Don't panic over oil just yet

According to BP anyway we are four decades away from running out of oil.

Check out this clip which tells us that at current rates we have 42 years left if no further reserves are found

One country that is weathering the storm....Iraq

Maybe not the ideal posting but one place that has so far avoided the global downturn is Iraq.

This from Time magazine

Iraq's ability to weather the global slowdown at the moment rests in the huge currency reserves it earned in recent years selling oil as prices soared. Iraq has roughly $30 billion in surpluses from previous years. That has allowed the country to maintain minimum standards of services and governance despite depression-scale unemployment (no reliable data are available, but some experts estimate unemployment may be over 20%). Iraq's GDP is growing steadily despite the global financial crisis. Last year, GDP grew in Iraq an estimated 7% to 9%. This year, GDP is projected to rise 5% to 7%. (See pictures of life returning to Iraq's streets.)

But storm clouds are on the horizon.With the global drop in oil prices the country faces a deficit this year of roughly $20 billion,which will wipe out the current surplus.

The country must then look to other sectors to prop it up and

Iraq cannot currently generate cash on capital markets like other countries by the sale of bonds because of hundreds of unsettled claims worth billions of dollars related to Iraq's 1991 invasion of Kuwait. Scores of possible lawsuits by Kuwaitis and Westerners lurk in countries where Iraq might sell bonds, which could be seized by courts deciding cases put forward by plaintiffs allegedly wronged by the former regime.

Running dry on oil and running dry on natural resources

This morning's lead story in the FT is worth a read.

The paper has got hold of a draft report which says that

Output from the world’s oilfields is declining faster than previously thought, the first authoritative public study of the biggest fields shows.
Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook,

The consequences are pretty obvious if this is correct although it was written prior to the chain of events which will see the world economy lapse into recession.However

The findings suggest the world will struggle to produce enough oil to make up for steep declines in existing fields, such as those in the North Sea, Russia and Alaska, and meet long-term de­mand. The effort will become even more acute as prices fall and investment decisions are delayed.

Allied to this the Guardian takes a look at the wider world of resource management

The world is heading for an "ecological credit crunch" far worse than the current financial crisis because humans are over-using the natural resources of the planet,

The report by The Living Planet says that

humans are using 30% more resources than the Earth can replenish each year, which is leading to deforestation, degraded soils, polluted air and water, and dramatic declines in numbers of fish and other species. As a result, we are running up an ecological debt of $4tr (£2.5tr) to $4.5tr every year - double the estimated losses made by the world's financial institutions as a result of the credit crisis

A bad day for the economy but worse to come?

It hasn't been a briliant day for the economy.Marks and Spencer's seeing falling food sales as customers switch to Lidl,Taylor Wimpey realising that nobody wants to buy new homes at the moment,and road hauliers descending on London asking for 24p a litre to be removed from their bills.

More bad news over at Open House where Colin Campbell explians why high oil prices are here for the foreseeable future

At first, people tended to assume that the current crisis likewise sprang for political circumstances in the Middle East, but now there is a growing awareness that much deeper issues are at stake

however he concludes

the world is about half way through the oil age. The first half was marked by the rapid expansion of just about everything, including agriculture which allowed the population to increase six-fold in parallel with oil. Its production today is equivalent in energy terms to 22 billion slaves working round the clock.
The second half, which now dawns, will be marked by the decline of this critical energy supply and all that depends on it. Petroleum Man will be extinct this century, but homo sapiens, if he is as wise as his name implies, can gradually find ways to adapt to the changed circumstances

It was all about oil

Staying on the subject of American policy in the Middle East,remember the arguments at the time of the lead up of the Iraq war.It was all about oil.

Today those may have been true all along.The New York Times is reporting that

A group of American advisers led by a small State Department team played an integral part in drawing up contracts between the Iraqi government and five major Western oil companies to develop some of the largest fields in Iraq, American officials say

.adding

The disclosure, coming on the eve of the contracts’ announcement, is the first confirmation of direct involvement by the Bush administration in deals to open Iraq’s oil to commercial development and is likely to stoke criticism

And the article continues

The deals have been criticized by opponents of the Iraq war, who accuse the Bush administration of working behind the scenes to ensure Western access to Iraqi oil fields even as most other oil-exporting countries have been sharply limiting the roles of international oil companies in development.

The balancing effect

When Phil Wollass,Labour's envirnomental spokesman appeared on Newsnight following the fuel protests he was quite adamant that the Treasury was losing out as the price of fuel increased.

Over at Ft.com blogs they are not so sure.

They quote Maurice Fitzpatrick of Grant Thorton who says

Tax revenues from North Sea oil would jump from an estimated £10bn - struck when oil was only $84 a barrel - to £16bn at the current price of about $128 a barrel.
Since the Budget in March, the Treasury has already taken an estimated £820m more than its forecasts in North Sea oil tax.
The £6bn of surplus revenue would easily cover the cost of U-turns on both fuel duty and vehicle excise duty, where ministers are introducing new bands which could cost an extra £200 for drivers of inefficient cars.
Deferring the 2p increase in fuel duty by six months would cost £550m. Scrapping the revamped vehicle excise duty altogether would mean the loss of an estimated £465m next year and £735m next year - although ministers may only remove the retrospective element of this tax.

The tresury begs to differ

* an increase in pump prices leads to an increase in inflation. This knocks through to the inflation-linked payments that the government has to make, including benefits, pensions, tax allowances, and government bonds.

* reduced demand for fuel from filling stations, which reduces revenue from fuel duties - as this is fixed at 50.35p per litre if people buy less fuel, revenue from this falls

So who is right or are they both right and does this simply fall into the so called balancing effect?

More warnings for Labour

Two interesting articles in the papers this morning.

It's Friday and therefore Polly Toynbee issues another warning to the Labour party

As times get tougher people will get angrier, and the "whose side are you on?" questions will matter more. If, by the time you read this, Labour has lost Crewe, it will signify a great switch of white working-class voters - and it is that flight, not the rich, that Labour should really have been fearing all these last years.

In the Independent,Dominic Lawson warns the government that it mustn't start blaming the problems on the price of oil,something re iterated by Harriet Harman this morning.

Instead he reminds the government of its tax policies

The level of fuel duty and VAT is clearly stated on every gas station forecourt in the land – and we all know who is responsible for that.

and reminding us that back in 2005, Sheikh Ahmad Fahd al-Sabah,OPEC's then president

pointed out that the British Exchequer was taxing fuel at a rate of 75 per cent

This morning's Express stages day 2 of the great fuel swindle reporting that

FUEL duty could be slashed by 12p a litre in the wake of the Government’s tax windfall from soaring oil prices, experts said last night.
A cut would bring much-needed relief to motorists suffering record prices at the pumps.
Petrol and diesel prices are set to go even higher after crude oil yesterday hit 135 dollars a barrel on the wholesale market.