It's probably fair to say that regardless of how much oil is found, there will never be another Saudi Arabia

From The Atlantic:

Lisa Margonelli

Jun 4 2009, 10:36AM

Uganda: The Next Saudi Arabia?

Uganda is a landlocked country of 32 million that's a bit smaller than Oregon. GDP: $1100. And, according to this report of a meeting with a representative of the US Department of Energy, may have reserves that "rival" those of Saudi Arabia.

(For reference: Saudi Arabia produces well over 10 million barrels of oil a day and has reserves estimated at 267 billion barrels.)

The DOE expert says Uganda could produce 3.5 million barrels a day, and possibly much more, and then offers US help with environmental and governance issues.

I have no way of knowing how accurate the prediction of Uganda's oil reserves is, but even if there is a lot of oil there, there's no doubt that the place and oil source we call Saudi Arabia was the product of a particular moment in world history, and a particular relationship between the US as the emerging post-colonial world power and the kingdom of Saudi Arabia, which needed protection as the Cold War heated up. In other words: More than oil made Saudi Arabia what it is today.

By contrast, this moment in history is a dramatically different petri dish. As this article shows, Uganda is actually considering NOT exporting its oil, which would mean that the reserves, no matter how large they are, would not realize their full value. Furthermore, Uganda is seriously looking at doing deals with both Iran and China--both in their own ways emerging powers without the baggage that the US has.

And the US has neither the diplomatic suasion nor the air of military invincibility that it had 50 years ago, or even 10 years ago. The US military, through AFRICOM, has a complex relationship with the government of Uganda and rival groups in nearby Democratic Republic of the Congo. Earlier this year, AFRICOM helped plan a horrifically botched raid on rebels who turned around and killed 900 civilians.

It's probably fair to say that regardless of how much oil is found, there will never be another Saudi Arabia, willing to invest so much of its income in creating spare capacity to keep America's vision of the world afloat with cheapish oil. For the US, chasing Saudi Arabias and oil reserves around the world has been part of our 20th century version of manifest destiny. But with incredible speed, the whole venture --both the good and the bad--is changing. "

Me:

Don the libertarian Democrat June 4, 2009 12:43 PM

"The US military, through AFRICOM, has a complex relationship with the government of Uganda and rival groups in nearby Democratic Republic of the Congo. Earlier this year, AFRICOM helped plan a horrifically botched raid on rebels who turned around and killed 900 civilians."

That's true, but you should have also mentioned this:

"UN says rebel hunt disaster for Congolese but must go on
09 Feb 2009 19:23:26 GMT
Source: Reuters
By Joe Bavier

DORUMA, Congo, Feb 9 (Reuters) - An offensive against Ugandan Lord's Resistance Army rebels in Congo has had catastrophic consequences for civilians but must go on to drive out the rebels, the U.N. humanitarian chief said on Monday.

Lord's Resistance Army (LRA) fighters have killed nearly 900 people in northeastern Democratic Republic of Congo, mostly since the start of a multinational campaign on Dec. 14 led by Ugandan forces.

"It's true that the humanitarian consequences have been catastrophic," U.N. Emergency Relief Coordinator John Holmes told reporters in Doruma, where at least 13,000 civilians have taken refuge after a spate of attacks by the rebels.

"I think they need to see the operation through. I don't know how long that will take...but I think there is no point in putting a premature end to it," Holmes said.

The decision lay with the Congolese and Ugandan governments, he said.

"We, meanwhile, will try to pick up the pieces as best we can."

I might also note the following:

"May 22nd, 2009 by alison in: Conflict Watch, Main Site
This week two US Senators and three Representatives banded together to introduce the LRA Disarmament and Northern Uganda Recovery Act, marking a watershed moment in our efforts to permanently end one of Africa's longest running conflicts. The bipartisan legislation has the potential to bring unprecedented levels of attention to this issue and spur our leaders to take the steps needed to stop LRA atrocities and help put northern Uganda on track towards lasting peace.

Stay tuned in the coming weeks for more details about the legislation and what it will take to make sure Congress and President Obama approve and implement it. Just yesterday Resolve Uganda joined with 21 civil society groups from the US and central Africa to voice our support for the legislation, but we know in the end it will take action on the part of people like you to push it past the finish line. "

according to sharia principles, and used for hedging risk rather than speculation.

