reuters.com Wed March 12, 2003 05:32 AM ET By Richard Mably

LONDON (Reuters) - Spare OPEC oil production capacity has been squeezed to just half the volume of Iraq's exports, exposing world markets as war looms, the International Energy Agency said on Wednesday.

In its monthly Oil Market Report, the IEA said that production increases over the past two months had left effective spare capacity in OPEC now of just 900,000 bpd on the 78-million-bpd global market.

"This is less than the potential loss of supply in the event of war in Iraq," said the Paris-based IEA, adviser on energy to 26 industrialized nations.

Iraqi supplies, running at 1.7 million barrels a day over the past month, are expected to shut should the United States launch an assault against Baghdad. In addition, Kuwait has said it may need to suspend as much as 700,000 bpd as a safety precaution during war.

"The market is heading into a period of heightened uncertainty with low stocks and limited spare production and shipping capacity," the IEA said.

The cold spell in the United States this winter cut commercial inventories by the end of January among its member countries to 50 days of forward demand, five days less than a year ago, the IEA said.

Its report calls into question OPEC's claims that it has some three million barrels a day to hand in case of a U.S. attack.

The cartel agreed at a meeting on Tuesday to keep production limits unchanged for the time being and said in a communique it would take prompt action if needed to ensure stable supplies.

The pledge was received well on oil markets and crude prices fell. U.S. light crude on Wednesday was off another 42 cents at $36.30 a barrel.

Most of OPEC's spare capacity is held by its biggest producer Saudi Arabia, but the IEA disputed Saudi claims to be able to pump 10 million barrels a day straight away.

The agency projected Saudi capacity at 9.5 million barrels daily in the second half of March, giving it just 400,000 bpd spare.

Riyadh was likely to lift capacity to 9.7 million bpd in April and 10 million bpd in May, it forecast, but still short of the 10.5 million bpd Saudi says it can pump at 90 days notice.

The IEA report said OPEC's spare cushion had shrunk from 3.3 million bpd in November. It estimated production rose by 1.5 million bpd in February to 27.18 million as Venezuela restored output after a strike and others opened the taps.

news.ft.com By Toby Shelley Published: March 12 2003 9:21 | Last Updated: March 12 2003 9:21

The oil market remained on a knife edge with tight stocks and low surplus capacity meaning war against Iraq could tax the ability of the system to cope, said the International Energy Agency.

In its monthly oil market report the Organisation for Economic Co-operation and Development's energy security watchdog said that excluding Iraq and Venezuela, effective spare production capacity is 900,000 barrels a day. This is well below Iraq's export volume.

The IEA cautions that any notional spare capacity in Venezuela has to be discounted while the country rebuilds output after two months of disruptive strikes against the government.

However, the report notes that a seasonal drop in global oil demand is only weeks away as the northern hemisphere winter draws to an end. The 1.6m b/d quarter-on-quarter fall in demand translates into a lower "call" on Opec members for crude, so boosting their available spare capacity. The lower call on Opec "has the potential in itself to offset current oil-for-food exports".

But that raises concerns for Opec members, the report notes. If Venezuela rebuilds output more rapidly than forecast and war against Iraq is launched later than has been expected, the market would be oversupplied and prices would collapse.

In February world oil production surged by 1.96m b/d, 1.5m b/d of which came from Opec. Some 850,000 b/d came from Venezuela as it ramped up output. Industry stocks fell 44m barrels and provide forward cover of 50 days, 5.5 days less than this time last year.

The IEA said its forecast for 2003 demand for oil is unchanged at 78.01m b/d.

www.energypulse.net 3.13.03   David Marvin Regen Jr., Marketing Director, Energy Systems, Inc.

More Articles By This Author It is time, once again, to pit American ingenuity and resolve against outmoded ways of living which have left our shores vulnerable. We are rapidly reaching the limits of our energy supplies and more world conflict will surely revolve around this issue. We speak of funding terrorism through energy dependency, but here is the irony. We have had solutions in our midst for decades. Many a direct result of our historic investment in the space program. A larger understanding shows that public policy should reflect the connection between energy, environment, economics, and national security. Most importantly, we have a profound opportunity to shape a better future at the local level, by insisting on energy accountability in building contracts for public construction.

