Tokyo-based Nomura: Oil prices may hit $220 a barrel

By Matt Egan
Fox Business
February 23, 2011

If the turmoil paralyzing parts of the Middle East and North Africa brings oil production in Libya and Algeria to a standstill, it could cause crude oil to explode to $220 a barrel, derailing the global economic recovery.

According to a new report from Tokyo-based Nomura, a simultaneous production halt from embattled Libya and neighboring Algeria would reduce OPEC spare capacity to 2.1 million barrels a day and may cause crude to spike from about $97 a barrel today to $220 a barrel.

“The closest comparison is the 1990-1991 Gulf War,” the Nomura analysts, led by Michael Lo, wrote, saying crude prices leaped 70% in seven months when OPEC’s spare capacity was cut to just 1.8 million barrels a day during that conflict with oil-rich Iraq.

While the $220 figure may sound high, Nomura said it could be an underestimate as speculative oil traders who were not around during the Gulf War may exaggerate the surge during an oil production halt.

The turmoil in Algeria hasn’t gotten nearly as much attention, but that government is also believed to be very vulnerable and recent protests have led the government there to lift its state of emergency.

The report comes as Wall Street has grown increasingly fearful the violence slamming Libya, Africa’s third-largest oil producer, will eat into the global economic recovery.

Even though the global economy has strengthened considerably in recent months, it’s clear $220 oil prices would seriously hurt growth, putting a huge burden on cash-strapped consumers and businesses, especially transportation companies like shipping giant FedEx (FDX: 89.25, 0.00, 0.00%), airliner JetBlue (JBLU: 5.70, 0.00, 0.00%) and cruise operator Carnival (CCL: 42.06, 0.00, 0.00%).

Crude’s expiring March contract spiked 8.5% — its biggest one-day gain since April 2009 — to a 2 1/2-year high of $93.57 on Tuesday in response to the turmoil in Libya. The surge in oil prices sent the Dow Jones Industrial Average tumbling 178 points, its steepest decline since November.

With no resolution in sight, crude continued its gains on Wednesday, with the commodity’s April contract jumping $2.16 a barrel, or 2.30%, to $97.58. Brent crude continues to vault ahead of crude, surging another $3.92 a barrel, or 3.71%, to $109.70.

According to Bloomberg data, Libya pumped 1.59 million barrels of crude a day last month, while Algeria pumped 1.25 million barrels a day.

The markets have been pricing in the possibility the crisis in Libya will break out into an all-out civil war as longtime Libyan leader Muammar al-Qaddafi has refused to step down. In a televised speech on Tuesday, he said, “I will fight to the last drop of my blood.”

Citing a source close to the al-Qaddafi regime, Time Magazine reported late Tuesday the leader has ordered security services to start sabotaging oil facilities. The forces plan to blow up several oil pipelines, cutting off flow to Mediterranean ports, the report said.

According to Italian authorities, the death toll during the political unrest in Libya may have jumped to about 1,000.

Oil on its way to $200 a barrel

  • Crude climbed up to $110 today due to what experts say is the effects of Libyan and Middle East unrest.
  • Oil insider Lindsey Williams says it´s just the beginning. “Unrest and oil prices will completely collapse U.S. Dollar in 2012.”
  • Oil companies will open massive U.S. reserves to cope with lack of oil for local consumption.

Reuters
February 23, 2011

Oil futures rallied above $110 a barrel on Wednesday, posting the biggest three-day percentage gain in a year, as the escalating violence in Libya could further reduce its production.

Between 300,000 and 400,000 barrels per day of Libyan output — up to 25 percent — has been shut down, according to Reuters calculations, marking the first cut in oil supplies related to the recent wave of anti-government unrest in North Africa and the Middle East.

After Libyan leader Muammar Gaddafi vowed in a defiant speech on Tuesday that he would not step down, promising severe punishment to his detractors, analysts fear that long-lasting supply disruptions or even permanent damage lies ahead for the OPEC member’s oil industry.