TO BE NOTED: From the FT:

"Derivatives forecast to make gradual return

By Robin Wigglesworth in Abu Dhabi

Published: May 20 2009 16:36 | Last updated: May 20 2009 16:36

Derivatives have become a bit of a bugbear for some regulators. They blame certain unregulated, over-the-counter instruments for exacerbating the financial crisis but sometimes lump them together with more common, listed derivatives.

The Gulf is no exception. As regulators across the world study the entrails of the financial crisis for lessons, there will be a natural slowdown in their introduction in the Gulf as well, bankers say. But most expect it only to be a matter of time before their use is more widely sanctioned.

Even in the relatively unsophisticated Gulf, many banks dabble in derivatives, but occasionally to disastrous effect.

Several Bahraini banks, and Abu Dhabi Commercial Bank in the United Arab Emirates, have lost significant amounts on credit derivatives such as asset-backed securities and collateralised debt obligations.

Most dramatically, Gulf Bank, one of Kuwait’s oldest and largest lenders, suffered a rare bank run and had to be rescued by the government after a large currency derivatives trade on behalf of a client went awry.

This has hardened attitudes among regional regulators towards such instruments, bankers admit.

Youssef Kamal, the Qatari finance minister, told the Financial Times last year that Gulf Bank’s predicament could never happen in Qatar because its institutions are prohibited from using derivatives.

But regional bankers insist a blanket ban is a mistake. “Derivatives are like a chainsaw,” observes one expert. “If you don’t know how to use one you can cause serious damage, but if you use them correctly and are well protected you will be fine.”

While the market for complex credit derivatives is unlikely to be resuscitated soon, bankers argue that simple, listed equity derivatives would be a boon for regional stock markets.

“There are some very opaque and complex derivatives, but many – such as futures, options and swaps – are very useful and important instruments for risk management and the proper functioning of capital markets,” says Jamal Al Kishi, head of Deutsche Securities Saudi Arabia.

Indeed, while Nasdaq Dubai is at present the only bourse that offers listed equity derivatives – it rolled out futures contracts on 21 UAE shares and a Nasdaq Dubai index last November – most exchanges in the region are keen to introduce full derivatives platforms to boost trading volumes.

NYSE Euronext has signed deals with the Qatar and Abu Dhabi stock exchanges to help provide technical support and expertise for derivatives, and the recently launched Bahrain Financial Exchange has targeted the instruments as a way to muscle in on the Middle East exchange market.

Though often thought of as un-Islamic, Muslim scholars say derivatives are permissible as long as they are structured according to sharia principles, and used for hedging risk rather than speculation.

Even Saudi Arabia has introduced them – albeit indirectly. Last year it introduced swap structures to allow foreigners to acquire the “economic rights” of individual Saudi stocks."

“How many words do you think you write per unit of electricity?” she asked.

From TimesOnLine:

"Money is dead - long live barter

With cash ever harder to come by, will the council let us settle tax bills in cake?

John-Paul Flintoff

Inspired by global economic developments, I’ve been thinking recently about doing without money. Not in a bad way. Oh no: I’m planning to do very well indeed without money – perhaps turn myself into Mr Big. And the method I intend to use, now that money has dried up everywhere, is . . . barter.

I realise it will not be easy. When I started doing this, I phoned the council to ask about settling my tax bill by barter, and an official said: “We allow direct debit, cash, cheque, credit card. But barter? It’s unheard of, sir.”

My accountant had warned me about this: only inheritance tax, he said, could be settled with goods, such as an oil painting. But I persisted, telling the man from the council that if I failed to pay my bill the council would send bailiffs to confiscate goods to the same value – a kind of forced barter after the fact.

What could I offer? A vast sackful of apples and other produce from my allotment, a selection of silk ties (rarely used), large piles of novels (good condition) and some amazing home-baked cakes.

He was unmoved. Perhaps I could work for the council instead – sweep the streets; paint a portrait of the mayor? “It’s a very ingenious proposal,” the official said, “but I don’t want to waste your time.”

I know what you’re thinking: barter is useless. But you may be mistaken. Because an astonishingly large proportion of the global trade in goods and services is barter-based, to protect traders against alarming currency fluctuations.