The United States has had the technology and engineering standards necessary to design and build super energy efficient buildings since the early days of the space program. If we had transferred what we learned then to the realm of building energy performance as an industry standard practice, our general state of affairs could be much different. There might be no energy crisis because twice as many homes and three times as many commercial buildings could be operating off the same electrical supply. Or conversely, each 10,000 square feet could reduce coal burning by 100 tons per year from the amount now burned to create the electricity to condition that same space. These may sound like outrageous claims, but all conclusions are based on commercial buildings that have existed for years and utility bills of record. But first lets look at a history of near misses in trying to bring energy accountability to the American people.

Apollo and the Oil Embargo were the first harbingers of modern self-sustainable architecture for all. During that time, President Jimmy Carter directed the Department of Energy to create better standards for energy performance in new buildings. These long forgotten programs could have been an ideal marriage of public policy with the needed supporting technology. But energy accountability as standard practice was never adopted in the private sector and we now are faced with all the same problems thirty years later but worse. After Carter was gone and with no oil crisis, later administrations failed to see the strategic importance of these programs. America missed an historic opportunity to bring energy accountability to this industry. As a result, commercial buildings erected in the last three decades use at least four times more energy to heat and cool because advanced energy performance initiatives were never implemented.

Once we embrace energy accountability, it returns billions of dollars to the economy and eliminates billions of tons of air pollution. The challenge is how to replace "prescriptive standards" used for specifications on insulating, heating and cooling of a building with "performance engineering standards" from the aerospace industry. Robert Southerlan, an aerospace engineer during the Apollo years, accomplished these decades ago. His engineering approach to energy efficient buildings was the model adopted by the TVA program known as “Watt Count” for Residential Homes. "Spin-Off" magazine, a NASA publication, recognized Watt Count for its achievements in energy accountability in 1981.

If TVA had ever instituted a Watt Count for Commercial Buildings, the Southeast might be a much different place. What if TVA had helped build several thousand super energy efficient commercial buildings during the 1980's? They would have come under intense scrutiny as the performance data generated by the accountants was shared with the executive decision-makers in the boardroom. Local Governments and School Boards would have seen that certain buildings and schools operated at half the cost. Commercial Real Estate executives would have seen that certain buildings generated twice the profit per square foot of other buildings in their portfolio. This information would have been there to bug these people year after year with each subsequent report. Any discussion of budget crunches or income taxes would serve as another painful reminder. This could have started a new mandate from the consumer.

The main market barrier to energy efficiency is how the low bid process works in the awarding of a building contract. The low bid system virtually guarantees higher operational costs and therefore a more expensive building to own over time. It is impossible to determine the true cost of owning a building unless capital cost for construction is combined with projected operating costs. This is something the industry is not accustomed to doing and those letting contracts are not accustomed to asking for, yet most states have laws encouraging them to do so. All future public-building contracts should be required by law to include an energy accountability specification in the bid. This is where self-sufficiency must start.

To gain market acceptance over doing something a little different, Bob Southerlan also saw the need to guarantee the energy use of a building to the owner before construction. If building energy use is more than 10% over the projected figures, a warranty bond pays the difference. His designs consistently exceed specifications, in part, because he is in control of both insulation and mechanical design. This holistic approach to building design was trademarked as the Synergy System by his company Energy Systems, Inc. It makes evaluating the thermodynamics of a building and accurately predicting its energy use much easier. This is the first step for super energy efficient building design. Quality control and oversight procedures used by general contractors and engineers ensure that mechanical & insulation subcontractors follow the architect’s specialized installation specifications. Other obstacles to energy efficiency are antiquated building codes, which are now decades behind the available technology. Codes stifle and prevent full utilization of products and methods that could dramatically lower energy use. Yet, there are still cases of significant gains in energy performance. These are two examples:

