Da Oil

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Index File FYI

This file contains all of the pre-institute work plus the work that the group did. A couple of things that you should know about the file (what is different about it): There are two overall link storiesPlan sends the perception to speculators that there will be an eventual decrease in the demand of oil- because of that the decrease the value of speculation and immediately dropping prices Saudi Arabia/OPEC fearing the switch to renewable energy will flood(put a lot of oil on the market) to drop prices and make renewables non-competitivethat is the “Flood Links”

New impact stories All of the relations/Iran work is self explanatory- plan drops prices that is bad for their economy or relations Backstopping- argues that decrease in prices precludes alternative energy supplies that better solver global warming, flipping the case I would run the D/A only against the ethanol aff, by reading the energy dependence link from the aff file, and the cap and trade aff with the links in this file. For the aff we have added a few new cards that say current prices are unsustainable and need to be moderated. These cards are also strategic in that they make the link non unique if you win them. If prices continue at the current trend it will cause a massive price collapse in the future, larger than the effect of the plan. ****Be sure to highlight down this file- not just the underlining***

1NC- Generic Oil DA A. Uniqueness Oil will slowly decrease to 100$ a barrel by the end of the year Yager 6/29

[Fred, Writer for Consumer Affairs, http://www.consumeraffairs.com/news04/2008/06/gas_prices271.html] Going forward, Mike believes eventually that global oil demand is going to weaken and that we’ll see an increase in spare capacity, which should dampen prices considerably, especially as OPEC expands production capacity. Some analysts are predicting $100 a-barrel oil by the end of the year. Still, we could see more increases before that happens because of speculative trading and the concern about oil availability. Mike also says he has “little confidence that U.S. lawmakers will take meaningful steps to 'drain liquidity' from the oil as an asset class trade.

B. Links1. Perception of the plan lowers oil prices- speculators predict decrease in demand Feldstein 7/1/08 [Chairman of the Council of Economic Advisors under President Reagan, Professor at Harvard, and Member of Wall Street Journal’s Board of Contributors, http://online.wsj.com/article/SB121486800837317581.html?mod=googlenews_wsj] Once this relation is understood, it is easy to see how news stories, rumors and industry reports can cause substantial fluctuations in current prices – all without anything happening to current demand or supply. Of course, a rise in the spot price of oil triggered by a change in expectations about future prices will cause a decline in the current quantity of oil that consumers demand. If current supply and demand were initially in balance, the OPEC countries and other oil producers would respond by reducing sales to bring supply into line with the temporary reduction in demand. A rise in the expected future demand for oil thus causes a current decline in the amount of oil being supplied. This is what happened as the Saudis and others cut supply in 2007. Now here is the good news. Any policy that causes the expected future oil price to fall can cause the current price to fall, or to rise less than it would otherwise do. In other words, it is possible to bring down today's price of oil with policies that will have their physical impact on oil demand or supply only in the future. For example, increases in government subsidies to develop technology that will make future cars more efficient, or tighter standards that gradually improve the gas mileage of the stock of cars, would lower the future demand for oil and therefore the price of oil today. Similarly, increasing the expected future supply of oil would also reduce today's price. That fall in the current price would induce an immediate rise in oil consumption that would be matched by an increase in supply from the OPEC producers and others with some current excess capacity or available inventories. Any steps that can be taken now to increase the future supply of oil, or reduce the future demand for oil in the U.S. or elsewhere, can therefore lead both to lower prices and increased consumption today.

