September 17th, 2008
No Oil for Blood; Thanks to three American senators, China will be pumping Iraqi oil.
Let’s see, I think these companies use equipment made by U.S. manufacturers? And don’t forget, they also pay taxes!
by Frederick W. Kagan
09/16/2008 3:15:00 PM
This morning, I had the honor of testifying before the House Budget Committee on the situation in Iraq. The discussion was polite and civilized, and was a reminder that even now it is possible for people who disagree about what to do in Iraq to argue without raised voices and disagreeable language (apart from the Code Pink women, yelling for those who think that shouting opponents down is preferable to arguing with them). Congressman Brian Baird once again demonstrated that it is possible even for those who bitterly opposed the war to recognize the importance of doing the right thing now–as well as the possibility of crossing the Republican-Democrat sectarian divide on this issue. One question came up repeatedly in the hearing that deserves more of an answer than it got, however: Why, after all the assistance we’ve given to Iraq over the past five years, was the first major Iraqi oil deal signed with China and not with an American or even a western company? The answer is, in part, because three Democratic senators intervened in Iraqi domestic politics earlier this year to prevent Iraq from signing short-term agreements with Exxon Mobil, Shell, Total, Chevron, and BP.
The Iraqi government was poised to sign no-bid contracts with those firms this summer to help make immediate and needed improvements in Iraq’s oil infrastructure. The result would have been significant foreign investment in Iraq, an expansion of Iraqi government revenues, and an increase in the global supply of oil. One would have thought that leading Democratic senators who claim to be interested in finding other sources of funding to replace American dollars in Iraq, in helping Iraq spend its own money on its own people, and in lowering the price of gasoline for American citizens, would have been all for it. Instead, Senators Chuck Schumer, John Kerry, and Claire McCaskill wrote a letter to Secretary of State Rice asking her “to persuade the GOI [Government of Iraq] to refrain from signing contracts with multinational oil companies until a hydrocarbon law is in effect in Iraq.” The Bush administration wisely refused to do so, but the resulting media hooraw in Iraq led to the cancellation of the contracts, and helps to explain why Iraq is doing oil deals instead with China.
Senators Schumer, McCaskill, and Kerry claimed to be acting from the purest of motives: “It is our fear that this action by the Iraqi government could further deepen political tensions in Iraq and put our service members in even great danger.” For that reason, presumably, Schumer went so far as to ask the senior vice president of Exxon “if his company would agree to wait until the GOI produced a fair, equitable, and transparent hydrocarbon revenue sharing law before it signed any long-term agreement with the GOI.” Exxon naturally refused, but Schumer managed to get the deal killed anyway. But the ostensible premise of the senators’ objections was false–Iraq may not have a hydrocarbons law, but the central government has been sharing oil revenues equitably and there is no reason at all to imagine that signing the deals would have generated increased violence (and this was certainly not the view of American civilian and military officials on the ground in Iraq at the time). It is certain that killing the deals has delayed the maturation of Iraq’s oil industry without producing the desired hydrocarbons legislation.
Nor is it entirely clear what the senators’ motivations were. Their release (available along with their letter to Secretary Rice at the New York Observer quoted Senator McCaskill as follows: “‘It’s bad enough that we have no-bid contracts being awarded for work in Iraq. It’s bad enough that the big oil companies continue to receive government handouts while they post record breaking profits. But now the most profitable companies in the universe–America’s biggest oil companies–stand to reap the rewards of this no-bid contract on top of it all,’ McCaskill said. ‘It doesn’t take a rocket scientist to connect these dots–big oil is running Washington and now they’re running Baghdad. There is no reason under the sun not to halt these agreements until we get revenue sharing in place,’ McCaskill said.” So was this about what’s best for Iraq and American interests there or about nailing “big oil” in an election year?
Either way, like Barack Obama’s asking the Iraqi foreign minister to hold off on a strategic framework agreement until after the American election, it was nothing but harmful to American interests and our prospects in Iraq.
Frederick W. Kagan, a resident scholar at the American Enterprise Institute, is a contributing editor to THE WEEKLY STANDARD. |
September 17th, 2008
I would hope that our leaders would give the go-ahead to sensible allow drilling off our shores; don’t they realize manufacturers provide jobs to this industry? And there are many companies in the U.S. that make equipment or components for this industry. I know, my company does….so let’s get it done!
Pelosi masquerades the bill as a “pro-offshore drilling” vote, but only allows drilling 50 miles beyond our coasts (a large percentage of offshore oil is found closer to the shores), requires states to sign-off on drilling but forbids the states from sharing in the royalties, giving them no incentive to allow drilling. In addition, the Democrat bill does not offer incentives for renewable energy without tax hikes, does not expand needed refinery capacity, forbids oil shale exploration, prevents drilling in the Arctic coastal plain, does not allow for more nuclear energy, does not promote clean coal and coal-to-liquid technology, and increases taxes on the oil and gas industry that will be passed along to American motorists.