The 640 Spence Lane Office Building is a 20,000-sq./ft commercial building in Nashville, TN. It has used less than $100 of natural gas to heat the building each year for the last two decades. It was the focal point of a "comparative energy use study" by TVA with 13 other area office buildings of same approximate size and use in 1984. It received a National Award for Energy Innovation from the DOE. It also received a first place prize from ASHRAE, (American Society of Heating, Refrigeration & Air-conditioning Engineers), in their national energy awards competition as a commercial building entry. The property owner was initially attracted because an economy of scale was reached (20,000 sq./ft) where the extra cost of the thermal envelope insulation was offset by an equal savings in HVAC mechanical systems. Since first capital costs were the same as competing bids from conventional contractors, the property owner chose the Synergy System and enjoyed an immediate return on investment. The dollar value of energy savings turned out to be equal to his profits from leased office space. Because the heating cycle only activates when the outside temperature is below 18 degrees F, this building has rarely used its gas heat source since it went on line. Imagine how this type of construction would impact heating oil consumption in the Northeast winter.

Twenty years later we have Boles Hall, an administrative office building at Centre College in Danville, KY. Energy Systems, Inc. designed the insulation/mechanical systems. This building is more than twice as energy efficient as the Spence Lane Building. Boles Hall costs about seven cents per square foot per year to heat and cool. This may be the most energy efficient building on the planet that uses no renewable energy technology like solar or geothermal. The economic impact of these buildings is over a dollar per square foot per year. What would it mean if all the school buildings built in the last 20 years could operate in a similar manner? Most school buildings range between 80 cents to 2 dollars per square foot per year to heat and cool. DOE figures energy costs for schools at $6 billion per year. DOE estimates are 25% savings on retrofit programs. Through new construction $6 billion dollars in energy costs could be reduced to one.

If we wish to examine the effect of entire communities built exclusively with energy performance standards, we could compare two identical communities with identical power plants on separate grids. One could be built entirely with the above mentioned performance standards and the other not. If the conventional community saturates the electrical supply when 1,000,000 homes and 100,000 commercial buildings are on-line, the energy performance community could continue to build 1,000,000 additional homes and 200,000 more commercial buildings before an equal electrical demand would exhaust the same supply. With such a large customer base, the utility can raise the price of electricity and increase profits with minimal economic impact. If both are building at the same rate, the performance community will have a much flatter growth curve on the demand side which makes long range planning much easier. The utility in the other community must instead spend millions to upgrade capacity at a much faster rate.

Self-sustainable architecture is the only realistic across-the-board Risk Aversion Strategy for the ratepayer. There are so many things that can cause a sudden electrical price hike in any given service region at any time. Drought has doubled the price of electricity in Prairie states. This will be catastrophic for many small business owners. Southern ratepayers and not TVA, will soon be footing the bill for environmental clean up. Or maybe you just live in California. Shall we count the ways? In the brave new world of deregulation and energy trading, endemic problems can have a systemic ripple effect. We are only one major event away from finding out. The economic impact of this risk aversion grows in parallel to the price of energy. Therein lies the beauty, no one is immune, and therefore everyone can benefit.

Environmental impact can be defined in tons of coal per year per square footage. Coal burning steam plants represent the main energy source of electrical production in America. If every building erected over the last three decades had these energy standards, there would be an average reduction in coal burning of 100 tons per 10,000 square feet per year. Global warming can not be solved without a group effort at the user end and cooperation from energy suppliers. Here people of Western New York have an additional opportunity to change their world by adding a few extra dollars to their electric bill. The ratepayer can choose to help fund capitol improvements to various renewable energy programs. Now that sounds like a future. While in the Southeast, TVA must spend the same amount to clean up environmental damage from strip mining coal as they spent to build the coal fired steam plants in the first place. Now that sounds like irony.

Building a self sufficient America can’t be done overnight but it can be done in one generation. Lets call it a 100-year plan, because by then there won’t be any oil left in Iraq anyway. There is no other industrial sector that could create more immediate jobs, both skilled and unskilled, than a massive federal building program. The performance engineering that begins here would certainly become an industry standard practice. And this could lead to one of the greatest economic booms in American history. One that would bring lasting rewards to those (taxpayers and property owners) with a stake in the American dream. Self-sufficiency by design is fundamental to maintaining a high standard of living, if not our survival as a species. The technology exists. All you have to do is ask for it.

