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    Hooray for Oil at Over 100 Dollars?
    By Pascal Riché
    Rue89

    Thursday 03 January 2008

    The price of oil over 100 dollars? But that's very good news, one hears here and there.

    Think about it, explain the advocates of this paradox: expensive oil, it's the beginning of the end of a product that undermines our environment. It's a powerful incentive to change consumption habits; to economize on energy; to invest in solar, wind, biomass, hydrogen; to ship merchandise by rail rather than by truck; to build bicycle paths.... It's the only way to put a stop to the suicidal warming of the planet and to contain the rise in sea level; the surge in prices will succeed there where people have failed. Have people not, in order to save the environment, strung conference upon conference in vain these last thirty years and without any tangible result? Expensive oil is the opportunity to remake the world!

    Those who rejoice this way are perhaps not wrong - in a dream vision of our life in the long term. But be careful not to get too enraptured. For now, reality is far from matching their reasoning.

    First of all, industrialists don't always react to a surge in prices the way one could hope. Rather than changing direction towards new energies, oil groups shift into high gear to drill in ever more distant locations, still deeper, still more dirtily. Thus, Total has just announced a billion euros investment a year in Canadian oil shale sands, the exploitation of which is, according to environmental organizations, highly polluting. "The group is doing practically nothing in clean energy, given its phenomenal financial situation. This strategy is deplorable!" laments Friends of the Earth.

    Then, very concretely, expensive oil has dramatic consequences for the most vulnerable households. In France, it's not just fishermen who are concerned. So are all those who use home heating oil or natural gas for heat, all those who - especially in rural areas - cannot do without their car. For poor families, the increase in oil prices is a nightmare. The government must intervene to help them adapt. Not necessarily by reducing taxes on fuel or gas. The government can also help finance home insulation, purchase of vehicles that use less fuel, solar water heating equipment ...

    In the environmental domain, as elsewhere, no "invisible hand" exists that will resolve all problems through the simple magic of price development. The price of oil, experts assure us, will continue to climb. Before crying, "Hooray for expensive oil," we must assure that governments commit themselves to going along with this change in era by providing the means.

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    Oil and Inequality
    Le Monde | Editorial

    Wednesday 03 January 2008

    All it took was a single transaction between two minor operators for the price of a barrel of oil to briefly cross the historic threshold of 100 dollars Tuesday, January 2, on the New York Mercantile Exchange, the Nymex. One year earlier, a barrel of oil traded for 50 dollars. To describe what economies dependent on oil undergo as a result of this spectacular increase, the image of a vise is undoubtedly more expressive than that of a shock. It's a strong, but progressive, constraint that is being exerted, giving actors some time to adapt.

    Except that not all actors are equal in their ability to adapt. The United States, which consumes a quarter of global crude production, suffers less than you might think from the increase in price, because gas absorbs only four percent of disposable household income, versus six percent in 1980. In Europe, the strength of the euro acts like a shield. For a country like China, which approaches 10 percent of global crude consumption, the enormous foreign exchange reserves accumulated thanks to exports have allowed it to pay the bill without too much difficulty. It's altogether different for developing countries lacking oil resources. According to a recent World Bank study, every time a barrel increases ten dollars, that inflicts a 1.5 percent reduction in the GDP of the planet's poorest countries.

    Rich economies tend to become more virtuous when oil is expensive. They increase their energy efficiency; invest in technologies that make vehicles less greedy. The Environmental Summit in France has benefited from this conjuncture. But poor countries are unarmed. The cars they can buy are not the hybrid models with high mileage that are all the rage in California. Transportation - an essential motor for development - remains massively dependent on oil. Most governments subsidize gas and heating oil: the price increase quickly becomes unbearable for tight budgets, forcing them to cut other essential outlays - housing, education or health.

    In 2005, at the G-8 summit, rich nations committed to reduce poor countries' debt by 50 billion dollars. Now, in 2006, the increase in the oil bill was already 10 times more than the debt reduction. Since, according to all forecasts, the world will have to live for a long time with expensive oil, it is urgent to envision not only transferring innovative technologies that will allow them to conserve energy to the poorest countries, but also supplying them with more financial aid. Who is ready to act along these lines?