1NC- Generic Oil DA 2. The decrease in demand and potential switch to renewable ends oil profits for producer nations Kaletsky 7/3 [Anatole, Writer for the Times (UK) Online, http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article4258181.ece] At the time of the last energy shock in the 1970s, Sheikh Yamani, the shrewd Saudi Oil Minister, famously told his greedier Opec colleagues that they would encourage replacement of oil by other energy sources and kill the golden goose that had made them wealthy if they kept pushing the oil price too high. “Remember,” he said, “the Stone Age didn't end because the cavemen ran out of stone.”The

last three global recessions - in 1974, 1980 and 1991 - were all triggered by an oil shock and it looks as if Opec is now determined to repeat this experience. How many such shocks will it take before we control our addiction to oil? Cynics will say that all the world's oil will have to run dry before we see any decisive action in the US or China to reduce and ultimately eliminate their oil demand. But a confluence of economics, politics, diplomacy, environmentalism and finance has suddenly been created which may unexpectedly prove the cynics wrong. An oil price of $140, never mind $200 or $300, is simply too economically damaging to be tolerated much longer. The question is no longer whether oil prices will be left to the market, but whether political interventions that override market forces will improve or worsen the situation. The usual answer to this question is the latter, which is why Western policymakers have been reluctant to do very much so far to curb the oil price. Such, in fact, is the faith in “oil market fundamentals” expressed, for example, by Gordon Brown and the recent Treasury paper he commissioned on the oil shock that one is drawn to a surprising conclusion: the main reason for inaction in the face of the oil shock may not be the lack of political will to implement difficult decisions, such as higher petrol taxes or government guarantees for nuclear construction, but simply the ideology of market fundamentalism, expressed in such slogans as “the market is always right”. But the market is not always right. It is usually right, but sometimes it is spectacularly wrong - as in the recent sub-prime saga. To acknowledge that governments must sometimes correct market failures is not to reject the economic lessons of the 1980s but rather to apply a proper understanding of economics. There are three main reasons why the market cannot be trusted in the case of oil. First, there is the enormous gap between the cost of producing oil in areas where it is abundant and the cost of producing any close substitutes for this oil. Easily accessible oil in places such as Saudi Arabia, Venezuela and Nigeria costs only a few dollars a barrel to pump once an oilfield is producing.

Even including exploration expenses, the total cost of production of Opec oil is well below $10 a barrel. However, the cost of any substitute runs to $50 or $60 a barrel, whether the Opec oil is replaced by oil from more hostile environments, such as deep-sea drilling in the Arctic, or by some other energy source such as nuclear or wind power. The gap between cheap Opec oil and any other energy source creates an enormous “rent”, beyond any normal return on capital and costs of production, which either accrues to Opec as profits or to consumers as the benefit they enjoy from an energy source cheaper than any alternative in their own economies. This rent, currently running at around $2 trillion annually, is at the heart of the perennial struggle between oil-producing and consuming governments. Either Western governments claim most of the rent for themselves by levying high taxes on domestic oil consumers, or Opec governments pocket most of the rent, as they are doing today. But why shouldn't this rent be distributed “fairly” or “rationally” by market forces? The answer lies in the second “market failure” inherent in the oil business monopoly power. Because almost all of the world's readily accessible oil is concentrated in a handful of nations, they have been able to achieve almost total monopoly power through Opec. With the supply of oil controlled by a monopoly, there is nothing “efficient” about the level of prices set in the market; and the competition between producers and consumers inevitably becomes an issue of politics, rather than economics. The rational response of Western governments to this monopoly power is to lower the cost of energy substitutes by accelerating technological advances and increasing economies of scale. This can be done by imposing very high taxes on oil consumption to guarantee high profits for producers of non-oil fuels. At the same time, such taxes can ensure that most of the rent earned from the difference between consumer prices and Opec production costs stays in Western treasuries instead of going to producer governments. The use of tax policy to capture rents for Western governments would be particularly effective if combined with regulations designed to prevent money being poured into speculative markets for “paper oil” - which brings us to the third reason why price signals are misleading in the market for oil. The gap between physical trading in oil and the paper markets in oil futures and oil-company shares raises all sorts of financial anomalies. One is the ramping-up of oil prices by

