From: Patricia-Anne WinterSun (p-aw@pacbell.net)
Date: Sat Sep 23 2000 - 19:22:29 PDT
Date: Sat, 23 Sep 2000 19:22:29 -0700 From: Patricia-Anne WinterSun <p-aw@pacbell.net> Subject: Response to GLOBAL WARMING! Message-id: <39CD6564.72C7F6DF@pacbell.net>
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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. I
f 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@worldwatch.org
Reah Janise Kauffman, Chairman's Office:
(office: 202.452.1999) (home: 703.237.4160) Email:
rjkauffman@worldwatch.org
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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