > But it may be too little too late. With the East Asian economies, including that
      > of China, booming again, and with U.S. oil production falling for eight years in
      > a row, even a production increase of 500,000 barrels may not restore lower oil
      > prices.
      > For the United States, which pays for its oil imports in part with grain
      > exports, this is not good news. Exports of grain and oil are each concentrated
      > in a handful of countries, with grain coming largely from North America and oil
      > mostly from the Middle East. The United States, which dominates grain exports
      > even more than Saudi Arabia does oil, is both the world's leading grain exporter
      > and its biggest oil importer. Ironically, all 11 members of OPEC are grain
      > importers.
      > Using the price of wheat as a surrogate for grain prices, shifts in the
      > grain/oil exchange rate can be easily monitored. From 1950 through 1972, both
      > wheat and oil prices were remarkably stable. In 1950, when wheat was priced at
      > $1.89 a bushel and oil at $1.71 a barrel, a bushel of wheat could be exchanged
      > for 1.1 barrels of oil. At any time during this 22-year span, a bushel of wheat
      > could be traded for a barrel of oil on the world market. (See attached table.)
      > With the 1973 oil price hike, this began to change. By 1979, the year of the
      > second oil price increase, OPEC's strength had pushed the exchange rate to
      > roughly 4 to 1. By 1982, when the price of oil had climbed past $33 a barrel,
      > the wheat/oil ratio had climbed to 8 to 1. This steep rise in the purchasing
      > power of oil led to one of the greatest international transfers of wealth ever
      > recorded.
      > Today, 27 years after the first oil price hike, the terms of trade are again
      > shifting in favor of OPEC. With grain prices at their lowest level in two
      > decades and oil prices at the highest level in a decade, the wheat/oil ratio has
      > shifted to an estimated 10 to 1 this year. OPEC has the United States over a
      > barrel once again. With its fast-growing fleet of gas-guzzling SUVs (sport
      > utility vehicles) and falling oil production, the United States is now dependent
      > on imports for a record 57 percent of its oil, making it even more vulnerable to
      > oil price hikes and supply disruptions than it was in 1973.
      > But this is not the only threat to international security. Climate change
      > from burning oil and other fossil fuels may be an even greater threat to
      > long-term world economic and political stability. Last month's discovery of open
      > water at the North Pole by an ice breaker cruise ship is only one of many recent
      > indications that human activities are altering the Earth's climate. The Arctic
      > Ocean ice has thinned by 40 percent in some 35 years. Scientists now believe
      > that summer ice in the Arctic Ocean could disappear entirely within the next 50
      > years. (See Worldwatch Issue Alert #7,
      > http://www.worldwatch.org/chairman/issue/000829.html )
      > Greenland's ice sheet is also starting to melt. If all the ice on this huge
      > island, which is three times the size of Texas and measures 10,000 feet thick
      > (over 3,000 meters) in some places, were eventually to melt, sea level would
      > rise by a staggering 23 feet (7 meters). In addition to ice melting and rising
      > sea level, global climate change can bring more extreme weather events-more
      > intense heat waves, more destructive storms, and more severe flooding.
      > The world is beginning to move beyond oil and coal toward energy sources
      > that do not disrupt climate. Widely varying growth rates of various sources of
      > energy from 1990-99 give a sense of the energy transition underway. Worldwide,
      > wind power generation grew by 24 percent per year, solar cell production by 17
      > percent, and geothermal power by 4 percent. By contrast, world oil use expanded
      > at 1 percent a year and coal use actually declined by nearly 1 percent.
      > Even oil company CEOs are talking about shifting from a carbon-based to a
      > solar/hydrogen-based energy economy. British Petroleum is now the world's
      > leading manufacturer of solar cells. Shell is pioneering the new hydrogen
      > economy. All the major automobile companies are working on fuel cell engines for
      > which the fuel of choice is hydrogen. The Japanese have developed a photovoltaic
      > roofing material that allows the rooftop to become the power plant for the
      > building.
      > Denmark now gets 10 percent of its electricity from wind. For
      > Schleswig-Holstein, the northernmost state in Germany, it is 14 percent. For the
      > industrial province of Navarra in Spain, it is 22 percent. We are now getting
      > glimpses of the new energy economy in the solar rooftops in Japan and in the
      > wind turbines scattered across the European countryside.
