Sad Doings....

The Breaking Point

Lawsuit filed against Rumsfeld:
Cruel Confinement of 'Enemy Combatant' in the United States

Author: Human Rights Watch
Published on August 8, 2005, 10:03
http://yubanet.com/artman/publish/article_23662.shtml

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

A lawsuit filed today against U.S. Secretary of Defense Donald Rumsfeld reveals the gratuitous cruelty inflicted on a foreign student held without charges for more than two years as an "enemy combatant" in a South Carolina naval brig, Human Rights Watch said. Although three men have been confined in the United States after being designated "enemy combatants" by President George Bush, the complaint by Ali Saleh Kahlah al-Marri provides the first look into the treatment of any of them in military custody.

Ali Saleh Kahlah al-Marri, a citizen of Qatar who had been studying in Peoria, Illinois, before his arrest, asked the federal district court in South Carolina to declare unconstitutional the severe and unnecessary deprivations and restrictions to which he has been subjected since he was placed in military custody in June 2003. Al-Marri had already initiated habeas proceedings challenging the legality of his detention as an enemy combatant. That case continues.

"It is bad enough that al-Marri has been held indefinitely without charges and incommunicado," said Jamie Fellner, director of Human Rights Watch's U.S. Program. "Now we learn that his life in the brig has also been one of cruelty and petty vindictiveness. Whatever the Bush administration believes he has done or wanted to do, there's no excuse for how they are treating him."

Al-Marri's complaint describes virtually complete isolation from the world. He has been confined round the clock in a small cell with an opaque window covered with plastic. He has not been allowed to speak to his wife or five children. He is allowed no newspapers, magazines, books (other than the Koran), radio or television. He is allowed no personal property. His cell contains a steel bed, a sink and a toilet. During the day, the mattress on his bed has been removed.

Out-of-cell time has been limited to three showers and three short periods of solitary recreation a week—but al-Marri has frequently been denied that out-of-cell time. Once he went 60 days without being permitted to leave his cell at all. When bad weather prevents him from going outside, he must remain in hand cuffs and leg irons during his indoor recreation. Leg irons and handcuffs are placed on him when he goes to the shower.

Al-Marri alleges that on occasion he has been denied basic hygiene products such as a toothbrush, toothpaste, soap and toilet paper. When not provided with toilet paper, he has had to use his hands to clean himself after he defecates, and it has taken more than an hour before soap was brought to him so that he could wash his hands. The water in his cell has frequently been turned off. He has been denied socks or footwear for months at a time, including during the winter months. Officers at the brig often lower the temperature in his cell until it becomes exceedingly cold, but they do not give him extra clothes or blankets to keep warm.

According to al-Marri's complaint, he has not been formally interrogated for almost one year. He states, however, that when he was interrogated, government officials threatened he would be sent to Egypt or Saudi Arabia, where they told him he would be tortured and sodomized and his wife would be raped in front of him.

For more than a year, al-Marri was not allowed to speak with any non-governmental personnel other than representatives of the International Committee of the Red Cross. Military personnel guarding him would not talk to him other than to give him orders. In October 2004, the government finally agreed to let him have access to counsel.

Al-Marri is a devout Muslim. According to his complaint, military officials have not permitted him to meet with a Muslim cleric, do not let him have a prayer mat and punish him if he follows his religion's requirement to cover his head while he prays (he uses a shirt for this purpose). They do not tell him which way Mecca lies, so he does not know in which direction to pray; nor do they provide him with a clock, so he does not know when to pray.

"It's the combination of restrictions imposed on al-Marri that offends basic norms of decency," said Fellner. "There is no security justification for them. The Pentagon apparently believes it can hold him under any conditions they choose for as long as they choose."

Al-Marri also claims he has been denied appropriate care for medical and mental health symptoms he has developed while in the brig. Prolonged solitary confinement pushes the boundary of what humans can psychologically tolerate. It can cause serious mental damage.

Al-Marri is a citizen of Qatar who lawfully resided in the United States, having come with his wife and children to obtain a graduate degree at Bradley University in Peoria, Illinois, the same university from which he had earned a bachelor's degree 10 years earlier. The Federal Bureau of Investigation arrested al-Marri at his home in December 2001 as a material witness in the investigation of the September 11 attacks, and he was subsequently indicted on federal charges of credit card fraud and lying to the FBI.

In 2003, President Bush designated al-Marri an enemy combatant, and shortly before his criminal trial was to begin, the criminal charges against him were dismissed, and he was sent to the Consolidated Naval Brig in North Charleston, South Carolina. Lawyers for al-Marri immediately challenged the President's actions in federal district court in Illinois, where his criminal case had been pending, but the courts ultimately held that this challenge had to be brought in the district where al-Marri was presently confined. On July 7, 2004, counsel for al-Marri filed a writ of habeas corpus in federal district court in South Carolina, challenging the lawfulness of his detention. On July 8, 2005, the court ruled that President Bush has the authority to detain non-citizens who had been residing in the United States as enemy combatants.

Human Rights Watch condemns the designation by presidential order of any civilian as an "enemy combatant" when the individual was detained far from any battlefield. Holding someone in military custody without charges because of such a designation constitutes a violation of the prohibition against arbitrary detention under international law. By treating al-Marri as an "enemy combatant," the Bush administration made an end-run around the due process and other constitutional guarantees of the U.S. criminal justice system.

Human Rights Watch disputes the government's contention that the laws of war permit holding al-Marri indefinitely and without charges. Those laws are not applicable outside areas of armed conflict and where there is no direct connection to an armed conflict. In the case of a civilian detained within the United States — whether or not affiliated with any terrorist organization — international human rights and constitutional law require that he be formally charged and given a fair trial before a civilian court.

Al-Marri is one of three men whom President Bush has designated as enemy combatants in the U.S. campaign against terrorism and who have been confined within the territorial United States. Lawyers for all three went to court challenging the lawfulness of their detentions. The government in each case insisted the president has the authority to decide unilaterally who is an enemy combatant and that anyone so designated is not entitled to a judicial hearing.

The first case was that of Yassir Hamdi, a U.S. citizen turned over to U.S. forces during the fighting in Afghanistan. In June 2004, the Supreme Court ruled that he was entitled to his day in court; the United States chose not to proceed with a hearing and allowed Hamdi to go to Saudi Arabia, where he also held citizenship.

The second designated enemy combatant was Jose Padilla, a U.S. citizen detained at Chicago's O'Hare Airport upon his return from the Middle East. According to the Bush Administration, Padilla had plotted with Al-Qaeda to commit terrorist acts in the United States. In June 2004, the Supreme Court ruled he had to bring his case before the federal district court in South Carolina, where he is being confined in the same navy brig as al-Marri. On February 28, 2005, the federal district court in South Carolina ruled that President Bush had "no power, neither express nor implied, neither constitutional nor statutory" to hold Padilla as an enemy combatant.

© Copyright 2005 by YubaNet.com

Send your letters to the editor to news@yubanet.com




--------------------------------------------------------------------------------


[This piece from late last year can be read in the context of Chancellor Schroeder’s recent signals opposing the use of military force in Iran. – JAH]

Lawsuit Against Rumsfeld Threatens US-German Relations

14.12.2004
http://www.dw-world.de/dw/article/0,1564,1427743,00.html

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

The Pentagon made thinly veiled threats on Monday, suggesting US-German relations could be at risk if a criminal complaint filed in German courts over Abu Ghraib proceeds.

The Pentagon expressed concern Monday over a criminal complaint filed in Germany against US Defense Secretary Donald Rumsfeld and other officials over the Abu Ghraib prison scandal, warning that "frivolous lawsuits" could affect the broader US-German relationship.

