Growing U.S. Need for Oil From the Mideast Is Forecast
By JEFF GERTH
WASHINGTON Dec. 25 — As President Bush seeks to reduce American reliance on oil imported from the Persian Gulf, new government studies predict that in two decades the West will be even more dependent on oil from Saudi Arabia and other Middle Eastern producers.
Mr. Bush, asked a week ago on the ABC News program "20/20" about the importance of Saudi Arabian oil, said that "we must have an energy policy that diversifies away from dependency" on foreign sources of oil — including some that "don't like America."
Late last month, the Department of Energy's Energy Information Administration forecast that in 2025 the majority — 51 percent — of world oil production would come from the Organization of the Petroleum Exporting Countries. About two-thirds of OPEC production, in turn, emanates from the Persian Gulf. The Energy Information Administration, or E.I.A., says OPEC now produces 38 percent of the world's oil.
The information administration projects that Saudi Arabia will need to produce 22 million barrels a day by 2020 to meet increased world demand, far in excess of its current production of about 8 million barrels.
"We're going to rely more and more on the Middle East markets for oil," said Fatih Birol, the chief economist for the Paris-based International Energy Agency, or I.E.A. The group's recent World Energy Outlook, which estimates energy markets through 2030, mirrors the forecast of the American energy agency.
Government and industry oil experts widely agree that it makes sense for the United States to diversify its sources of energy. It is also possible that in the next decade increased oil from the Atlantic Basin and the Caspian Sea could make a short-term dent in American dependency on the Middle East.
"Our dependency on the Persian Gulf could take a slight dip before it goes up," said John Brodman, the deputy assistant secretary of energy for international energy policy. "But the basic geological fact of life is that 70 percent of the proven oil reserves are in the Middle East."
The importance of Saudi Arabia to long-term oil markets is different from its ability to produce extra oil quickly — an ability sometimes referred to as surge capacity. If oil markets were disrupted by a war in Iraq or strikes in Venezuela, only Saudi Arabia could increase its production within a few months to fill the gap.
The new forecasts highlight a fundamental quandary facing the United States: American dependence on Saudi oil limits the strategic options of the United States even as relations between the United States and Saudi Arabia have been strained since the attacks on Sept. 11, 2001.
President Bush's national security strategy, released in September, aimed to "enhance energy security" by having the United States work with allies to "expand the sources and types of global energy supplied, especially in the Western Hemisphere, Africa, Central Asia and the Caspian region."
The strategy did not mention the Persian Gulf region, which figures so prominently in the latest forecasts.
The ability of countries like Saudi Arabia to increase their production significantly is by no means a certainty. The Energy Information Administration estimates assume that "sufficient capital will be available to expand production capacity."
Furthermore, some oil experts question whether the region's old fields will be up to the task.
"The giant and supergiant oil fields are getting old, and some are clearly dying without being replaced," said Ali Morteza Samsam Bakhtiari, a senior official in the National Iranian Oil Company. In an e-mail message sent from Iran, he questioned whether Saudi Arabia was capable of reaching 22 million barrels a day and said it would take "a miracle for OPEC to ever achieve a production of 50 million barrels per day (or more) as all three major institutions — I.E.A., E.I.A. and OPEC — are predicting for 2020."
Latin American market roundup
December 25, 2002
RIO DE JANEIRO, Brazil, Dec. 25 (UPI) -- Stocks were mostly up across Latin America in this abbreviated holiday week of trading. In Brazil, soothing moderate statements emanated from the president-elect, while Argentina saw fresh hopes for multilateral aid.
Brazil's President-elect Luiz Inacio Lula da Silva completed his Cabinet this week, with appointments spread throughout the myriad political parties in the country. This, coupled with repeated statements from the future minister of finance and central bank president in regard to fighting inflation, keeping spending in check and continuing debt payments, has cheered investors.
Brazil's currency -- the real -- has gained about 8 percent since mid-December, further bolstering the market. Investors, while aware that Lula -- as the president elect is known -- has much to prove once he takes office on Jan. 1, are nevertheless confident that the worst of the country's economic turbulence is behind it.
The biggest worry for investors in Brazil has been the country's massive $230 billion debt, much of which is linked to floating interest rates and the dollar. Fears of an imminent default have lessened -- though by no means dissipated -- as currency gains alleviate the debt burden, or at least slow its growth somewhat.
Markets in the country have so far given a vote of confidence to Lula. Since his Oct. 27 election, the main stock index is up 15 percent, the currency has added 6.2 percent and the benchmark bond due in 2014 grew 17 percent.
Over in Argentina, investors were relieved by word from the International Monetary Fund that a transitional aid package may be on the way. The country has been negotiating for more than a year to have aid resumed.
A statement from the U.S. Treasury lending support to the idea of a temporary aid package to see Argentina through elections next April helped the market move upward. The statement noted that an agreement was expected sometime in January.
But the Clarin newspaper reported Tuesday that Argentina will have to weaken its foreign exchange controls if it hopes to the new IMF aid. The government imposed limits on how much money individuals and corporations alike can send abroad in an effort to bolster foreign reserves.