In one of the most famous examples, Pepsi took profits from Soviet Russia in the form of vodka. The largest barter of all time took place last year: China agreed to build massive infrastructure in the Democratic Republic of Congo in exchange for copper and cobalt supplies worth an estimated £6 billion. About the same time, Saudi Arabia and Iran agreed with Pakistan and Thailand, respectively, to swap oil for food.( TRUE. I POSTED ON THIS. )

Not for nothing has The Wall Street Journal described barter as a “powerful cash-saving tool”. The journal of the “reciprocal trade industry”, Barter News, goes further: “We’re moving into the golden age of barter,” it reported recently, adding that 600,000 companies in the US alone actively traded both locally and across borders.

In the UK, a village pub, the Pigs, at Edgefield, in Norfolk, offered pints in exchange for locally sourced food to be cooked in its kitchens. Thousands of others trade more formally through exchanges such as Bartercard: last year the Fashion TV network used Bartercard to save £110,000 in cash on alcohol and other goods for its launch party – which FTV is repaying by providing advertising.

Happily, barter works for individuals too. A Canadian, Kyle MacDon-ald, made headlines by bartering, via trade after trade on the internet, a paper clip for a house. Only slightly less impressive, my friend the photographer Guy Hills persuaded every tailor in Savile Row to make him an outfit in return for photographing them at work. A couple named Dan and Gemma Scott cut £9,000 from the cost of their wedding by bartering for the church, the reception, the cars and the photos. To do this, they worked as housekeeper and labourer, dug ditches, delivered leaflets and repaired cars. “When Gemma started planning the wedding,” Dan said, “I knew we didn’t have the money for it. We ended up with a £12,000 wedding for just £3,000.”

It wasn’t the Scotts alone who benefited: the people for whom they carried out those services probably wouldn’t have hired them, in the present economic turmoil, if they’d asked for cash. The wedding might not have happened, and a whole lot of economic activity would never have taken place if the Scotts hadn’t thought of using barter.

Despite these examples, it would be misleading to suggest that barter always takes place between two parties who each have something the other wants. Indeed, straight swaps of that kind are rare, because they’re flawed: if you want one of my cakes and can’t offer anything I need, the barter is over before it starts.

To get around this, barter is these days increasingly transacted through a group exchange: you pay me a credit for my delicious cake, and I spend that credit on another member of the exchange – getting my loo unblocked, or having a foot massage. In effect, the credits are a form of money issued and guaranteed by the group.

The challenge lies in finding the right exchange network. ReadIt SwapIt.co.uk has had a huge increase in book swaps (there are currently 221,000 books available). WhatsMineIsYours.com facilitates clothing and accessory exchange. SeedyPeople.co.uk lets gardeners and allotmenteers exchange seeds. UKhomeswap.co.uk has thousands of users who pay a monthly fee in the hope of swapping council properties, while Hamptons International has a similar scheme for landlords.

Alas, satisfaction is not guaranteed. On ReadItSwapIt, for instance, many members have done many swaps – one in Scotland claims to have done 900 – but for me it would be cheaper and more convenient, now that my local post office has closed, to get new books from the library (which hasn’t, yet) and give away anything I don’t need to charity shops.

On swapz.co.uk and swapcycle.co.uk, the variety of offers is stunning. They give evidence that many transactions are taking place that wouldn’t have done if people depended entirely on money. Typical of this is the woman offering to do housework in exchange for somebody fitting tiles in her kitchen, through one of many local exchange trading systems, or Lets, up and running across the country. As many as 40,000 people belong to Lets, and more are joining all the time.

Slightly different are the 250 or so “time banks” across the country, in which everybody’s time has the same value. In effect, this brings members’ income down (or up) to the national average. The revolutionary implication is that if people want to stop being poor and oppressed they could save themselves the trouble of protest marches by setting up a time bank and dropping out of the mainstream economy altogether.

At least, that’s the theory. Practice is trickier. Molly Scott Cato of Cardiff School of Management, the author of Green Economics, a delightful new book examining such things, concedes that time banks can improve quality of life in communities. “But for most members this is peripheral to their main livelihood,” she says.