The complaint was filed in Berlin on Nov. 30 by the New York-based Center for Constitutional Rights (CCR) and Berlin's Republican Lawyers' Association on behalf of four Iraqis who were alleged to have been mistreated by US soldiers.

Besides Rumsfeld, former CIA director George Tenet, Undersecretary of Defense for Intelligence Steven Cambone, Lieutenant General Ricardo Sanchez, Brigadier General Janis

Karpinski and five other military officers who served in Iraq were named in the complaint, which seeks an investigation into their role in the prisoner abuses at Abu Ghraib.

US-German relations at risk

"Generally speaking, as is true anywhere, if these kinds of lawsuits take place with American servicemen in the cross-hairs, you bet it's something we take seriously," said Lawrence DiRita, the Pentagon's spokesman. "If you get an adventurous prosecutor who might want to seize onto one of these frivolous lawsuits, it could affect the broader relationship. I think that's probably safe to say," he told AFP.

Germany is home to some 70,000 US troops, many of which have rotated into and out of Iraq from German bases. Sanchez, the former US commander in Iraq, is stationed in Germany as commander of the Army's 5th Corps.

Universal jurisdiction for war crimes

The groups that filed the complaint said they had chosen Germany because of its Code of Crimes Against International Law, introduced in 2002, which grants German courts universal jurisdiction in cases involving war crimes or crimes against humanity.

It also makes military or civilian commanders who fail to prevent their subordinates from committing such acts liable. DiRita said he did not know whether the United States had raised specific concerns directly with the German government. But he said, "I think every government in the world, particularly a NATO ally, understands the potential effect on relations with the United States if these kinds of frivolous lawsuits were ever to see the light of day."

Similar tussle with Belgium

The United States clashed with Belgium last year over a similar law that allowed war crimes charges to be brought against retired General Tommy Franks (photo), who led the US invasion of Iraq, as well as numerous other international figures.

The 1993 law empowered Belgian courts to judge suspects accused of war crimes, crimes against humanity and genocide, regardless of where the alleged acts were committed, or the nationality of either the accused or the victims.

US Defense Secretary Donald Rumsfeld threatened to block funding for a new NATO headquarters in Belgium over the law, and said the United States was considering whether it would continue to send officials to meetings in Brussels as long as the law was in place.

The Belgian parliament replaced the law with a watered down version in August 2003 and its high court threw out lawsuits against Franks, former president George H.W. Bush, Secretary of State Colin Powell and Israeli Prime Minister Ariel Sharon.

Indicating the US planned to play a similar game of hardball with Germany, Rumsfeld has informed the German government via the US embassy that he will not take part in the annual Munich security conference in February should the investigation proceed.

Author DW staff/AFP (ziw)

http://www.dw-world.de © Deutsche Welle




--------------------------------------------------------------------------------

World Turning Its Back on Brand America

by Kevin Allison in New York
August 2, 2005
http://news.ft.com/cms/s/77868922-0228-11da-9481-00000e2511c8.html

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

The US is increasingly viewed as a "culture-free zone" inhabited by arrogant and unfriendly people, according to study of 25 countries' brand reputations.

The findings, published online today, will add to concerns that anti-Americanism is hurting companies whose products are considered to be distinctly "American".

The Anholt-GMI Nation Brands Index found that although US foreign policy remained a key driver of hostility, dissatisfaction with the world's sole superpower might run deeper.

"The US is still recognized as a leading place to do business, the home of desirable brands and popular culture," said Simon Anholt, author of the survey. "But its governance, its cultural heritage and its people are no longer widely respected or admired by the world."

Keith Reinhard, president of Business for Diplomatic Action, a group of business leaders dedicated to improving the US's image overseas, said help from the private sector was needed to repair Brand America.

"Right now the US government is not a credible messenger," said Mr Reinhard, chairman of DDB Worldwide, the advertising group. "We must work to build bridges of understanding and co-operation and respect through business-to-business activities."

Such initiatives could include lobbying for less stringent visa requirements for foreign students entering the US, increased cultural exchanges between US businesses and their foreign counterparts, and courses in diplomacy and foreign languages at business schools.

The US ranked 11th in the Brands Index, which asks people around the world to rate 25 countries according to their cultural, political and investment potential and other criteria. Australia received the highest overall score, with respondents expressing "an almost universal admiration of its people, landscapes and living and working environment", according to the report.

Although the US received high marks for its popular culture, it ranked last in cultural heritage, a measure of a country's "wisdom, intelligence, and integrity", according to Mr Anholt.

That the world takes a dim view of the US people will surprise most Americans themselves: the study's American respondents consistently placed the US at the top of all six categories polled.

© Copyright The Financial Times Ltd 2005




--------------------------------------------------------------------------------

[Destroy the economy and watch the dominoes fall: the giant gap between the finance economy and the real economy is full of fake credit; reign that in by raising interest rates, and the “folks” in the “heartland” of the “homeland” will have to default on their mortgages because they can’t make the higher payments. Then the banks have a lot of houses nobody can buy and a lot of bad loans on the books. Dollars don’t look so attractive then, because despite the higher interest rates, the money supply is still enormous – without the exports or the gold reserves to back those dollars up. And just what do the Chinese want all their dollars for, if Congress sees fit to forbid CNOOC from buying real physical assets with them? For the moment, China re-invests those dollars in the U.S. economy – inadvertently subsidizing the 700 billion dollar war in Iraq – so that Joe and Jane America will have enough purchasing power to buy cheap Chinese goods at Wal-Mart and Target. With steeper prices for liquid fuels, consumer prices will go up; steeper still, and the Soviet phenomenon of empty shelves will make a first appearance at a supermarket near you.

How much was that enlistment bonus again?

--JAH]

Uncle Sam wants you –
even if you’re 42 years old

By Rick Maze
Times staff writer
July 19, 2005
http://www.armytimes.com/print.php?f=1-292925-983408.php

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

The Defense Department quietly asked Congress on Monday to raise the maximum age for military recruits to 42 for all branches of the service.

Under current law, the maximum age to enlist in the active components is 35, while people up to age 39 may enlist in the reserves. By practice, the accepted age for recruits is 27 for the Air Force, 28 for the Marine Corps and 34 for the Navy and Army, although the Army Reserve and Navy Reserve sometimes take people up to age 39 in some specialties.

The Pentagon’s request to raise the maximum recruit age to 42 is part of what defense officials are calling a package of “urgent wartime support initiatives” sent to Congress Monday night prior to a Tuesday hearing of the House Armed Services military personnel subcommittee.

At that hearing, David S.C. Chu, under secretary of defense for personnel and readiness, said he felt the military’s recent problems with recruiting were improving, but that additional incentives would help.

Chu mentioned the age change in passing during the hearing but gave no other details, such as whether any of the services were seriously considering recruiting 42-year-olds.

Most of the initiatives in the package were previously requested by the Bush administration as part of the 2006 defense budget, which is pending before Congress. They include raising the maximum re-enlistment bonus to $90,000; maximum hardship duty pay to $750 a month; special pay and incentive bonuses for nuclear qualified officers to $30,000; assignment incentive pay to $3,000; and increasing accession and affiliation bonuses for reservists.

The request, not yet approved by the White House, also asks lawmakers to revise some benefits proposals already before Congress.

For example, the Bush administration originally asked Congress to increase enlistment bonuses to $30,000, but the Pentagon now wants bonuses of up to $40,000.

The administration also asked for an Army-only test of a $1,000 referral bonus that would be paid to current soldiers if they get someone to enter the Army and make it through basic and advanced training. Now, the Pentagon wants that payment to be $2,500.