Traders were intently watching what top OPEC exporter Saudi Arabia will do, even as its oil minister has reiterated assurances the kingdom and other OPEC members would be ready to act should a supply shortfall develop.

“I don’t think Libya alone will take us to $150 a barrel, but, if unrest spreads in the Gulf countries, we could easily get there. That is why it is imperative the Saudis release some extra barrels into the market now to calm the situation, rather than simply trying to talk the price down,” said Edward Meir, an analyst at MF Global in New York.

In London, ICE Brent crude for April delivery gained $4.01, or 3.8 percent, at $109.79 a barrel. Earlier, it touched a session high of $110.35, the highest since September 2, 2008, when prices hit $110.45.

In three days, the Brent contract has surged nearly $8, or 7.8 percent, the biggest three-day percentage advance since February 2010.

In New York, the new front-month, April crude rose $2.48, or 2.6 percent, to $97.90 a barrel. It earlier reached $98.07, the highest intraday price since October 2, 2008, when prices hit $100.37.

Since resuming trading on Tuesday, following a long holiday weekend, U.S. crude has advanced nearly $12, or nearly 14 percent, the biggest two-day percentage gain since January 2009.

Brent’s premium against U.S. crude widened to as much as $12.84, after posting $10.36 at the close on Tuesday.

Traders were gearing up for U.S. weekly inventory data, the first of which will be released by the industry group American Petroleum Institute later Wednesday at 4:30 p.m. EST.

A Reuters poll forecast that U.S. crude stockpiles rose 1.3 million barrels last week, while distillate inventories fell 1.4 million barrels and gasoline supplies rose 400,000 barrels.

U.S. Senate Also Covering-up Oil spill

Global Research

On Tuesday, the US senate began hearings into the Deepwater Horizon disaster, which took the lives of 11 workers in an April 20oil spillexplosion and has since poured millions of gallons of oil into the Gulf of Mexico, threatening the region with an environmental and economic catastrophe.

Appearing before the Energy and Natural Resources Committee in the morning and the Environmental and Public Health Committee in the afternoon were executives from the three corporations implicated in the disaster: Lamar McKay, president of the US operations of BP, which owned the oil and the drill site; Steven Newman, president of Transocean, the contractor that owned the rig and employed most of its workers; and Tim Probert, an executive with Halliburton, which contracted for the work of cementing the rig’s wellhead one mile beneath ocean’s surface.

The hearing resembled a falling out among thieves, with multi-millionaire executives—who, until April 20, had collaborated in thwarting basic safety and environmental considerations—each blaming the other for the explosion.

McKay of BP blamed Transocean. “Transocean owned the Deepwater Horizon drilling rig and its equipment, including the blowout preventer,” he said. “Transocean’s blowout preventer failed to operate.” Newman flatly denied that the blowout preventer was responsible for the disaster, shifting blame to BP, which he said controlled the operation, and Halliburton, which was responsible for the cementing around the well cap. “The one thing we know with certainty is that on the evening of April 20 there was a sudden, catastrophic failure of the cement, the casing, or both,” Newman said. Probert of Halliburton pushed back, indicating that BP and Transocean had moved forward operations before cementing was adequately set.

There was, in fact, some harmony between the accounts offered by the executives of Halliburton and Transocean, both of whom appeared to suggest that BP ordered the skipping of a usual step in offshore drilling—the placing of a cement plug inside the well to hold explosive gases in place. That this step was passed over was corroborated by two workers on the rig, who spoke to the Wall Street Journal on condition of anonymity. The workers also told the Journal that BP first cleared the decision with the US Department of the Interior’s Minerals Management Service (MMS). Both BP and the MMS refused comment to the Journal.

Robert Bea, a University of California at Berkeley engineering professor, has gathered testimony from Deepwater Horizon survivors that indicates the rig was hit by major bursts of natural gas, promoting fears of an explosion just weeks before the April 20 blast, the New Orleans Times-Picayune reports. This raised concerns about whether mud at the well head should be replaced by much lighter seawater prior to installation of a concrete plug. The decision to proceed won out, according to information gathered by Bea.