Contact The Author Email the author Phone: 615-292-9382

www.euobserver.com

GIACOMO FILIBECK - "It is becoming clear that the United States is making a political and strategic mistake. In the end, this could be fatal for the West, destroying a necessary alliance between the democratic countries of the Northern Hemisphere, and fatal for the entire Middle East."

EUOBSERVER / SALT&PEPPER - The events these past few days have raised fears among some that barely a decade after the collapse of the Berlin Wall, the West will become divided into two new new blocs: an anti-American bloc and an anti-European bloc. I do not believe this to be a real prospect. The dispute between the US administration and certain European governments does not greatly involve the peoples of the two sides who are often critical of their own governments.

In an editorial on 9 March, the largest newspaper in the United States, the New York Times, clearly spoke out against an armed intervention in Iraq without the legitimate backing of the UN. The daily also published an article by former US President and winner of the 2002 Nobel peace prize Jimmy Carter who vigorously defended the stance that an attack that was not under the auspices of the United Nations would constitute a violation of international law. It would also be unprecedented in the history of civil nations and contribute to the decline of American prestige on the international scene.

Infatuation with power This reading of recent events is undoubtedly a reply to the analysis of the Democrats that is today shared by a large portion of US public opinion: for them, a unipolar, hegemonic and authoritarian system cannot produce the correct results in terms of achieving peace and democracy around the world. On the contrary, a system like this damages America’s soft power, which until now has been a successful weapon of the United States in international relations.

The true error of the George W. Bush administration from this point of view would be its infatuation with power. The illusion of the empire (hard military and economic power) would make it blind to the need to find solutions with the international community in order to achieve political stability, economic growth and democratic values.

There is no doubt that the painful events of 11 September have affected the policies of the US administration. The now famous "National Security Strategy" presented by President Bush to Congress on 17 September 2002 is extremely clear. America is facing a new and extremely serious challenge. On the one hand international terrorism is penetrating open and democratic societies, using against them modern technologies (that they themselves have produced). On the other hand, the anti-American rogue States are supporting terrorist networks, offering them hospitality and funding and through them waging a non-conventional war against the "Evil Empire".

The wrongs of preventive war In the face of instruments of mass destruction made possible by new technologies and suicide fighting techniques, it would appear impossible for a society open to the movement of goods, people and capital to fight terrorism, leaving it vulnerable to new disastrous attacks. Therefore, the preventive war would be the only possible way of defending one’s own territory and one’s own cultural model. The new and extremely dangerous corollary of this theory is, however, unilateralism whereby if the United States decides an armed intervention it can intervene regardless of the consensus of the United Nations, in contempt of international law and in total disagreement with international public opinion.

There is also another extremely weak element in the theory of preventive war: nowhere is there a direct strategy to get to the root of international terrorism, which finds fertile ground in the despair and poverty of the countries of the Third and Fourth Worlds. Today, a quarter of the world’s population consumes three quarters of the energy, food and natural resources available on this planet. The gap between North and South continues to grow, and new countries end up being sucked into the whirlpool of poverty (witness what is occurring in Argentina and Venezuela).

Snowball effect In this context, as many analysts have already underlined these past few weeks, a unilateral intervention by the United States in Iraq, with the consequent dissolution of the Iraqi State, would probably have a snowball effect and lead to more instability in the Middle East. It could further antagonise the Israeli-Palestinian conflict (already there have been dramatic first signs of this), feed fundamentalist terrorism, weaken moderate Arab governments, trigger migrations and produce a crisis in oil production.

It is therefore becoming clear that the United States is making a political and strategic mistake. In the end, this could be fatal for the West, destroying a necessary alliance between the democratic countries of the Northern Hemisphere, and fatal for the entire Middle East, destroying once and for all the legitimacy of the international institutions and their peace-keeping role. Also, it is becoming obvious that an alternative solution has to be found together with an international interlocutor capable of implementing it in the eyes of the US administration. However, as the situation stands, neither one exists.