The request also includes a new Army initiative that officials are calling the Army Home Ownership program. It would set aside money for new recruits that could be used to buy a home at the end of an enlistment, an idea that Army officials believe will help convince parents and other “adult influencers” of service-age youths about the benefits of joining the military.

Lawmakers are sympathetic to the need to do more. Rep. John McHugh, R-N.Y., said he is willing to look at new pay-and-benefits initiatives, although he personally believes that what the Pentagon needs is an increase in personnel to cut the workload on active and reserve service member.

Rep. Vic Snyder of Arkansas, the subcommittee’s ranking Democrat, also vowed to help.

“Recruitment is a challenge right now,” Snyder said. “Both the military and Congress are working on solutions, but I expect these challenges will be with us for some time. Military service is honorable and can be a real growing opportunity for a young man or woman.”




--------------------------------------------------------------------------------

The Oil Effect

With most other prices relatively tame, consumers could weather the energy squeeze if they had a cushion. They don't.

August 20, 2005
http://www.nytimes.com/2005/08/20/opinion/20sat2.html?th&emc=th

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

Just when it was starting to seem as if consumers were really shaking off high energy prices, Wal-Mart announced this week that its profits stumbled in the second quarter, rising at their slowest rate in four years. Forced to choose between their closets and their gasoline tanks, Americans unsurprisingly chose their tanks. Wal-Mart warned that future sales would be curtailed as well, and no wonder: gasoline is now averaging $2.60 a gallon nationwide, nearly a 39 percent increase from last year. At the same time, natural gas prices are up 60 percent to 90 percent around the country, presaging steep home-heating bills in the months ahead on top of high prices at the pump.

With most other prices relatively tame, consumers could weather the energy squeeze if they had a cushion. They don't.

Wage gains for most Americans are barely keeping up with inflation. And according to a recent Commerce Department report, Americans, on average, are now saving nothing each month, so they obviously cannot pay higher energy bills by reducing the amount they save.

That leaves rising home values to cover growing energy costs. According to a recent report by John Makin, a visiting scholar at the American Enterprise Institute in Washington, the housing boom has offset the economic drag of higher oil prices by enabling homeowners to get cash through refinancing or selling at a profit, and by creating a "wealth effect": as their houses appreciate, homeowners feel rich and thus spend freely, even as they neglect to save.

Mr. Makin estimates that a mere leveling off of housing prices would be sufficient to remove the economic boost from real estate. That would slow consumer spending and, with it, the economy.

No one knows when that leveling off will occur. But homes are already becoming increasingly unaffordable, and refinancings are slowing down. There are early signs that banks are beginning to tighten their lending standards. And the Federal Reserve, which has been trying for more than a year to push up mortgage rates, will probably succeed in that endeavor at some point.

The pain that now seems imminent might have been avoided. Conservation could have reduced energy demand and prices, while properly targeted job growth and savings incentives - not tax cuts for the rich - could have built a stronger job recovery, helping to foster higher wages and new savings. Maybe next time around.



--------------------------------------------------------------------------------

Protests cripple Ecuador oil output

Friday 19 August 2005 10:11 PM GMT
http://english.aljazeera.net/NR/exeres/AF9602EC-361A-4566-8722-5B459E7C9893.htm

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.



Protesters want the govern-
ment to re-negotiate its
contracts

Ecuador's defense minister has resigned during protests which have crippled oil production and forced the country to ask Venezuela for a loan of crude oil so it can keep up exports, officials said.

Ecuador will seek a $400 million emergency loan from the Latin American Reserve Fund to avoid balance of payments problems resulting from the protest in two provinces and import $140 million worth of fuel, Economy Minister Magdalena Barreiro said.

The protests pushed US crude oil futures up $2 above $65 a barrel in New York on Friday.

Ecuador is South America's fifth largest producer of crude oil and, after Venezuela, is the second-largest South American supplier of oil to the United States.

Defense Minister Solon Espinoza resigned at the request of President Alfredo Palacio for his handling of the worst crisis since Palacio took office in April, officials at the president's office said.

Palacio blamed Espinoza for allowing protests to get out of hand and named a popular retired army general, Osvaldo Jarrin, in his place, they said.

The government declared a state of emergency on Wednesday and ordered troops to restore order in Sucumbios and Orellana provinces where protesters began to invade oil camps, sabotage equipment and block highways on Monday.

Protester demands
Backed by regional officials, the demonstrators are demanding, among other things, that oil companies hire more locals, provide greater investment in roads and public works in the zone and make income tax and royalty payments directly into local government coffers.

Demonstrators also want the government to renegotiate contracts with Occidental Petroleum Corporation, Petrobras and EnCana Corporation, to raise state participation.

"We need the crude loan for us to be able to export and partly normalize our exports"

Magdalena Barreiro,
Economy Minister

Troops fired tear gas at protesters who tried to free the mayor of the jungle city of Lago Agrio from a police station on Friday, local radio reported.

Army General Gonzalo Mesa said the situation in Lago Agrio was "manageable." Troops have retaken control of local airports and are clearing obstacles left on the runways, he said.

Drop in oil output
Oil output at state-owned Petroecuador, which has fallen to zero from its usual 201,000 barrels per day, will only return to normal in November, Economy Minister Magdalena Barreiro told reporters.

Most of Petroecuador's exports go the United States. The company suspended its exports on Thursday, declaring force majeure - a contractual clause invoked in case of events beyond the company's control.

Ecuador will ask Venezuela to lend it crude oil so it can meet export commitments, Barreiro said.

"We need the crude loan for us to be able to export and partly normalize our exports," Barreiro said.

She did not say how much oil Ecuador wanted but said Foreign Minister Antonio Parra would present the request to Venezuelan President Hugo Chavez at a meeting in Cuba on Friday.

Debt liabilities
Ecuador will meet its debt liabilities despite the protest, Barreiro said. Ecuador defaulted on foreign bonds in 1999 but has since grown strongly with low inflation, partly thanks to the introduction of the US dollar as currency in 2000.


Ecuador is South America's fifth
largest producer of crude oil

The government has accused former President Lucio Gutierrez, who was sacked by Congress in April and is now in Peru, of being behind the demonstrations.

But Palacio himself might have helped trigger the protests by inflaming popular expectations with moves including diverting money from a fund previously destined for debt payments to pay for social programmes, according to Alberto Ramos, an economist at Goldman Sachs in New York.

These moves have been harshly criticized by foreign bond holders.

The government is "extremely vulnerable to social activism and other rent-seeking pressures," Ramos said in a research note.

Three Ecuadorean presidents have been toppled amid popular unrest since 1997.




--------------------------------------------------------------------------------


'Peak oil' issue piques interest

By Cathy Proctor
The Denver Business Journal
Updated: 8:00 p.m. ET Aug. 14, 2005
http://msnbc.msn.com/id/8956556/

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

With the price of oil and gasoline spiraling higher, top energy analysts wonder about two things:

Where will it end?

Are the world's supplies reaching what experts call "peak oil," the point where supplies steadily decline and prices rise even more sharply higher?

Some experts say the world's oil production peak could be five to 15 years away. Others scoff, noting it's been predicted for decades. And besides, skeptics say, new technologies will bring more oil to the market.

The city of Denver will wade into the debate when it hosts a two-day seminar Nov. 10-11 on "peak oil" and what it may mean to Denver and the nation's economy. The U.S. arm of the International Association for the Study of Peak Oil & Gas (www.aspo-usa.com) will co-host the event.

Mayor John Hickenlooper, the state's most famous former petroleum geologist, said he heard Tom Petrie, chairman and CEO of Denver oil and gas investment firm Petrie Parkman & Company Inc., give a presentation on the topic about a year ago.

"It was so compelling that I thought more people should be aware of this going on," Hickenlooper said. "That this is happening, has or is about to happen.