Whatever the immediate cause of the disaster, the clear thrust of the hearings was to focus public outrage on a single, correctable “mistake,” such as a mechanical failure or regulatory oversight, in order to obscure the more fundamental reasons for the disaster: the decades-long gutting of regulation carried out by both Republicans and Democrats at the behest of the oil industry that made such a catastrophe all but inevitable.

A similar calculation lay behind Department of the Interior Secretary Ken Salazar’s Tuesday announcement that the MMS, which ostensibly regulates offshore oil drilling, will be split into two units—one that collects the estimated $13 billion in annual royalties from the nation’s extractive industries, and one that enforces safety and environmental regulations. Salazar’s claim that this would eliminate “conflicts of interest” in government regulation was nervy, to say the least, coming from a man with long-standing and intimate ties with oil and mining concerns, including BP.

Indeed, more farcical than the executives’ recriminations against each other was the spectacle of senators attempting to pose as tough critics of the oil industry. The US Senate, like the House of Representatives, the Department of the Interior, and the White House, is for all intents and purposes on the payroll of BP and the energy industry as a whole. Among the senators sitting on the two committees who have received tens of thousands in campaign cash from BP and the oil industry are Richard Shelby (Republican, Alabama), Mary Landrieu (Democrat, Louisiana), John McCain (Republican, Arizona) and Lisa Murkowski (Republican, Alaska).

One of the few truthful moments in the hearings came when an exasperated Murkowski told the executives, “I would suggest to all three of you that we are all in this together.” Murkowski and Landrieu also expressed concerns that the disaster could compromise offshore drilling.

None with even a passing familiarity of the workings of Washington or the Senate can have any doubt that Tuesday’s hearings were but the opening of a government whitewash. The ultimate aim is to shield the major industry players and the financial interests that stand behind them from any serious consequences.

The assemblage of the guilty parties inside the Senate chambers took place as ruptured pipes on the ocean floor continued to gush forth oil at a rate conservatively estimated at 220,000 gallons per day some 40 miles off Louisiana’s coast. The rate could be many times greater, but arriving at a more accurate estimate is impossible because BP has refused to release its underwater video footage for independent analysis.

BP, which is liable for cleanup costs, has all but admitted it has no idea of how to stop the leak. Its attempt last weekend to lower a four story box over the piping failed when ice crystals clogged a portal at the structure’s roof, a result that was widely anticipated. BP is now considering lowering a much smaller box in order to avoid icing. US Coast Guard and BP representatives have also floated the idea of a “junk shot,” firing golf balls, tire shreds, and other refuse at high pressure into the well.

The drilling of two relief wells continues, with the aim of disrupting the flow of oil from the current well. This option will take a minimum of 90 days, during which 18 million gallons more oil will pour out at the low-end estimate. Even this option provides no certainty. “The risks include unpredictable weather, since the wells will be operational at the start of hurricane season,” according to a report in the Christian Science Monitor. “The wells are also being drilled into the same mix of oil and gas that caused the original explosion, and operating two wells in the area creates the potential of igniting a second explosion that is more powerful.”

If the spill cannot be stopped—a distinct possibility—the ruptured well could release a large share of the deposit’s underground reserves into the Gulf of Mexico, which totals upwards of 100 million barrels of crude oil. And even if the spill is stopped at a lesser volume, with each day there is a growing probability that the oil will devastate the entire Gulf from Louisiana to Florida and possibly reach the Gulf Stream, impacting the Atlantic seaboard.

In the interim, the Environmental Protection Agency (EPA) has given BP clearance to resume pumping chemical dispersants into the oil column as it emerges from the broken piping. BP also continues to dump large quantities of dispersant onto the ocean’s surface. The environmental impact of such heavy use of dispersants is unknown, but a growing number of scientists and environmental groups are warning that the highly toxic substance could simply be transferring the brunt of the spill from the shore to marine ecosytems.