All the same, I do find all this barter activity rather inspiring. I may not have persuaded the council, yet, but the company that sells me electricity proved willing to consider barter. A woman handling the marketing seemed to think I could help to write some publicity material. Something, however, needed to be resolved first: “How many words do you think you write per unit of electricity?” she asked."

I'm giving the thought of barter serious consideration.

"A gasoline tax will reduce global warming, reduce depletion of petroleum reserves and cause the price of petroleum to fall"

A good point made on Robert's Stochastic Thoughts:

"Major category error...

((( I SHOULD ADMIT THAT I RARELY USE THIS PHRASE SINCE I ASSOCIATE WITH RYLE, A PHILOSOPHER I CAN'T ABIDE.

A category mistake, or category error, is a semantic or ontological error by which a property is ascribed to a thing that could not possibly have that property. All (propositional) mistakes involve some sort of misascription of properties, so in a sense any mistake is a "category mistake": putting a thing into a class to which it does not belong. But a "category mistake" in colloquial philosophical usage seems to be the most severe form of misascription, involving the endorsement of what is in fact logically impossible. Thus the mistaken claim that "Most Americans are atheists" is not a category mistake, since it is merely contingently true that most Americans are theists. On the other hand, "Most bananas are atheists" is a category error. To show that a category mistake has been committed one must typically show that once the phenomenon in question is properly understood, it becomes clear that the claim being made about it could not possibly be true.)))

... from Harvard Philosophy concentrator.

Matthew Yglesias writes

"Given what we’ve learned about the risks of catastrophic climate change, it [] seems like a concept that’s been somewhat overtaken by events. A carbon tax, or a cap on greenhouse gas emissions with auctioned permits, would constitute a tax on gasoline among other things. And there’s no particular( SPECIFIC ) reason that burning fuel in a car should be disfavored versus other carbon-intensive activities."

via Kevin Drum
http://www.motherjones.com/kevin-drum/index.html?welcome=true

The fact that there is a reason to tax both coal and petroleum consumption does not mean that "there is no patricular reason that burning fuel in a car should be disfavored compared to other carbon-intensive activities."( I DON'T SEE THE CATEGORY ERROR. HE SIMPLY IS WRONG ABOUT THE FACT THAT THERE ARE PARTICULAR OR OTHER REASONS. ) A newly understood problem with petroleum consumption doesn't eliminate that many excellent longer understood reasons to limit petroleum consumption. It can't. A newly discovered problem with burning gasoline and other things can't eliminate the case that burning gasoline is worse. A positive number plus a constant is greater than 0 plus a constant. ( GOOD POINTS )


Those of us who are roughly twice Yglesias's age remember the original logic of a gasoline tax, which was designed to reduce dependence on foreign oil. That argument is, for some reason, out of fashion, but it is much more compelling now than it was then.( TRUE )

The fact that we have a new concern -- global warming -- which will be partially addressed by a gasoline tax isn't and can't be a reason why burning fossile fuels in cars isn't particularly bad( TRUE ). The case for a carbon tax as opposed to a carbon tax plus a gasoline tax is that there is no problem with gasoline consumption except for global warming( NOT TRUE ).

It is odd that criticism of this nonsensical position from the author of dozens of "peak oil" posts is so measured.

A gasoline tax will reduce global warming, reduce depletion of petroleum reserves and cause the price of petroleum to fall. It is fairly likely that the cost will be entirely born by oil exporting countries and not at all by -- well us.

If one opposes a gasoline tax, one should logically advocate aid for Kuwait Saudi Arabia and Russia. If that sounds crazy then so is the current minimal US gasoline tax."

We should add the tax now while the price of gas is low.

"Abdullah Hajeri led a march on the Emir's palace in Kuwait last week"

Speaking of the Gulf. Bloomberg, again:

"The region's rulers are under pressure from citizens to shore up investors, not just banks, as they try to fend off what may be the worst economic crisis since December 1998, when oil at $10.35 a barrel forced them to slash spending. Crude prices have fallen 50 percent from a record $147.27 in July, and stock indexes in Dubai and Saudi Arabia are down by as much this year.

Gulf economies are more susceptible to financial turmoil than in the past because of their greater dependency on international expertise, investment and tourists to diversify away from oil. While Dubai, home to the world's tallest building and the man-made Palm Island, is considered most at risk, no part of the Persian Gulf will go untouched."