"I don't think, 'the sky is falling, the sky is falling.' But the sooner we begin to examine what the alternatives could be, as the price of oil increases, the better off we'll be and the less trauma and less economic hardship we'll endure. Like any business, you want to plan for these things."

Petrie has studied the world's oil economy for years. The firm has advised Saudi Arabia about its natural gas resources, the state of Alaska on gas-pipeline options and the U.S. Department of Energy on the sale of an oilfield. Petrie has advised on more than $130 billion worth of energy-related mergers and acquisitions.

In early August, during a presentation at the Colorado Oil and Gas Association's annual conference, Petrie told a crowd of oil and gas executives he believes "peak oil" could hit in the next decade.

"We're a lot nearer to peak oil than some people like to acknowledge," he said.

Oil prices on the New York Mercantile Exchange neared $65 per barrel Aug. 10, up 40 percent from a year ago.

Prices at the pump were at record levels both in Colorado and across the nation on Aug. 10. AAA reported the national average at a record $2.376 per gallon for regular unleaded while Colorado's average was $2.32 per gallon, a 22 percent jump from a year ago.

But some believe the oil and gas industry will respond to higher prices with new technology to reach new resources.

"I am extremely skeptical that we're looking at a peak oil perspective. We have tar sands, oil shale, advances in deep drilling. There's a lot out there," said Edward Murphy, group director for refining and marketing at the American Petroleum Institute in Washington, D.C., whose 400 members include the world's major oil companies.

"It's hard to make a convincing case that we're reaching peak oil production. It's really a technology issue. The question is how quickly is technology going to advance and will it advance as quickly as demand."

But even if new technology increases oil supplies -- albeit at higher prices -- the effect on the nation's and world's economies will be broad.

"When you look at how widespread and critical our reliance on oil is, the bigger the issue is. Everybody has a dog in this fight," Hickenlooper said.

© 2005 Denver Business Journal

© 2005 MSNBC.com




--------------------------------------------------------------------------------

The Breaking Point

By Peter Maass, New York Times
Published on Sunday, August 21, 2005
http://www.energybulletin.net/8112.html

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

The largest oil terminal in the world, Ras Tanura, is located on the eastern coast of Saudi Arabia, along the Persian Gulf. From Ras Tanura's control tower, you can see the classic totems of oil's dominion -- supertankers coming and going, row upon row of storage tanks and miles and miles of pipes. Ras Tanura, which I visited in June, is the funnel through which nearly 10 percent of the world's daily supply of petroleum flows. Standing in the control tower, you are surrounded by more than 50 million barrels of oil, yet not a drop can be seen.

The oil is there, of course. In a technological sleight of hand, oil can be extracted from the deserts of Arabia, processed to get rid of water and gas, sent through pipelines to a terminal on the gulf, loaded onto a supertanker and shipped to a port thousands of miles away, then run through a refinery and poured into a tanker truck that delivers it to a suburban gas station, where it is pumped into an S.U.V. -- all without anyone's actually glimpsing the stuff. So long as there is enough oil to fuel the global economy, it is not only out of sight but also out of mind, at least for consumers.

I visited Ras Tanura because oil is no longer out of mind, thanks to record prices caused by refinery shortages and surging demand -- most notably in the United States and China -- which has strained the capacity of oil producers and especially Saudi Arabia, the largest exporter of all. Unlike the 1973 crisis, when the embargo by the Arab members of the Organization of Petroleum Exporting Countries created an artificial shortfall, today's shortage, or near-shortage, is real. If demand surges even more, or if a producer goes offline because of unrest or terrorism, there may suddenly not be enough oil to go around.

As Aref al-Ali, my escort from Saudi Aramco, the giant state-owned oil company, pointed out, ''One mistake at Ras Tanura today, and the price of oil will go up.'' This has turned the port into a fortress; its entrances have an array of gates and bomb barriers to prevent terrorists from cutting off the black oxygen that the modern world depends on. Yet the problem is far greater than the brief havoc that could be wrought by a speeding zealot with 50 pounds of TNT in the trunk of his car. Concerns are being voiced by some oil experts that Saudi Arabia and other producers may, in the near future, be unable to meet rising world demand. The producers are not running out of oil, not yet, but their decades-old reservoirs are not as full and geologically spry as they used to be, and they may be incapable of producing, on a daily basis, the increasing volumes of oil that the world requires. ''One thing is clear,'' warns Chevron, the second-largest American oil company, in a series of new advertisements, ''the era of easy oil is over.''

In the past several years, the gap between demand and supply, once considerable, has steadily narrowed, and today is almost negligible. The consequences of an actual shortfall of supply would be immense. If consumption begins to exceed production by even a small amount, the price of a barrel of oil could soar to triple-digit levels. This, in turn, could bring on a global recession, a result of exorbitant prices for transport fuels and for products that rely on petrochemicals -- which is to say, almost every product on the market. The impact on the American way of life would be profound: cars cannot be propelled by roof-borne windmills. The suburban and exurban lifestyles, hinged to two-car families and constant trips to work, school and Wal-Mart, might become unaffordable or, if gas rationing is imposed, impossible. Carpools would be the least imposing of many inconveniences; the cost of home heating would soar -- assuming, of course, that climate-controlled habitats do not become just a fond memory.

But will such a situation really come to pass? That depends on Saudi Arabia. To know the answer, you need to know whether the Saudis, who possess 22 percent of the world's oil reserves, can increase their country's output beyond its current limit of 10.5 million barrels a day, and even beyond the 12.5-million-barrel target it has set for 2009. (World consumption is about 84 million barrels a day.) Saudi Arabia is the sole oil superpower. No other producer possesses reserves close to its 263 billion barrels, which is almost twice as much as the runner-up, Iran, with 133 billion barrels. New fields in other countries are discovered now and then, but they tend to offer only small increments. For example, the much-contested and as-yet-unexploited reserves in the Alaska National Wildlife Refuge are believed to amount to about 10 billion barrels, or just a fraction of what the Saudis possess.

But the truth about Saudi oil is hard to figure out. Oil reservoirs cannot be inventoried like wood in a wilderness: the oil is underground, unseen by geologists and engineers, who can, at best, make highly educated guesses about how much is underfoot and how much can be extracted in the future. And there is a further obstacle: the Saudis will not let outsiders audit their confidential data on reserves and production. Oil is an industry in which not only is the product hidden from sight but so is reliable information about it. And because we do not know when a supply-demand shortfall might arrive, we do not know when to begin preparing for it, so as to soften its impact; the economic blow may come as a sledgehammer from the darkness.

Of course the Saudis do have something to say about this prospect. Before journeying to the kingdom, I went to Washington to hear the Saudi oil minister, Ali al-Naimi, speak at an energy conference in the mammoth Ronald Reagan Building and International Trade Center, not far from the White House. Naimi was the star attraction at a gathering of the American petro-political nexus. Samuel Bodman, the U.S. energy secretary, was on the dais next to him. David O'Reilly, chairman and C.E.O. of Chevron, was waiting in the wings. The moderator was an éminence grise of the oil world, James Schlesinger, a former energy secretary, defense secretary and C.I.A. director.

''I want to assure you here today that Saudi Arabia's reserves are plentiful, and we stand ready to increase output as the market dictates,'' said Naimi, dressed in a gray business suit and speaking with only a slight Arabic accent. He addressed skeptics who contend that Saudi reservoirs cannot be tapped for larger amounts of oil. ''I am quite bullish on technology as the key to our energy future,'' he said. ''Technological innovation will allow us to find and extract more oil around the world.'' He described the task of increasing output as just ''a question of investment'' in new wells and pipelines, and he noted that consuming nations urgently need to build new refineries to process increased supplies of crude. ''There is absolutely no lack of resources worldwide,'' he repeated.