“The companies love the idea of using a chemical to spray on an oil slick to sink it,” Rick Steiner, a former professor of Marine Conservation at the University of Alaska, told the World Socialist Web Site. “It’s ‘out of sight out of mind’ as far as the public is concerned because TV cameras can’t see it. This is the big oil company playbook: public relations, litigation protection, and image.”

Oil has now washed ashore in three places: the Chandeleur Islands off Louisana’s coast, on the coast of a navigable channel from the Mississippi River known as the “South Pass,” and on Alabama’s Dauphin Island. Fishing has been blocked over a wide area, effectively imposing layoffs on thousands of fishermen, many of whom are self-employed and therefore not entitled to unemployment benefits. Sightings of birds covered in oil and dead sea turtles washed ashore have increased in recent days.

In his testimony, McKay boasted that BP would make available “grants of $25 million to Louisiana, Mississippi, Alabama, and Florida,” and that it has paid out approximately $3.5 million in damage claims to those affected by the spill. These figures, presented as an act of enormous magnanimity, are such a tiny share of BP’s revenues as to be almost inconsequential.

The company took home $93 million per day in profits—for a total of $6.1 billion—during the first quarter alone. The $3.5 million in damage claims paid out are significantly less than CEO Tony Hayward’s 2009 compensation, estimated at over $4,700,000 by Forbes.

Cybersecurity: The Takeover of the Internet

By Luis R. Miranda
The Real Agenda
May 1, 2010

In the United States, a recent version of a bill was passed by the House Of Representatives, which will give the Federal cybersecurityCommunications Commission (FCC) complete dominion over the web. The bill includes the creation of a new sector of internet security which will include the training, research and coordination of cyberspace. It allows the National Institute of Standards and Technology (NIST) to create a program to recruit children from Kindergarten up to 12 years old to teach them how to carry out internet surveillance, as part of the new Cyber Army. The scholarship program that will fund the training will teach the students how to create and identity management systems used to control access to the web, computer networks, and data. It will also create a series of standards which all service providers will have to meet in order to remain active. Internet users will have to put up with endless requirements, which include the use of government issued software. Bye, bye Linux!

In section 12, subsection 4, the document reads: “We shall provide a procedure to identify K-12 students to participate in summer work and internship programs that will lead to the certification of a federal information technology workforce standards…” In other words, anyone who intends to work anywhere close to the internet, will need to be certified by the federal government, and the federal government will assure itself it will have the “humans resources” to carry this plan out by recruiting children as young as 5 years of age.

Besides the programs described above, the bill also talks about the creation of new protocols that will provide enhanced security. All software made available will have to first be reviewed by the government and then pre-aproved. Again, bye bye open source! Coincidentally, Google has announced the creation of their own version of the internet; which many worried citizens recognize as a beta test for the coming internet 2.0. Among some of the suggested practices that would be adopted under this internet 2.0, is the use of biometric identification in order to access the web. This would allow the government and its technology partners -AKA Microsoft, Google, AT&T, Verizon and others- to further monitor anyone who uses the web, since such identification would narrow down the work to a single individual operating from a specific computer at a specific location. This type of practices have been put in place by technology manufacturers in computers, external hard drives and other devices, which were biometrically enabled. Recently, Microsoft unveiled the latest version of their Xbox game console which features a 5 megapixel camera that activates on movement and recognizes specific body movements.

Section 7, which talks about licensing and certification of cybersecurity professionals reads: “Beginning three years after the enactment of this act, it shall be unlawful for any individual to engage in business in the United States or to be employed in the United States as a provider of cybersecurity services to any federal agency or information system or network … who is not licensed and certified by the program.” Reading further into the bill, it is clear the mentioned networks include not only the all public ones, but also all private ones.