The IMF wants companies to have the freedom to send money outside of Argentina in order to service their debts. While a seemingly reasonable request, the issues is a politically sticky one with Argentine lawmakers.
The biggest corporate news of the week came as Mexico's Coca-Cola Femsa bought Panamerican Beverages, Latin America's largest soft-drink bottler, in a $3.6 billion deal.
Coca-Cola Co. in Atlanta owns 30 percent of Coca-Cola Femsa.
The new company, which will operate under the Coca-Cola Femsa name, will become the world's No. 2 bottler of Coke products, and its biggest bottler outside of the United States.
The move significantly bolsters Coca-Cola's distribution network in Latin America, where its sales have slumped of late. The buy also gives it a stronger presence in the key Latin American markets of Brazil, Mexico, Argentina and Venezuela, as well as some Central American countries.
As for the markets, Brazil's Bovespa stock index ended last Thursday up 2 percent at 11,207. The local currency had gained more than 6 percent since the beginning of the week, cheering investors.
Friday brought a healthy 2.5 percent jump to 11,207 for the index. Investors were bullish on comments from the Lula camp about fighting inflation. Fixed-line phone company Telemar gained 2.3 percent, while oil company Petrobras added 3.2 percent.
On Monday the Bovespa lost 0.2 percent to close at 11,470. The country's largest private bank -- Bradesco -- lost 2.5 percent. The Bovespa was shuttered on Tuesday as well as for Christmas on Wednesday.
In Mexico, the IPC index ended last Thursday 0.5 percent up at 6,120, shrugging off losses on Wall Street. The index then rose Friday to 6,131. Wireless operator America Movil added 2.1 percent.
Monday brought a gain of 0.4 percent to 6,153 for the IPC. Bottler Coca-Cola Femsa, though, lost 3.8 percent after it announced plans to purchase Miami-based Panamerican Beverages. On Tuesday, the IPC lost 0.3 percent to end at 6,151. Coca-Cola Femsa gained back slightly, rising 3.17 percent. But retailers were hit hard, as sluggish sales soured investors. Elektra lost 3.5 percent. The market was closed Wednesday.
Argentina's Merval index rose 1.74 percent to 496 last Thursday on hopes for new IMF aid. On Friday, the one-year anniversary of the resignation of former President Fernando de la Rua, the index gained 1.57 percent to 503.9.
Monday saw the Merval rise 3.35 percent to 520.8 after the late Friday announcement that the IMF was considering a transitional aid package. The index then added 0.5 percent to 523.9 on Tuesday, with utilities gaining nicely. Electricity company Central Puerto added 4 percent, while oil company Perez Companc gained 0.9 percent. The Merval was closed Wednesday.
In Chile, the IPSA index rose 1.2 percent to 85.05 Thursday. The index then dropped to 84.92 Friday. Monday saw a gain of 0.2 percent to 85.15, while Tuesday brought a loss of 1.11 percent to 84.19.
Venezuela's markets were closed for the week as a general strike paralyzed the country. The markets last traded on Nov. 29. Protesters are seeking the ouster of President Hugo Chavez, blaming him for the economic woes of the country.
Venezuela's opposition tones down demand for Chavez to quit now
Opponents of Venezuela's embattled leader Hugo Chavez have apparently toned down recent demands for his immediate ouster.
The opposition has revived previous calls for Mr Chavez to call for elections if he loses a referendum they want planned for February.Advertisement
Opposition leaders said massive street protests and a crippling four week old general strike clearly showed that the people wanted Mr Chavez to resign.
"Accept that if you lose it you should call general elections within no more than 30 days. And we, who have confronted you with a general civic strike will get the country moving," said strike leader Carlos Ortega.
Venezuela's opposition tones down demand for Chavez to quit now
Opponents of Venezuela's embattled leader Hugo Chavez have apparently toned down recent demands for his immediate ouster.
The opposition has revived previous calls for Mr Chavez to call for elections if he loses a referendum they want planned for February.
Opposition leaders said massive street protests and a crippling four week old general strike clearly showed that the people wanted Mr Chavez to resign.
"Accept that if you lose it you should call general elections within no more than 30 days. And we, who have confronted you with a general civic strike will get the country moving," said strike leader Carlos Ortega.
Venezuelans spent Christmas still in the grip of a general strike now in its fourth week.
The walkout has crippled the vital oil sector, prompting government warnings strike organizers could face criminal charges.
Scarce fuel supplies meant many Venezuelans have had to cancel family reunions.
The strike has so far cost the state oil monopoly US$1.3 billion, with world prices edging above US$31 a barrel.
Caracas entered Christmas Day with an eerie calm, as strike leaders told protesters to rest and prepare for new, massive rallies.
But protestors still gathered in one of the city's largest squares to press their demands for Mr Chavez to step down.
In a gesture for reconciliation, the president issued a message of goodwill to his countrymen to mark the festive season.
He still refuses to quit and has vowed to beat the strike and take control of the state oil company.
His foes are equally as determined to keep it shut down until he leaves office.
Both sides are due to resume internationally mediated negotiations later Thursday.
The government has made it clear it would maintain a tough stance at the talks.