Politics & economics – Mar 28

March 27, 2006

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China lifts price of domestic oil products

Mure Dickie, Financial Times
China on Sunday announced its first rise in domestic oil product prices in eight months, but promised to soften the blow to farmers, fishermen and urban transportation companies with a new system of subsidies.

…The increases are too small to make up for the steep increase in global oil prices during the past year, but will ease the pain imposed by Beijing’s pricing regime on domestic refiners such as Sinopec, the internationally listed market leader. The commission did not give comparative figures for most state-set petrol and diesel prices, but said Sunday’s move raised the ex-refinery cost of oil products for military use by 5.1-6.8 per cent.

China’s refining sector lost a reported Rmb30bn in 2005, and refiners’ lack of enthusiasm for supplying the domestic oil products market led to severe shortages in some parts of the country last summer. In spite of China’s increasing reliance on imported oil, Beijing has been unwilling to pass price increases on to the pump out of concern over the impact on already hard-pressed farmers and vocal urban groups such as taxi drivers.

Analysts say the gap between market and state-set prices had been becoming increasingly unsustainable, with Beijing forced to give Sinopec a windfall payment of Rmb9.42bn at the end of last year to compensate for its refining losses.
(26 March 2006)


Follow the chopsticks

Editorial, NY Times
China’s relentless economic growth has created severe environmental problems and depleted its natural resources. Its energy demands have contributed to rising oil prices and the gases associated with global warming. So it is heartening when China, the world’s most populous nation, takes steps to curb its appetites. We hope other countries (like the United States) may be similarly inspired.

Last week, Beijing announced plans to raise existing taxes and impose new ones on things like gas-guzzling cars and trucks, and disposable wooden chopsticks. The 5 percent chopsticks tax (a tax that also extends to floor planking) is intended to persuade people to buy reusable and plastic chopsticks in order to slow clear-cutting in Southeast Asia.

Similarly, Chinese officials announced a big jump in taxes on vehicles with large engines, while reducing taxes on smaller vehicles. This follows an earlier directive imposing more stringent fuel-economy standards on all vehicles sold after July 1. Taken together, the moves reflect growing official concern about the rapid proliferation of private vehicles in China.

This is good news for anyone worried about global warming because a big percentage of greenhouse gas emissions come from vehicles. Even with more efficient cars, however, China is expected to be an increasingly heavy producer of those gases because it relies so heavily on coal-fired power plants. The increased gases from these plants are likely to cancel out any savings from automobiles unless some way is found to reduce them.

Still, China is to be commended for using regulatory levers and economic incentives to encourage more efficient cars and trucks. Neither Congress nor the White House has done much of anything to improve the efficiency of this country’s vehicles for the past 20 years.
(25 March 2006)


Chat With Chomsky (remark on oil and Iraq war)

Noam Chomsky, Washington Post
Q from Arlington, Va.: Why do you think the US went to war against Iraq?

Noam Chomsky: Iraq has the second largest oil reserves in the world, it is right in the midst of the major energy reserves in the world. Its been a primary goal of US policy since World War II (like Britain before it) to control what the State Department called “a stupendous source of strategic power” and one of the greatest material prizes in history. Establishing a client state in Iraq would significantly enhance that strategic power, a matter of great significance for the future. As Zbigniew Brzezinski observed, it would provide the US with “critical leverage” of its European and Asian rivals, a conception with roots in early post-war planning. These are substantial reasons for aggression — not unlike those of the British when they invaded and occupied Iraq over 80 years earlier, at the dawn of the oil age.
(24 March 2006)


Vague law and hard lobbying add up to billions for big oil

Edmund L. Andrews, NY Times
It was after midnight and every lawmaker in the committee room wanted to go home, but there was still time to sweeten a deal encouraging oil and gas companies to drill in the Gulf of Mexico.

“There is no cost,” declared Representative Joe L. Barton, a Texas Republican who was presiding over Congressional negotiations on the sprawling energy bill last July. An obscure provision on new drilling incentives was “so noncontroversial,” he added, that senior House and Senate negotiators had not even discussed it.

Mr. Barton’s claim had a long history. For more than a decade, lawmakers and administration officials, both Republicans and Democrats, have promised there would be no cost to taxpayers for a program allowing companies to avoid paying the government royalties on oil and gas produced in publicly owned waters in the Gulf.

But last month, the Bush administration confirmed that it expected the government to waive about $7 billion in royalties over the next five years, even though the industry incentive was expressly conceived of for times when energy prices were low. And that number could quadruple to more than $28 billion if a lawsuit filed last week challenging one of the program’s remaining restrictions proves successful.

“The big lie about this whole program is that it doesn’t cost anything,” said Representative Edward J. Markey, a Massachusetts Democrat who tried to block its expansion last July. “Taxpayers are being asked to provide huge subsidies to oil companies to produce oil – it’s like subsidizing a fish to swim.”

How did a supposedly cost-free incentive become a multibillion-dollar break to an industry making record profits?
(27 March 2006)
Comment by peakguy at The Oil Drum (NYC).


Energy a concern at UK Aussi forum

The Economic Times (India)
CANBERRA: The leaders of Australia and Britain joined forces on Monday to warn that the growing energy needs of emerging economic giants India and China represented a key strategic challenge for the years to come.

“The emergence of China and India is making a difference, not only to the issue of globalisation but to the question of how we ensure that those countries can grow sustainable but also meet their energy needs in doing so,” British prime minister Tony Blair said in an address to the UK-Australian Leadership Forum in Canberra.

Blair said China was virtually building a new coal-fired power station every month to meet its soaring energy needs.

“It is an incredibly rapid rate of development in the energy sector as a result of the need to develop their economy and that is putting pressure on the world’s energy supply,” he said. “Exactly the same is happening with India.”

Blair said the issue was on the agenda of every policymaker in Europe and around the world, trying to “meet the energy needs of those two emerging economies … in a world of more scarce energy supply.”

Australian prime minister John Howard, speaking to the same gathering of Australian and British officials and business leaders, said the centre of gravity of the world’s middle class was shifting away from Europe and North America to India and China.
(27 March 2006)


Tags: Geopolitics & Military, Industry