The Comprehensive National Cybersecurity Initiative will give the President emergency powers -to be added to the ones he got under the Patriot Act- that include contingencies to limit the publication of content, access to the internet and shut down of the web. Some presidential aides as well as technology professional who support the bill tried to dampen critics concerns alleging the president already has vast powers to regulate the Internet during emergencies. No one would think the government’s intent is to take advantage of a bill like this in order to limit or end access to the net, if it was not for the crystal clear statements that government officials have put out with respect to net neutrality, internet 2.0, access to the web and so on. One of the best examples we can use to illustrate what the military industrial complex is planning to do is the most recent statements by Barack Hussein Obama’s Regulatory Czar, Cass Sunstein. He said websites should be mandated remove “rumors” and “hateful” or “absurd” statements, usually contained in “right wing” websites. “In the era of the Internet, it has become easy to spread false or misleading rumors about almost anyone,” Sunstein writes. “Some right-wing websites like to make absurd and hateful remarks about the alleged relationship between Barack Obama and the former radical Bill Ayers; one of the websites’ goals was undoubtedly to attract more viewers. “On the Internet as well as on talk radio, altruistic propagators are easy to find; they play an especially large role in the political domain. When Sean Hannity, the television talk show host, attacked Barack Obama because of his alleged associations, one of his goals might have been to promote values and causes that he cherishes.”

The kind of policies bills like the passed in the U.S. House of Representatives wants to implement, are also being proposed and adopted elsewhere in the world. In Australia, senators are rocking their newly acquired powers, by telling the citizens what is legal and what is illegal to say or publish on the web. One of the many people advancing censorship in the land down under is Senator Steve Fielding, who is a member of the party called Family First. He wants all X-rated content banned for everyone, including adults. Mr. Fielding is open to wide censorship on the internet.

Meanwhile in Indonesia, the local government is following on the steps of the United States and Australia. “There are myriad violations by Internet users in Indonesia. We don’t have any intention to move backward… but we don’t want people to think that the government ignores matters like pornography on the Internet.” Recent laws passed in Indonesia were adopted despite firm opposition and widespread protests. The bill was supported by conservative Muslim groups such as the Prosperous Justice Party (PKS), which traces its origins back to Egypt’s outlawed Muslim Brotherhood.

Governments and organizations that support internet censorship and push for cybersecurity acts usually cite pornography, rumors, hate speech and conspiracy theories as the reasons to intervene with what is written and read online. In reality, however, such plans are efforts to minimize or eliminate dissent, much like some governments like Venezuela, Iran, Saudi Arabia and Cuba close newspapers and television stations that challenged the “official position”.

In the United Kingdom, a bill labeled as The Digital Economy Bill includes a new code to limit Internet access. Local reports warn that the government may bypass the regular consultation process to bring it into force. The bill in the UK contains two clauses, 10 and 11, which are particularly worrisome. They would enable Ofcom to move forward with technical measures as soon as the Initial Obligations code has been introduced. This is seen as a government plan to jump the gun, and ahead to limit the Internet without following the appropriate steps. According to the site IPINTEGRITY.com, the rules included in the bill mirror the language of ‘limitations’ contained in the Universal Services directive in the E.U. Telecoms Package.

What other goals do these kind of internet bills will try to achieve?

Back in the United States, section 5 of the Cybersecurity bill states: “The transfer of cybersecurity standards, processes, technology and techniques, will be developed by NIST.” Both NIST and the FCC, have praised Google’s initiative to build a high speed version of the internet. At the same time, the FCC is in the process of submitting a National Broadband Plan which will effectively limit the amount of time and areas a user can access. In addition, internet users would be charge by the use of bandwidth, the amount of downloads and so on. Among the plans to be implemented with the new cybersecurity bill is the “harmonization” of the web. This means, people will eventually have to use software approved by federal agencies in order to access the world wide web.