His assurances did not assure. A barrel of oil cost $55 at the time of his speech; less than three months later, the price had jumped by 20 percent. The truth of the matter -- whether the world will really have enough petroleum in the years ahead -- was as well concealed as the millions of barrels of oil I couldn't see at Ras Tanura.

For 31 years, Matthew Simmons has prospered as the head of his own firm, Simmons & Company International, which advises energy companies on mergers and acquisitions. A member of the Council on Foreign Relations, a graduate of the Harvard Business School and an unpaid adviser on energy policy to the 2000 presidential campaign of George W. Bush, he would be a card-carrying member of the global oil nomenclatura, if cards were issued for such things. Yet he is one of the principal reasons the oil world is beginning to ask hard questions of itself.

Two years ago, Simmons went to Saudi Arabia on a government tour for business executives. The group was presented with the usual dog-and-pony show, but instead of being impressed, as most visitors tend to be, with the size and expertise of the Saudi oil industry, Simmons became perplexed. As he recalls in his somewhat heretical new book, ''Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy,'' a senior manager at Aramco told the visitors that ''fuzzy logic'' would be used to estimate the amount of oil that could be recovered. Simmons had never heard of fuzzy logic. What could be fuzzy about an oil reservoir? He suspected that Aramco, despite its promises of endless supplies, might in fact not know how much oil remained to be recovered.

Simmons returned home with an itch to scratch. Saudi Arabia was one of the charter members of OPEC, founded in 1960 in Baghdad to coordinate the policies of oil producers. Like every OPEC country, Saudi Arabia provides only general numbers about its output and reserves; it does not release details about how much oil is extracted from each reservoir and what methods are used to extract that oil, and it does not permit audits by outsiders. The condition of Saudi fields, and those of other OPEC nations, is a closely guarded secret. That's largely because OPEC quotas, which were first imposed in 1983 to limit the output of member countries, were based on overall reserves; the higher an OPEC member's reserves, the higher its quota. It is widely believed that most, if not all, OPEC members exaggerated the sizes of their reserves in order to have the largest possible quota -- and thus the largest possible revenue stream.

In the days of excess supply, bankers like Simmons did not know, or care, about the fudging; whether or not reserves were hyped, there was plenty of oil coming out of the ground. Through the 1970's, 80's and 90's, the capacity of OPEC and non-OPEC countries exceeded demand, and that's why OPEC imposed a quota system -- to keep some product off the market (although many OPEC members, seeking as much revenue as possible, quietly sold more oil than they were supposed to). Until quite recently, the only reason to fear a shortage was if a boycott, war or strike were to halt supplies. Few people imagined a time when supply would dry up because of demand alone. But a steady surge in demand in recent years -- led by China's emergence as a voracious importer of oil -- has changed that.

This demand-driven scarcity has prompted the emergence of a cottage industry of experts who predict an impending crisis that will dwarf anything seen before. Their point is not that we are running out of oil, per se; although as much as half of the world's recoverable reserves are estimated to have been consumed, about a trillion barrels remain underground. Rather, they are concerned with what is called ''capacity'' -- the amount of oil that can be pumped to the surface on a daily basis. These experts -- still a minority in the oil world -- contend that because of the peculiarities of geology and the limits of modern technology, it will soon be impossible for the world's reservoirs to surrender enough oil to meet daily demand.

One of the starkest warnings came in a February report commissioned by the United States Department of Energy's National Energy Technology Laboratory. ''Because oil prices have been relatively high for the past decade, oil companies have conducted extensive exploration over that period, but their results have been disappointing,'' stated the report, assembled by Science Applications International, a research company that works on security and energy issues. ''If recent trends hold, there is little reason to expect that exploration success will dramatically improve in the future. . . . The image is one of a world moving from a long period in which reserves additions were much greater than consumption to an era in which annual additions are falling increasingly short of annual consumption. This is but one of a number of trends that suggest the world is fast approaching the inevitable peaking of conventional world oil production.''

The reference to ''peaking'' is not a haphazard word choice -- ''peaking'' is a term used in oil geology to define the critical point at which reservoirs can no longer produce increasing amounts of oil. (This tends to happen when reservoirs are about half-empty.) ''Peak oil'' is the point at which maximum production is reached; afterward, no matter how many wells are drilled in a country, production begins to decline. Saudi Arabia and other OPEC members may have enough oil to last for generations, but that is no longer the issue. The eventual and painful shift to different sources of energy -- the start of the post-oil age -- does not begin when the last drop of oil is sucked from under the Arabian desert. It begins when producers are unable to continue increasing their output to meet rising demand. Crunch time comes long before the last drop.

''The world has never faced a problem like this,'' the report for the Energy Department concluded. ''Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary. Previous energy transitions (wood to coal and coal to oil) were gradual and evolutionary; oil peaking will be abrupt and revolutionary.''

Most experts do not share Simmons's concerns about the imminence of peak oil. One of the industry's most prominent consultants, Daniel Yergin, author of a Pulitzer Prize-winning book about petroleum, dismisses the doomsday visions. ''This is not the first time that the world has 'run out of oil,''' he wrote in a recent Washington Post opinion essay. ''It's more like the fifth. Cycles of shortage and surplus characterize the entire history of the oil industry.'' Yergin says that a number of oil projects that are under construction will increase the supply by 20 percent in five years and that technological advances will increase the amount of oil that can be recovered from existing reservoirs. (Typically, with today's technology, only about 40 percent of a reservoir's oil can be pumped to the surface.)

Yergin's bullish view has something in common with the views of the pessimists -- it rests on unknowns. Will the new projects that are under way yield as much oil as their financial backers hope? Will new technologies increase recovery rates as much as he expects? These questions are next to impossible to answer because coaxing oil out of the ground is an extraordinarily complex undertaking. The popular notion of reservoirs as underground lakes, from which wells extract oil like straws sucking a milkshake from a glass, is incorrect. Oil exists in drops between and inside porous rocks. A new reservoir may contain sufficient pressure to make these drops of oil flow to the surface in a gusher, but after a while -- usually within a few years and often sooner than that -- natural pressure lets up and is no longer sufficient to push oil to the surface. At that point, ''secondary'' recovery efforts are begun, like pumping water or gas into the reservoirs to increase the pressure.

This process is unpredictable; reservoirs are extremely temperamental. If too much oil is extracted too quickly or if the wrong types or amounts of secondary efforts are employed, the amount of oil that can be recovered from a field can be greatly reduced; this is known in the oil world as ''damaging a reservoir.'' A widely cited example is Oman: in 2001, its daily production reached more than 960,000 barrels, but then suddenly declined, despite the use of advanced technologies. Today, Oman produces 785,000 barrels of oil a day. Herman Franssen, a consultant who worked in Oman for a decade, sees that country's experience as a possible lesson in the limits of technology for other producers that try to increase or maintain high levels of output. ''They reached a million barrels a day, and then a few years later production collapsed,'' Franssen said in a phone interview. ''They used all these new technologies, but they haven't been able to stop the decline yet.''

The vague production and reserve data that gets published does not begin to tell the whole story of an oil field's health, production potential or even its size. For a clear-as-possible picture of a country's oil situation, you need to know what is happening in each field -- how many wells it has, how much oil each well is producing, what recovery methods are being used and how long they've been used and the trend line since the field went into production. Data of that sort are typically not released by state-owned companies like Saudi Aramco.

