OIL

WORLD IMPACT  Every $10-a barrel rise in oil price subtracts $300 billion from the world economy, even after the transfer of payments. –USNWR 1/10/2005 pg. 47

INCREASED COSTS  Rising cost in manufacturing –Plastics, Heating….  Transportation: trucking, airlines…  More efficiency –Additional cost –Good long term

THE ECONOMY  Consumer Spending accounts for 70% of U.S. economy BW 11/25/02 pg. 34  U.S. needs over $2 billion of foreign investment per day  1 of 10 barrels of oil produced in the world are for U.S. cars NPR News 4/5/05  Americans own 1.2 vehicles, EU=.6 FT 8/17/02  In ’98, 17 Bil. catalogs were distributed – 64 per every man, woman & child. DP 2/7/01  Computer generates 140 lbs. of solid & hazardous waste and 7,000 gallons of wastewater in its manufacture. USNWR 6/25/01

THE U.S. DOLLAR  Oil is priced in $U.S.  With weak $, oil producers are tempted to raise prices to offset weak $.  U.S. imports nearly 60% of oil it consumes, rise in oil price widens the trade gap.  Trade deficit tends to push down $.

OIL CURSE  Venezuela, Nigeria, Azerbaijan, Equatorial Guinea, Colombia…  Poor sharing of resources –Lack of infrastructure –No diversification –Corruption –Coup attempts

CRESCENT OF INSTABILITY  By 2030 OPEC is projected to supply more than half the world’s oil (up from 35% now) USNWR 1/10/2005 pg. 51  Saudi Arabia, Iran, Iraq, Russia, Libya, Nigeria, Venezuela, Algeria  Where will China get its oil?  Terrorists have I.D.’d oil as Achilles heel of U.S. and Western economies

COST OF INSTABILITY  Extraction, Transportation, Processing  Saudis have 30,000 guards  Kidnapping, Government Blackmail  Environmental Damage

THE MIDDLE EAST  Political Stability - Tribal allegiance  United Arab Emirates imports 100%, Kuwait & Qatar 98% of its food.  Saudi: King, Crown Prince, Defense, Foreign and Interior Ministers are all brothers.

VENEZUELA  Venezuela supplies one seventh of U.S. imported oil. By some measures, it is U.S. leading foreign source of crude. Fortune 10/3/2005 pg. 30

CITGO  CITGO has 14,000 service stations  CITGO is among US biggest gasoline providers.  CITGO is owned by Venezuela’s national oil company.  Chávez subsidizes cheap oil to dozens of Caribbean nations, including Cuba.

Rafael Ramírez  Forced renegotiations of operating agreements – from 34%, tax will increase to 50%. Operating agreements will become JV’s with Venezuela controlling at least 51%.  Tar sands royalties on each barrel are being raised from 1% to nearly 17%.  Oil companies are accused of cheating on taxes and will be charged back-taxes. Fortune 10/3/2005 pg. 30

How far can I bend over? Sean Rooney, Head of Shell Oil, Venezuela  “The government of Venezuela is auditing the majority of oil companies’ returns. We were lucky enough to be the first.”  The Venezuelans can and will be extracting higher rents, and we accept that. We are prepared to pay more when the opportunity merits.” Fortune 10/3/2005 pg. 30

Branding & Perceptions  US has made more than 170 mostly uninvited visits to Latin America in last two centuries.  US aided overthrow of democratically elected Allende in Chile with a military dictator  US removed Panama’s Noriega  45 years of sanctions on Cuba  Reverend Pat Robertson advocates “taking Chávez out”

Operation Miracle - Branding  Cataracts and similar eye conditions are prevalent in the Caribbean.  Cuban doctors examine potential patients in Venezuela. Those chosen are flown to Cuba along with a companion, and receive food, accommodation and treatment free of charge.  Money comes from a social fund generated by oil.  Cuban surgeons perform as many as 1,500 operations a day in 14 locations throughout Cuba.  M,W,F: aircrafts from Belize, Th: San Vincente & Dominica, Sat: Granada, Antigua…  Headlines: “I can see again” FT 10/21/05 pg. 6

THE NEW AGE  THE WORLD HAS ACHIEVED BRILLIANCE WITHOUT CONSCIENCE. OURS IS A WORLD OF NUCLEAR GIANTS AND ETHICAL INFANTS. –General Omar Bradley