Section 6, which details the new standards NIST will put in place, indicates that those who do not comply with federal regulations will be barred from using the internet. Subsection 2.2, again touches on the FCC’s prerogative to decide what are safe standards and to allow access to the web only to those Internet Service Providers (ISP’s) and other companies that meet those standards. In other words, companies that provide internet services and the users themselves will have to operate under the federal governments boundaries or simply forget about what up until now has been a freely accessed medium. This type of policies match Cass Sunstein’s views regarding the use of the web. He says: “freedom usually works, but in some contexts, it is an incomplete corrective.” He proposes a “chilling effect” on “damaging rumors” or using “corrective” measures to deter future rumor mongers. WND reported about Sunstein’s “First Amendment New Deal” also known as a new “Fairness Doctrine” that includes the creation of a panel of “nonpartisan experts” to force “diversity of view” on the airwaves. The regulatory Czar’s radical proposal is contained in his 1993 book “The Partial Constitution.

Section 8, which talks about Domain Name Contracts, gives an advisory panel created by the act veto power on decisions made by the assistant secretary of commerce for Communications and Information with respect to renewal or modification of the Internet Assigned Numbers Authority for the operation of Domain Name System. This seems to echo what was stated by the two representatives who presented the cybersecurity bill. “We must protect our critical infrastructure at all costs—from our water to our electricity, to banking, traffic lights and electronic health records,” Jay Rockefeller said. Olympia Snowe agreed with her colleague: “if we fail to take swift action, we, regrettably, risk a cyber-Katrina.” The governments that approve bills like the ones in the U.S., and initiatives like the ones in Indonesia, Australia, New Zealand, the United Kingdom and other countries, will certainly follow on the steps China has left behind. There, “companies like Cisco Systems, Nortel Networks, Microsoft, Sun Microsystems and Websense – stand accused of aiding and abetting human rights violations,” states the website campaignforliberty.com. The group Amnesty International documented violations committed by Chinese authorities which have introduced regulations, closed LAN houses, spied on and blocked e-mails, taken down search engines as well as foreign news and politically-sensitive websites. More recently, a new filtering system was put to work, with the intention of banning a list of key words and terms”. Such control, it seems, can be implemented either through a central organization that will oversee all internet providers and users, or through regional and local management posts, which the American bill states, will be established through the monetary support of non-profit organizations which will serve as branches for the centralized cybersecurity center.

Groups concerned with the far reaching powers the bill appropriates to the president -whomever he or she happens to be- as well as federal agencies are already mobilizing to show their opposition. GoPetition.com, is a place where people can sign a petition to reject S773. The site correctly states that if the bill passes, “Barack Obama can silence his dissenters directly by ordering a shutdown of all Americans’ access to the Internet. The Internet is a free marketplace of ideas and information and not a federal government property.” Another site called thepetitionsite.com also prompts people to make their voice heard by signing their petition. “If you’re on this site, then you probably know how useful the internet is for the sharing of information.” And it continues, “You also probably enjoy the many ways you can interact with others and entertain yourself. This will all come to and end if the cybersecurity Act of 2009 (s773) passes.” The website freedomfactory.us begins its opposition by citing what many internet users are familiar with: “The usual threats and scare tactics are used to justify giving Big Brother greater powers, including giving the President the power to shut down portions of the internet he deems a threat to national security, and access to vast amounts of digital data currently legally off limits.”

Shelly Roche, from breakthematrix.com pointed out a very important issue. The more dis-centralized the management and control of the web is, the harder it is to “take it down” or significantly hack it to a level where it poses a threat to users or companies. “If common practices are forced on private companies via a federal certification program, hackers will have a road map that, once deconstructed, could unlock every compliant network.”

Just like the neoconservatives used Leo Strauss’ theory to create fictitious threats in the 20th century, engaging the fundamentalist Christians at home to build support, now communist/fascist infected federal governments have created a fake cyber threat in order to push their agenda to limit access to the world wide web. Just like the neocons succeeded in creating the fake war on terror based on a false premise and alliances with terrorist groups around the world -which they themselves financed and directed- now the liberals, -also controlled by banking interests- are trying to tighten the grip on the only medium that challenges their power and control; the only medium that brought some real freedom of information to the people; the only medium that put the brakes on their plan to create a global technocracy, to consolidate their scientific dictatorship.