Furthermore, Speaker Pelosi again is forbidding Congress from considering an alternative bill. Manzullo joined many of his colleagues earlier this year in unveiling the American Energy Act (HR 6566), which will increase the supply of American-made energy, improve conservation and efficiency, and promote new and expanding energy technologies to help lower the price at the pump and reduce America’s increasingly costly and dangerous dependence on foreign sources of energy.
Here’s the latest….
By H. JOSEF HEBERT
The Associated Press
Wednesday, September 17, 2008; 6:19 AM
WASHINGTON — Offshore oil drilling, which has dominated energy debates in the presidential campaign, is now coming to the Senate.
The House late Tuesday approved on a 236-189 vote legislation that would open waters 50 miles off the Pacific and Atlantic coasts to oil and natural gas development _ if the adjacent states agree to go along.
The legislation now goes to the Senate, where Democratic leaders are expected to mold it to their liking in the next few days.
So far, the Senate has indicated it has no intention of going as far as the House in expanding offshore oil and gas drilling beyond the western Gulf of Mexico, where energy companies have been pumping oil and gas for decades.
At least two proposals being crafted in the Senate would allow drilling in some areas along the southern Atlantic from Virginia to Georgia. But the Pacific and remainder of the Atlantic seaboard would not be affected.
Senate Majority Leader Harry Reid, D-Nev., also has said he would make way for a vote on a broader Republican drilling proposal that would allow states to opt for offshore exploration from New England to the Pacific Northwest and share in the royalties that are collected.
Congress has renewed bans on drilling off the Atlantic and Pacific coasts and the eastern Gulf of Mexico off Florida annually for the past 26 years.
But expanded offshore drilling has become a mantra of GOP energy policy that has been felt in both presidential and congressional campaigns, even though lifting the drilling ban would have little if any impact on gasoline prices or produce any more oil for years.
Republican presidential nominee John McCain vowed at the recently concluded GOP convention to push for new offshore oil and natural gas drilling as delegates chanted “drill, baby, drill.” His Democratic rival, Barack Obama, also has said he supports more drilling as part of a broader energy package.
But in the Senate the issue of drilling remains divisive.
No matter what the proposal, it is expected to face a filibuster and no one has yet to predict with certainty that any drilling bill will garner the 60 votes needed to overcome such a roadblock.
The drilling measure passed late Tuesday in a largely party-line vote by the House is unlikely to survive the Senate.
President Bush, who has called for ending the offshore drilling bans, signaled he would veto the legislation if it reached his desk, arguing that it would stifle offshore oil development instead of increasing it.
House Speaker Nancy Pelosi, D-Calif., called the bill “a new direction in energy policy … that will end our dependence on foreign oil” by shifting federal subsidies from promoting the oil industry to spurring development of alternative energy sources and energy efficiency.
The House measure would allow drilling in waters 50 miles from shore almost everywhere from New England to Washington state as long as a state agrees to go along with energy development off its coast. Beyond 100 miles, no state approval would be required. The drilling ban would remain in the eastern Gulf of Mexico.
But Republicans called the drilling measure a ruse to provide political cover to Democrats feeling pressure to support more drilling at a time of high gasoline prices.
“How much new drilling do we get out of this bill? It’s zero. Just zero,” declared House Republican leader John Boehner of Ohio. “It’s a hoax on the American people. This is intended for one reason … so the Democrats can say we voted on energy.”
The bill would not share royalties from energy production with the adjacent states, which Republicans said would keep states from accepting any new drilling off their beaches. Republicans also cited Interior Department estimates that 88 percent of the 18 billion barrels of oil believed to be in waters now under drilling bans would remain off-limits because they are within the 50-mile protective coastal buffer.
The House-passed bill calls for rolling back nearly $18 billion in tax breaks over 10 years for the five largest oil companies and using the revenue for tax incentives to help commercialize alternative energy such as solar, wind and biomass, and programs that foster energy efficiency.
The bill also would require the president to make available oil from the government’s Strategic Petroleum Reserve. Pelosi said such a move is needed to drive down gasoline prices, although oil prices have dropped dramatically in recent weeks and many energy experts believe gasoline prices will fall as well after refineries recover from Hurricane Ike.
Democrats added a provision at the last minute that makes it a federal crime for oil companies with federal leases to provide gifts to government employees, a response to a recent sex and drug scandal involving the federal office that oversees the offshore oil royalty program and energy company employees.
The House bill also would:
_Provide tax credits for wind and solar energy industries, the development of cellulose ethanol and other biofuels.
_Require utilities nationwide to generate 15 percent of their electricity from solar, wind or other alternative energy sources.
_Give tax breaks for new energy efficiency programs, including the use of improved building codes, and for companies that promote their employees’ use of bicycles for commuting.
September 17th, 2008
Good news, bad news…good if you’re going there for business, bad if you’re exporting there…..