      > A nationwide wind resources survey by the U.S. Department of Energy
      > indicates that three states--North Dakota, Kansas and Texas--have enough
      > harnessable wind energy to satisfy national electricity needs. With new wind
      > farms coming online over the last year or two in Minnesota, Iowa, Texas, and
      > Wyoming, U.S. wind-generation jumped by 29 percent in 1999. (See Worldwatch
      > Issue Alert #3 http://www.worldwatch.org/chairman/issue/000607.html )
      > The generation of electricity from wind is exciting because money spent for
      > this electricity typically stays in the community, whereas money spent for
      > electricity generated by oil may end up in the Middle East. Moreover, with cheap
      > wind-generated electricity, hydrogen, the preferred fuel for fuel cell engines,
      > can be produced during the night when electricity demand is low.
      > As these examples indicate, the transition to a new energy economy has
      > begun, but it is not moving fast enough. The time has come to restructure the
      > tax system both to reduce the threat of soaring oil prices and to stabilize
      > climate. We can restructure our tax system by lowering the personal and
      > corporate income tax and offsetting it with an increase in a tax on gasoline.
      > OPEC members know that the cost of producing oil in Saudi Arabia, which has the
      > lion's share of world oil reserves, is roughly $2 a barrel. They also know that
      > if they push the price of oil too high, they will trigger a global recession.
      > This is not in their interest.
      > If there is a world price for petroleum products beyond which a further rise
      > would be disruptive, then the issue is who gets the difference between the low
      > production cost of oil and this much higher market price. If importing countries
      > push prices of gasoline, fuel oil, jet fuel, and other oil products close to
      > that limit by imposing stiff taxes, then the potential for raising prices by
      > OPEC is lessened. This is why, in a meeting with President Clinton in New York
      > earlier this week, Saudi Crown Prince Abdullah urged importing countries to
      > lower their taxes on gasoline and other oil products.
      > If we take the initiative and raise gasoline taxes while lowering income
      > taxes, the increase in the gasoline tax will end up in our treasury and
      > individuals will benefit from lower income taxes. But if we don't restructure
      > and let OPEC countries keep increasing the price of oil, and hence of gasoline,
      > the equivalent of the gasoline tax increase will end up in OPEC treasuries. We
      > will eventually pay the same higher price for gasoline, but not get the income
      > tax reduction.
      >
      > Copyright: Worldwatch Institute 2000
      >
      > CONTACT INFORMATION FOR JOURNALISTS:
      > Lester R. Brown, Chairman: (office: 202.452.1999)
      > (home: 202.328.6256) Email: lesterbrown@...
      > Reah Janise Kauffman, Chairman's Office:
      > (office: 202.452.1999) (home: 703.237.4160) Email: rjkauffman@...
      > FAX: (202) 296-7365
      >
      > FOR ADDITIONAL INFORMATION AND DATA: WWW.WORLDWATCH.ORG/ALERTS/INDEXIA.HTML
      >
      >
      > Table: The Wheat/Oil Exchange Rate, 1950-2000
      >
      > Year Bushel of Wheat Barrel of Oil Bushels/Barrel
      > (U.S. dollars) (ratio)
      >
      > 1950 1.89 1.71 1
      >
      > 1955 1.81 1.93 1
      >
      > 1960 1.58 1.50 1
      >
      > 1965 1.62 1.33 1
      >
      > 1970 1.49 1.30 1
      > 1971 1.68 1.65 1
      > 1972 1.90 1.90 1
      > 1973 3.81 2.70 1
      > 1974 4.89 9.76 2
      > 1975 4.06 10.72 3
      > 1976 3.62 11.51 3
      > 1977 2.81 12.40 4
      > 1978 3.48 12.70 4
      > 1979 4.36 17.26 4
      > 1980 4.70 28.67 6
      > 1981 4.76 32.50 7
      > 1982 4.36 33.47 8
      > 1983 4.28 29.31 7
      > 1984 4.15 28.25 7
      > 1985 3.70 26.98 7
      > 1986 3.13 13.82 4
      > 1987 3.07 17.79 6
      > 1988 3.95 14.15 4
      > 1989 4.61 17.19 4
      > 1990 3.69 22.05 6
      > 1991 3.50 18.30 5
      > 1992 4.11 18.22 4
      > 1993 3.82 16.13 4
      > 1994 4.08 15.47 4
      > 1995 4.82 17.20 4
      > 1996 5.64 20.37 4
      > 1997 4.35 19.27 4
      > 1998 3.43 13.07 4
      > 1999 3.05 17.98 6
      > 2000 (est.) 2.94 29.34 10
      >
      > SOURCE: International Monetary Fund, International Financial Statistics, various
      > years. Compiled by Worldwatch Institute.
      >
      > -END-
      >
      >
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      ###

      J.H. Crawford Carfree Cities
      postmaster@... http://www.carfree.com
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