Where have we encountered this conundrum before? Citizens who don't like only the banks getting a bailout? Now that's globalization. We're all alike.

"There aren't many international investors left in the region, he added.

Regional competition to attract investors and tourists from around the world led to a surge in record-breaking projects."

Put those on hold, just like everywhere else, there's an economic credit hoovering back home going on.

"The emirate has almost 8 percent of the world's oil reserves and a sovereign wealth fund with assets between $250 billion and $875 billion, according to a range of estimates compiled by the International Monetary Fund. Even with its decline, oil still averages $110 a barrel for the year.

Residents of the region are used to government intervention. All Gulf countries are run by unelected rulers who maintain political power through tribal allegiances and marriages. Generous state welfare programs have traditionally damped demands for more political participation.

How the region's rulers cope with the turmoil may define relations with their people in the future, as they try to wean their subjects off state handouts and encourage them to find jobs and embrace market capitalism.

``There's no question that it sets back the move from socialist, paternalistic societies toward more modern capitalist states,'' said Gabriel Stein, a director at London's Lombard Street Research, which provides economic analysis to investors and companies. ``It is a trend that we have seen all over the world. The immediate reaction is that you told us to do this, so now things are going wrong it's up to you to help us out.''

Ah yes, governments will grow larger for the near term. However, helping citizens through economic downturns needn't be seen as a rush towards socialism. Nor, apparently, massive government interventions in the economy. So don't go all marxist quite yet.

``The U.S. financial crisis has ramifications for all countries, including the Gulf,'' U.S. Deputy Secretary of Treasury Robert Kimmitt said this week during a speech in Dubai, where he met representatives of sovereign wealth funds. ``Our capital markets are more integrated than ever before, allowing opportunities, but also financial difficulties, to spread rapidly across borders.''

We did some good before, look at all your wondrous buildings, so please don't blame us for this financial crisis which we started.

"Of the Gulf states, Dubai may be hardest hit by a global economic slowdown because it has borrowed more to finance its transformation from a Persian Gulf trading post to a financial and tourist hub, and has only 4 billion barrels of oil reserves.

Government-controlled companies owe at least $47 billion, more than Dubai's gross domestic product, and they will continue to accumulate debt faster than the economy grows, Moody's Investors Service estimated in an Oct. 13 report. It concluded that Dubai may need financing help from Abu Dhabi."

Let's change that from 'may' to 'will'.

"Gulf states will invest in renewable energy projects in the U.K. "

An interesting post on Bloomberg. First this:

"Nov. 2 (Bloomberg) -- U.K. Prime Minister Gordon Brown urged sovereign wealth funds from the Persian Gulf to invest in British companies needing more financing because of the credit crunch.

Brown arrived in Riyadh late yesterday with Business Secretary Peter Mandelson, Energy Secretary Ed Miliband and a delegation of business leaders to encourage funding from cash- rich oil producers."

So Britain, as a single country, is going out and encouraging investment in the U.K. from oil rich countries in the Gulf. Seems smart, but I wonder how much this effects cooperation with other countries.

"Brown's visit coincides with the signing of a number of deals in which Gulf states will invest in renewable energy projects in the U.K.

``Gulf oil and gas revenues have provided masses of finance for the region, but will now also be used to help kick-start the British green energy revolution,'' Miliband told reporters. ``Gulf states recognize the U.K., too, has natural assets to offer investment opportunities for them.''

Oil money being invested in renewable energy. Interesting. I approve.

"Separately, Brown reiterated the need for gulf states to boost the International Monetary Fund's $250 billion cash supply by ``hundreds of billions of dollars.''

``If we are to stop the spread of the financial crisis, we need a better global insurance policy to help distressed economies,'' Brown said. ``That is why I have called for more resources for the IMF.''

Countries including Saudi Arabia will probably contribute more to the IMF ``so we can have a bigger fund worldwide,'' Brown said. ``I think people want to invest both in helping the world get through this very difficult period of time, but also I think people want to work with us so we are less dependent on oil and have more stability in oil prices.''

Arab nations and china haven't been represented enough on international bodies such as the IMF, he said."

What's being said is that other countries are going to be putting up more money for the IMF, and they'll want a bigger say in where the money goes. Seems fair. I approve.