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OIL

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

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OIL

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  1. OIL

  2. 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

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

  4. 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

  5. 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 $.

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

  7. 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

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

  9. 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.

  10. 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

  11. 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.

  12. 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

  13. 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

  14. 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”

  15. 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

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

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