David Blanchflower, the arch-dove on the Bank of England’s Monetary Policy Committee (MPC), today forecast that the UK economy is heading for an “unpleasant shock” with unemployment set to spike in October.
Sterling fell to a two-and-a-half year low against the dollar as markets digested Mr Blanchflower’s comments, sending the pound down to $1.7460 — a level last seen in April 2006.
Speaking before the Treasury Select Committee, Mr Blanchflower’s “doom-laden view” of the economy included forecasts the UK would “see a large rise in unemployment”, to the tune of an extra 60,000 a month for “several months”.
Unemployment is currently running at 1.67 million, or 5.4 per cent of the population in the three months to June.
Read the rest of the story…http://business.timesonline.co.uk/tol/business/economics/article4730740.ece
September 17th, 2008
From the way the presidential candidates have been talking, you might think that American factories and workers are unable to compete in the global economy. John McCain has promised to open new markets for American goods and provide help for workers who lose their jobs. Barack Obama has expressed doubts about past trade agreements and has proposed changes in tax laws that he says now encourage companies to ship jobs overseas.
The candidates deserve credit for recognizing the challenges posed by trade and foreign investment. But their tone obscures a major success story: the dramatic improvement in our balance of international trade. This export boom has saved us from recession over the past year and, despite the recent financial turmoil, is likely to continue doing so. It is generating at least 2 million new and high-paying jobs, about half of them from increased foreign sales by the beleaguered manufacturing sector.
Fresh evidence of the trend came last month, when the second-quarter growth rate for the U.S. economy was revised upward, to 3.3 percent. A record surge in net exports accounted for almost all of that expansion. Since the housing and financial crises erupted in mid-2007, there has been a decline in final domestic demand. We would have been in recession throughout this period had we relied wholly on internal economic forces.
International trade has saved the day. Our external balance has improved by more than $200 billion as calculated for gross domestic product (GDP) purposes, cutting the previous deficit by more than one-third. This dramatic progress has kept the overall economy growing by modest amounts. The prophets of recession ignored the international engagement of the U.S. economy.
The Organization for Economic Cooperation and Development foresees continued modest expansion of the U.S. economy during 2008-09, with 80 percent of the impetus coming from trade improvement. (The trade balance in nominal dollars has not gained as much, but this was due to the higher price of oil imports earlier in the year and does not affect the GDP growth picture.) Gains of an additional $100 billion or so are likely, which would cut the pre-2006 real deficit in half, despite slowing foreign growth and the recent rebound of the dollar.
This favorable swing of at least $300 billion in the “real” trade balance translates into more than 2 million new jobs in the U.S. economy. These export jobs pay 15 to 20 percent more than the national average.
All major sectors, from agriculture to consumer goods to services, as well as our bellwether capital equipment, have shared in the export boom. About half the gains have come in manufactured products; the trade swing is likely to boost employment in manufacturing substantially, offsetting at least part of the downdraft from sluggish domestic growth and ongoing productivity improvement. Foreign sales of our manufactured products, including cranes from Wisconsin and diesel engines made in Indiana, are soaring.
Two major factors are driving this stellar performance. One is continued growth in the rest of the world, driven largely by emerging markets. Those countries, led by China and India, make up half the global economy. While down from record highs, their annual growth rates remain around 6 percent. Hence the world economy as a whole is likely to expand at a 3.5 to 4 percent rate in 2008 and 2009 despite the sharp slowdown in the United States and softer performances in Europe and Japan.
The second factor is the weaker exchange rate for the dollar, which has restored U.S. international competitiveness to a substantial degree. Before its recent climb, the dollar had gradually declined over the past six years, by an average of about 25 percent against the currencies of our main trading partners. This reversed the huge dollar increase from 1995 to 2002, which had sapped our price competitiveness and was the main cause of the recent record trade deficits. The U.S. trade deficit is still too large and the dollar remains overvalued against a few key Asian currencies, notably those of China and Japan, but it has essentially returned to levels at which we can compete on a reasonably even field against most countries.
Globalization is paying off for the United States just when we need it. Our traditional strategy of helping other countries, especially in the developing world, strengthen their economies is redounding to our major benefit. Our continuing effort to correct the huge trade and currency imbalances is paying large dividends. The trade liberalization of the past 50 years remains incomplete but has opened markets that our firms and workers can exploit. Efforts to derail the integration of the world economy in the face of current developments would be contrary to U.S. national interests. We should be making new compacts to reduce barriers as rapidly as possible rather than fearing to implement those already negotiated, such as the free-trade agreements with Colombia and Korea that are languishing in Congress.
By C. Fred Bergsten; Washington Post, Wednesday, September 17, 2008; A19
The writer is director of the Peterson Institute for International Economics. He was assistant Treasury secretary for international affairs from 1977 to 1981 and assistant for international economic affairs to the National Security Council from 1969 to 1971.