As Matthew Simmons searched for clues to the truth of the Saudi situation, he immersed himself in the minutiae of oil geology. He realized that data about Saudi fields might be found in the files of the Society of Petroleum Engineers. Oil engineers, like most professional groups, have regular conferences at which they discuss papers that delve into the work they do. The papers, which focus on particular wells that highlight a problem or a solution to a problem, are presented and debated at the conferences and published by the S.P.E. -- and then forgotten.

Before Simmons poked around, no one had taken the time to pull together the S.P.E. papers that involved Saudi oil fields and review them en masse. Simmons found more than 200 such papers and studied them carefully. Although the papers cover only a portion of the kingdom's wells and date back, in some cases, several decades, they constitute perhaps the best public data about the condition and prospects of Saudi reservoirs.

Ghawar is the treasure of the Saudi treasure chest. It is the largest oil field in the world and has produced, in the past 50 years, about 55 billion barrels of oil, which amounts to more than half of Saudi production in that period. The field currently produces more than five million barrels a day, which is about half of the kingdom's output. If Ghawar is facing problems, then so is Saudi Arabia and, indeed, the entire world.

Simmons found that the Saudis are using increasingly large amounts of water to force oil out of Ghawar. Most of the wells are concentrated in the northern portion of the 174-mile-long field. That might seem like good news -- when the north runs low, the Saudis need only to drill wells in the south. But in fact it is bad news, Simmons concluded, because the southern portions of Ghawar are geologically more difficult to draw oil from. ''Someday (and perhaps that day will be soon), the remarkably high well flow rates at Ghawar's northern end will fade, as reservoir pressures finally plummet,'' Simmons writes in his book. ''Then, Saudi Arabian oil output will clearly have peaked. The death of this great king'' -- meaning Ghawar -- ''leaves no field of vaguely comparable stature in the line of succession. Twilight at Ghawar is fast approaching.'' He goes on: ''The geological phenomena and natural driving forces that created the Saudi oil miracle are conspiring now in normal and predictable ways to bring it to its conclusion, in a time frame potentially far shorter than officialdom would have us believe.'' Simmons concludes, '' Saudi Arabia clearly seems to be nearing or at its peak output and cannot materially grow its oil production.''

Saudi officials belittle Simmons's work. Nansen Saleri, a senior Aramco official, has described Simmons as a banker ''trying to come across as a scientist.'' In a speech last year, Saleri wryly said, ''I can read 200 papers on neurology, but you wouldn't want me to operate on your relatives.'' I caught up with Simmons in June, during a trip he made to Manhattan to talk with a group of oil-shipping executives. The impression he gives is of an enthusiastic inventor sharing a discovery that took him by surprise. He has a certain wide-eyed wonder in his regard, as if a bit of mystery can be found in everything that catches his eye. And he has a rumpled aspect -- thinning hair slightly askew, shirt sleeves a fraction too long. Though he delivers a bracing message, his discourse can wander. He is a successful businessman, and it is clear that he did not achieve his position by being a man of impeccable convention. He certainly has not lost sight of the rule that people who shout ''the end is nigh'' do not tend to be favorably reviewed by historians, let alone by their peers. He notes in his book that way back in 1979, The New York Times published an investigative story by Seymour Hersh under the headline ''Saudi Oil Capacity Questioned.'' He knows that in past decades the Cassandras failed to foresee new technologies, like deep-water and horizontal drilling, that provided new sources of oil and raised the amount of oil that can be recovered from reservoirs.

But Simmons says that there are only so many rabbits technology can pull out of its petro-hat. He impishly notes that if the Saudis really wanted to, they could easily prove him wrong. ''If they want to satisfy people, they should issue field-by-field production reports and reserve data and have it audited,'' he told me. ''It would then take anybody less than a week to say, 'Gosh, Matt is totally wrong,' or 'Matt actually might be too optimistic.'''

Simmons has a lot riding on his campaign -- not only his name but also his business, which would not be rewarded if he is proved to be a fool. What, I asked, if the data show that the Saudis will be able to sustain production of not only 12.5 million barrels a day -- their target for 2009 -- but 15 million barrels, which global demand is expected to require of them in the not-too-distant future? ''The odds of them sustaining 12 million barrels a day is very low,'' Simmons replied. ''The odds of them getting to 15 million for 50 years -- there's a better chance of me having Bill Gates's net worth, and I wouldn't bet a dime on that forecast.''

The gathering of executives took place in a restaurant at Chelsea Piers; about 35 men sat around a set of tables as the host introduced Simmons. He rambled a bit but hit his talking points, and the executives listened raptly; at one point, the man on my right broke into a soft whistle, of the sort that means ''Holy cow.''

Simmons didn't let up. ''We're going to look back at history and say $55 a barrel was cheap,'' he said, recalling a TV interview in which he predicted that a barrel might hit triple digits.

He said that the anchor scoffed, in disbelief, ''A hundred dollars?''

Simmons replied, ''I wasn't talking about low triple digits.''

The onset of triple-digit prices might seem a blessing for the Saudis -- they would receive greater amounts of money for their increasingly scarce oil. But one popular misunderstanding about the Saudis -- and about OPEC in general -- is that high prices, no matter how high, are to their benefit.

Although oil costing more than $60 a barrel hasn't caused a global recession, that could still happen: it can take a while for high prices to have their ruinous impact. And the higher above $60 that prices rise, the more likely a recession will become. High oil prices are inflationary; they raise the cost of virtually everything -- from gasoline to jet fuel to plastics and fertilizers -- and that means people buy less and travel less, which means a drop-off in economic activity. So after a brief windfall for producers, oil prices would slide as recession sets in and once-voracious economies slow down, using less oil. Prices have collapsed before, and not so long ago: in 1998, oil fell to $10 a barrel after an untimely increase in OPEC production and a reduction in demand from Asia, which was suffering through a financial crash. Saudi Arabia and the other members of OPEC entered crisis mode back then; adjusted for inflation, oil was at its lowest price since the cartel's creation, threatening to feed unrest among the ranks of jobless citizens in OPEC states.

''The Saudis are very happy with oil at $55 per barrel, but they're also nervous,'' a Western diplomat in Riyadh told me in May, referring to the price that prevailed then. (Like all the diplomats I spoke to, he insisted on speaking anonymously because of the sensitivities of relations with Saudi Arabia.) ''They don't know where this magic line has moved to. Is it now $65? Is it $75? Is it $80? They don't want to find out, because if you did have oil move that far north . . . the chain reaction can come back to a price collapse again.''

High prices can have another unfortunate effect for producers. When crude costs $10 a barrel or even $30 a barrel, alternative fuels are prohibitively expensive. For example, Canada has vast amounts of tar sands that can be rendered into heavy oil, but the cost of doing so is quite high. Yet those tar sands and other alternatives, like bioethanol, hydrogen fuel cells and liquid fuel from natural gas or coal, become economically viable as the going rate for a barrel rises past, say, $40 or more, especially if consuming governments choose to offer their own incentives or subsidies. So even if high prices don't cause a recession, the Saudis risk losing market share to rivals into whose nonfundamentalist hands Americans would much prefer to channel their energy dollars. A concerted push for greater energy conservation in the United States, which consumes one-quarter of the world's oil (mostly to fuel our cars, as gasoline), would hurt producing nations, too. Basically, any significant reduction in the demand for oil would be ruinous for OPEC members, who have little to offer the world but oil; if a substitute can be found, their future is bleak. Another Western diplomat explained the problem facing the Saudis: ''You want to have the price as high as possible without sending the consuming nations into a recession and at the same time not have the price so high that it encourages alternative technologies.''