A new Marshall Plan As regards Europe, the position taken by France, Germany and Belgium of opposing US intervention gives expression to the will of international public opinion but looks doomed to fail, because alone these countries are unable to express a Middle East foreign policy different from that of the United States. Such a policy should clearly be based on a plan of economic aid and investment, support for local production, education and social development, through the added value of international solidarity, and all this with the purpose of exporting democracy to create peace: in short, a new Marshall Plan.

The radical change in American foreign policy and the consequent Iraqi crisis have occurred at a time when the countries of Europe still do not have the instruments for a common foreign policy. In this way, the EU countries have reacted according to their own national interests, with the result that the total of individual diplomacies has not produced a common position. France’s resistance in the UN Security Council and its heightened opposition to the position of the United States have brought to the fore the paradox of a powerless Europe.

American unilateralism is in fact the product of the political inconsistency of the European Union and its incapacity to propose diplomatic alternatives to the United States’ stance. The uncoordinated national diplomatic efforts of the individual European states express nothing other than an empty game of power and sovereignty, incapable of producing any concrete result. On the other hand, there where a result could be expressed, at the level of the Community institutions, a democratic government of the Union responsible for foreign and security policy is lacking.

Citizens in charge of own destiny And this is what 80% of the Union’s citizens, many of whom demonstrated through the streets of Europe on February 15, are calling on the Convention to create. A European government would have the diplomatic strength to launch a Marshall Plan for the Middle East that brings with it development, peace and democracy and that guarantees disarmament. The Union’s citizens know that they will be in charge of their own destiny only when Europe speaks in the world with a single voice.

They also know that by maintaining sovereignty for foreign affairs, Europe’s individual states are dooming themselves to division, subordination and decline. Europe’s citizens know the paradox of a powerless Europe that is leaving Europe without the capacity to act: only Europe’s leaders seem deaf to their requests and blind to the needs of the world.

The only hope is that the Convention will be able to see what the governments are not seeing and will listen to the voice of European citizens. If this occurs, the lessons of these past few days will not have been in vain and will write an important page in history. It takes courage, the courage that Europe’s citizens are asking the members of the Convention to have.

Join the debate

GIACOMO FILIBECK - President of the European Youth Convention and of the European Youth Forum Website  European Youth Forum  European Youth Convention     Written by Giacomo Filibeck Edited by Honor Mahony

seattlepi.nwsource.com Wednesday, March 12, 2003 By STEVEN FRIEDERICH SEATTLE POST-INTELLIGENCER REPORTER

OLYMPIA -- State lawmakers yesterday quizzed oil industry officials about the spike in gas prices and were told petrol could cost even more at the pumps this summer.

In the Seattle area, drivers paid an average of $18.52 to fill 10-gallon gas tanks with regular unleaded gas on Friday, compared with $12.14 a year ago, according to the most recent data from AAA.

The direct out-of-pocket pinch consumers are feeling is the reason legislators held a work session on current oil and gas prices. Another hearing -- with public comment -- is scheduled for Friday.

"People expect the price of everything to go up," Rep. Laura Ruderman, D-Kirkland, told a spokesman from a petroleum association. "It was $1.35 at the cheap station near my home; as of Friday it's $1.81. That looks like a spike. The thing that's changed is you are taking advantage of the increased war talk."

Ruderman put it simply, "Tell me how to tell my constituents that price is reasonable."

Industry officials blame some of the price run-up on tensions with Iraq and the labor dispute in Venezuela, which is settled but continues to hamper supply.

Anita Mangeles, of the Western States Petroleum Association, told legislators that demand is higher than supply right now.

"Iraq has not a thing to do with this," countered Tim Hamilton, spokesman with the Automotive United Trades Organization. "I believe we'd be here today if we shot Saddam and installed the pope."

Hamilton warns that gas prices could even go higher. Typically, the winter months see the lowest spike of gas in the year, but that wasn't the case this year. And summer months see as high as a 50-cent burp.

"Why have prices gone up? In a word: Crude," she said. "Crude oil costs have doubled to $37.77 now compared to $18.00 last year."

Competition also keeps gas prices down. For example, Rep. Richard DeBolt , R- Tacoma, said a gas station in his district charges $2.05 just because it's a mile off the freeway.

FOR MORE INFO To read AAA's latest information on gas prices, go to www.fuelgaugereport.com