From the American standpoint, one argument in favor of conservation and a switch to alternative fuels is that by limiting oil imports, the United States and its Western allies would reduce their dependence on a potentially unstable region. (In fact, in an effort to offset the risks of relying on the Saudis, America's top oil suppliers are Canada and Mexico.) In addition, sending less money to Saudi Arabia would mean less money in the hands of a regime that has spent the past few decades doling out huge amounts of its oil revenue to mosques, madrassas and other institutions that have fanned the fires of Islamic radicalism. The oil money has been dispensed not just by the Saudi royal family but by private individuals who benefited from the oil boom -- like Osama bin Laden, whose ample funds, probably eroded now, came from his father, a construction magnate. Without its oil windfall, Saudi Arabia would have had a hard time financing radical Islamists across the globe.

For the Saudis, the political ramifications of reduced demand for its oil would not be negligible. The royal family has amassed vast personal wealth from the country's oil revenues. If, suddenly, Saudis became aware that the royal family had also failed to protect the value of the country's treasured resource, the response could be severe. The mere admission that Saudi reserves are not as impressively inexhaustible as the royal family has claimed could lead to hard questions about why the country, and the world, had been misled. With the death earlier this month of the long-ailing King Fahd, the royal family is undergoing another period of scrutiny; the new king, Abdullah, is in his 80's, and the crown prince, his half-brother Sultan, is in his 70's, so the issue of generational change remains to be settled. As long as the country is swimming in petro-dollars -- even as it is paying off debt accrued during its lean years -- everyone is relatively happy, but that can change. One diplomat I spoke to recalled a comment from Sheik Ahmed Zaki Yamani, the larger-than-life Saudi oil minister during the 1970's: ''The Stone Age didn't end for lack of stone, and the oil age will end long before the world runs out of oil.''

Until now, the Saudis had an excess of production capacity that allowed them, when necessary, to flood the market to drive prices down. They did that in 1990, when the Iraqi invasion of Kuwait eliminated not only Kuwait's supply of oil but also Iraq's. The Saudis functioned, as they always had, as the central bank of oil, releasing supply to the market when it was needed and withdrawing supply to keep prices from going lower than the cartel would have liked. In other words, they controlled not only the price of oil but their own destiny as well.

''That is what the world has called on them to do before -- turn on the taps to produce more and get prices down,'' a senior Western diplomat in Riyadh told me recently. ''Decreasing prices used to keep out alternative fuels. I don't see how they're able to do that anymore. This is a huge change, and it is a big step in the move to whatever is coming next. That's what's really happening.''

Without the ability to flood the markets with oil, the Saudis are resorting to flooding the market with promises; it is a sort of petro-jawboning. That's why Ali al-Naimi, the oil minister, told his Washington audience that Saudi Arabia has embarked on a crash program to raise its capacity to 12.5 million barrels a day by 2009 and even higher in the years after that. Naimi is not unlike a factory manager who needs to promise the moon to his valuable clients, for fear of losing or alarming them. He has no choice. The moment he says anything bracing, the touchy energy markets will probably panic, pushing prices even higher and thereby hastening the onset of recession, a switch to alternative fuels or new conservation efforts -- or all three. Just a few words of honest caution could move the markets; Naimi's speeches are followed nearly as closely in the financial world as those of Alan Greenspan.

I journeyed to Saudi Arabia to interview Naimi and other senior officials, to get as far beyond their prepared remarks as might be possible. Although I was allowed to see Ras Tanura, my interview requests were denied. I was invited to visit Aramco's oil museum in Dhahran, but that is something a Saudi schoolchild can do on a field trip. It was a ''show but don't tell'' policy. I was able to speak about production issues only with Ibrahim al-Muhanna, the oil ministry spokesman, who reluctantly met me over coffee in the lobby of my hotel in Riyadh. He defended Saudi Arabia's refusal to share more data, noting that the Saudis are no different from most oil producers.

''They will not tell you,'' he said. ''Nobody will. And that is not going to change.'' Referring to the fact that Saudi Arabia is often called the central bank of oil, he added: ''If an outsider goes to the Fed and asks, 'How much money do you have?' they will tell you. If you say, 'Can I come and count it?' they will not let you. This applies to oil companies and oil countries.'' I mentioned to Muhanna that many people think his government's ''trust us'' stance is not convincing in light of the cheating that has gone on within OPEC and in the industry as a whole; even Royal Dutch/Shell, a publicly listed oil company that undergoes regular audits, has admitted that it overstated its 2002 reserves by 23 percent.

''There is no reason for any country or company to lie,'' Muhanna replied. ''There is a lot of oil around.'' I didn't need to ask about Simmons and his peak-oil theory; when I met Muhanna at the conference in Washington, he nearly broke off our conversation at the mention of Simmons's name. ''He does not know anything,'' Muhanna said. ''The only thing he has is a big mouth. We should not pay attention to him. Either you believe us or you don't.''

So whom to believe? Before leaving New York for Saudi Arabia, I was advised by several oil experts to try to interview Sadad al-Husseini, who retired last year after serving as Aramco's top executive for exploration and production. I faxed him in Dhahran and received a surprisingly quick reply; he agreed to meet me. A week later, after I arrived in Riyadh, Husseini e-mailed me, asking when I would come to Dhahran; in a follow-up phone call, he offered to pick me up at the airport. He was, it seemed, eager to talk.

It can be argued that in a nation devoted to oil, Husseini knows more about it than anyone else. Born in Syria, Husseini was raised in Saudi Arabia, where his father was a government official whose family took on Saudi citizenship. Husseini earned a Ph.D. in geological sciences from Brown University in 1973 and went to work in Aramco's exploration department, eventually rising to the highest position. Until his retirement last year -- said to have been caused by a top-level dispute, the nature of which is the source of many rumors -- Husseini was a member of the company's board and its management committee. He is one of the most respected and accomplished oilmen in the world.

After meeting me at the cavernous airport that serves Dhahran, he drove me in his luxury sedan to the villa that houses his private office. As we entered, he pointed to an armoire that displayed a dozen or so vials of black liquid. ''These are samples from oil fields I discovered,'' he explained. Upstairs, there were even more vials, and he would have possessed more than that except, as he said, laughing, ''I didn't start collecting early enough.''

We spoke for several hours. The message he delivered was clear: the world is heading for an oil shortage. His warning is quite different from the calming speeches that Naimi and other Saudis, along with senior American officials, deliver on an almost daily basis. Husseini explained that the need to produce more oil is coming from two directions. Most obviously, demand is rising; in recent years, global demand has increased by two million barrels a day. (Current daily consumption, remember, is about 84 million barrels a day.) Less obviously, oil producers deplete their reserves every time they pump out a barrel of oil. This means that merely to maintain their reserve base, they have to replace the oil they extract from declining fields. It's the geological equivalent of running to stay in place. Husseini acknowledged that new fields are coming online, like offshore West Africa and the Caspian basin, but he said that their output isn't big enough to offset this growing need.

''You look at the globe and ask, 'Where are the big increments?' and there's hardly anything but Saudi Arabia,'' he said. ''The kingdom and Ghawar field are not the problem. That misses the whole point. The problem is that you go from 79 million barrels a day in 2002 to 82.5 in 2003 to 84.5 in 2004. You're leaping by two million to three million a year, and if you have to cover declines, that's another four to five million.'' In other words, if demand and depletion patterns continue, every year the world will need to open enough fields or wells to pump an additional six to eight million barrels a day -- at least two million new barrels a day to meet the rising demand and at least four million to compensate for the declining production of existing fields. ''That's like a whole new Saudi Arabia every couple of years,'' Husseini said. ''It can't be done indefinitely. It's not sustainable.''

Husseini speaks patiently, like a teacher who hopes someone is listening. He is in the enviable position of knowing what he talks about while having the freedom to speak openly about it. He did not disclose precise information about Saudi reserves or production -- which remain the equivalent of state secrets -- but he felt free to speak in generalities that were forthright, even when they conflicted with the reassuring statements of current Aramco officials. When I asked why he was willing to be so frank, he said it was because he sees a shortage ahead and wants to do what he can to avert it. I assumed that he would not be particularly distressed if his rivals in the Saudi oil establishment were embarrassed by his frankness.

Although Matthew Simmons says it is unlikely that the Saudis will be able to produce 12.5 million barrels a day or sustain output at that level for a significant period of time, Husseini says the target is realistic; he says that Simmons is wrong to state that Saudi Arabia has reached its peak. But 12.5 million is just an interim marker, as far as consuming nations are concerned, on the way to 15 million barrels a day and beyond -- and that is the point at which Husseini says problems will arise.

At the conference in Washington in May, James Schlesinger, the moderator, conducted a question-and-answer session with Naimi at the conclusion of the minister's speech. One of the first questions involved peak oil: might it be true that Saudi Arabia, which has relied on the same reservoirs, and especially Ghawar, for more than five decades, is nearing the geological limit of its output?

Naimi wouldn't hear of it.

''I can assure you that we haven't peaked,'' he responded. ''If we peaked, we would not be going to 12.5 and we would not be visualizing a 15-million-barrel-per-day production capacity. . . . We can maintain 12.5 or 15 million for the next 30 to 50 years.''

Experts like Husseini are very concerned by the prospect of trying to produce 15 million barrels a day. Even if production can be ramped up that high, geology may not be forgiving. Fields that are overproduced can drop off, in terms of output, quite sharply and suddenly, leaving behind large amounts of oil that cannot be coaxed out with existing technology. This is called trapped oil, because the rocks or sediment around it prevent it from escaping to the surface. Unless new technologies are developed, that oil will never be extracted. In other words, the haste to recover oil can lead to less oil being recovered.

''You could go to 15, but that's when the questions of depletion rate, reservoir management and damaging the fields come into play,'' says Nawaf Obaid, a Saudi oil and security analyst who is regarded as being exceptionally well connected to key Saudi leaders. ''There is an understanding across the board within the kingdom, in the highest spheres, that if you're going to 15, you'll hit 15, but there will be considerable risks . . . of a steep decline curve that Aramco will not be able to do anything about.''

Even if the Saudis are willing to risk damaging their fields, or even if the risk is overstated, Husseini points out a practical problem. To produce and sustain 15 million barrels a day, Saudi Arabia will have to drill a lot more wells and build a lot more pipelines and processing facilities. Currently, the global oil industry suffers a deficit of qualified engineers to oversee such projects and the equipment and the raw materials -- for example, rigs and steel -- to build them. These things cannot be wished from thin air or developed quickly enough to meet the demand.

''If we had two dozen Texas A&M's producing a thousand new engineers a year and the industrial infrastructure in the kingdom, with the drilling rigs and power plants, we would have a better chance, but you cannot put that into place overnight,'' Husseini said. ''Capacity is not just a function of reserves. It is a function of reserves plus know-how plus a commercial economic system that is designed to increase the resource exploitation. For example, in the U.S. you have infrastructure -- there must be tens of thousands of miles of pipelines. If we, in Saudi Arabia, evolve to that level of commercial maturity, we could probably produce a heck of a lot more oil. But to get there is a very tedious, slow process.''

He worries that the rising global demand for oil will lead to the petroleum equivalent of running an engine at ever-increasing speeds without stopping to cool it down or change the oil. Husseini does not want to see the fragile and irreplaceable reservoirs of the Middle East become damaged through wanton overproduction.

''If you are ramping up production so fast and jump from high to higher to highest, and you're not having enough time to do what needs to be done, to understand what needs to be done, then you can damage reservoirs,'' he said. ''Systematic development is not just a matter of money. It's a matter of reservoir dynamics, understanding what's there, analyzing and understanding information. That's where people come in, experience comes in. These are not universally available resources.''

The most worrisome part of the crisis ahead revolves around a set of statistics from the Energy Information Administration, which is part of the U.S. Department of Energy. The E.I.A. forecast in 2004 that by 2020 Saudi Arabia would produce 18.2 million barrels of oil a day, and that by 2025 it would produce 22.5 million barrels a day. Those estimates were unusual, though. They were not based on secret information about Saudi capacity, but on the projected needs of energy consumers. The figures simply assumed that Saudi Arabia would be able to produce whatever the United States needed it to produce. Just last month, the E.I.A. suddenly revised those figures downward -- not because of startling new information about world demand or Saudi supply but because the figures had given so much ammunition to critics. Husseini, for example, described the 2004 forecast as unrealistic.

''That's not how you would manage a national, let alone an international, economy,'' he explained. ''That's the part that is scary. You draw some assumptions and then say, 'O.K., based on these assumptions, let's go forward and consume like hell and burn like hell.''' When I asked whether the kingdom could produce 20 million barrels a day -- about twice what it is producing today from fields that may be past their prime -- Husseini paused for a second or two. It wasn't clear if he was taking a moment to figure out the answer or if he needed a moment to decide if he should utter it. He finally replied with a single word: No.

''It's becoming unrealistic,'' he said. ''The expectations are beyond what is achievable. This is a global problem . . . that is not going to be solved by tinkering with the Saudi industry.''

It would be unfair to blame the Saudis alone for failing to warn of whatever shortages or catastrophes might lie ahead.

In the political and corporate realms of the oil world, there are few incentives to be forthright. Executives of major oil companies have been reluctant to raise alarms; the mere mention of scarce supplies could alienate the governments that hand out lucrative exploration contracts and also send a message to investors that oil companies, though wildly profitable at the moment, have a Malthusian long-term future. Fortunately, that attitude seems to be beginning to change. Chevron's ''easy oil is over'' advertising campaign is an indication that even the boosters of an oil-drenched future are not as bullish as they once were.

Politicians remain in the dark. During the 2004 presidential campaign, which occurred as gas prices were rising to record levels, the debate on energy policy was all but nonexistent. The Bush campaign produced an advertisement that concluded: ''Some people have wacky ideas. Like taxing gasoline more so people drive less. That's John Kerry.'' Although many environmentalists would have been delighted if Kerry had proposed that during the campaign, in fact the ad was referring to a 50-cents-a-gallon tax that Kerry supported 11 years ago as part of a package of measures to reduce the deficit. (The gas tax never made it to a vote in the Senate.) Kerry made no mention of taxing gasoline during the campaign; his proposal for doing something about high gas prices was to pressure OPEC to increase supplies.

Husseini, for one, doesn't buy that approach. ''Everybody is looking at the producers to pull the chestnuts out of the fire, as if it's our job to fix everybody's problems,'' he told me. ''It's not our problem to tell a democratically elected government that you have to do something about your runaway consumers. If your government can't do the job, you can't expect other governments to do it for them.'' Back in the 70's, President Carter called for the moral equivalent of war to reduce our dependence on foreign oil; he was not re-elected. Since then, few politicians have spoken of an energy crisis or suggested that major policy changes are necessary to avert one. The energy bill signed earlier this month by President Bush did not even raise fuel-efficiency standards for passenger cars. When a crisis comes -- whether in a year or 2 or 10 -- it will be all the more painful because we will have done little or nothing to prepare for it.

Peter Maass is a contributing writer. He is writing a book about oil.

Copyright 2005 The New York Times Company

~~~~~~~~~~~~~~~ Editorial Notes ~~~~~~~~~~~~~~~~~~~

See the original for photos and a readers forum.

Author Peter Maass has a website at www.petermaass.com/

-BA
Article found at :
http://www.energybulletin.net/newswire.php?id=8112

Original article :
http://www.nytimes.com/2005/08/21/magazine