institutional investors. Another is the strong incentive for Western oil companies to invest in oil exploration, which is inherently inefficient, when competing with low-cost state-owned producers, instead of investing in new technologies to replace oil, where Western economies have a comparative advantage over Opec. As a result of these perverse incentives, Western energy executives invariably insist that there is no plausible alternative to oil. For example, Rex Tillerson, chairman of Exxon, remarked last year that he wasn't interested in biofuel research because “I don't have a lot of technology to add to moonshine”. Tony Hayward, chief executive of BP, wrote a few weeks ago that “humankind remains dependent on fossil fuels” because renewable sources now account for only 2 per cent of global energy use. This is hardly surprising, since companies such as BP and Exxon have no special skills in nuclear power, wind turbines or photovoltaics, and they have strong vested interests in political and fiscal support to explore for oil in ever more difficult and hostile regions of the world. But such support cannot be economically justified since Opec will always have an unbeatable comparative advantage in producing oil. If Western governments play their cards correctly, people such as Mr

Tillerson and Mr Hayward will be proved wrong - and ironically Sheikh Yamani will eventually be proved right. The world will wean itself off oil long before the sands of Saudi Arabia run dry.

1NC- Generic Oil DA C. ImpactBelow 80 dollars, companies will stop refining unconventional oil Kwan ‘7 (Gordon, Head of China Energy, “How does the recent rise in oil price differ from significant surges in the past?” Asiamoney, Nov., lexis) While there is plenty of oil resources left, the low hanging fruits have been picked and remaining oil requires far higher costs to be commercialised. Cheap oil is gone, and the remaining oil is trapped in very remote areas, such as ultra-deepwater, the Arctic, the oil sands, or located in geopolitically risky countries such as Nigeria, Venezuela or the Middle East. The higher-than-expected production costs have hurt the third quarter performances of ExxonMobil, Shell, BP and Chevron. To motivate oil companies to monetise these high cost resources requires oil prices to stay at well above $80US per barrel in real terms. The surge of the oil price from $80US to $100US per barrel reflects also the ongoing global shortage of oil field/drilling equipment as well as the eroding purchasing power of the greenback amidst increasing strategic stockpiling by China, the United States and Japan.

Unconventional oil key to solve peak oil Spratt and Sutton 2-9-08 (David, analyst for CarbonEquity, and Philip, Greenleap Strategic Insitute, “Climate Code Red: The case for a sustainability emergency,” http://www.energybulletin.net/40081.html) It is increasingly recognised that the discovery of geological reserves of cheap conventional oil cannot keep pace with growing world demand. This problem is often referred to as “peak oil”. Its emergence is reflected, in part, in rising oil prices and the expectation they will go higher as the gap between supply and demand increases in coming years. A recent Queensland Government task force (2007) found “overwhelming evidence” that world oil production would reach an absolute peak in the next 10 years. So should we postpone dealing with peak oil until we have solved the climate crisis? Given the enormity of the climate problem, we cannot resolve it before peak oil demands our attention in a very practical way. Or should we put off the resolution of the climate issue until we have sorted out the peak oil issue? It will take at least 10 to 20 years to carry out the economic structuring required to solve the peak oil crisis (Hirsch, Bezdek et al., 2005), yet the economic structural changes that need to be made to solve the climate crisis must be completed in the same time period. Clearly the two issues need to be dealt with together and the solutions integrated. There are two sets of responses to the peak oil problem, focusing on supply and on demand. The supply-side solution is to substitute new sources of energy for the declining conventional oil resource by using: non-conventional fossil fuel sources such as shale oil, tar sands or from the conversion of coal or fossil fuel gas to petrol or diesel; or renewable sources such as biofuels (e.g. ethanol or methanol petrol extenders or diesel derived from carbohydrate-rich plants) or other renewable energy types such as wind, solar and geothermal to charge electric vehicles.

1NC- Generic Oil DA Oil peak causes disease, war, and loss of agriculture that culminates in extinction Morris ‘99

(Robert C. PHD, science education, Chair of the Board QEI Management Training and Development Institute, The Environmental Case for Nuclear Power: Economic, Medical and Political Considerations, p 122-23) With the loss of oil and worsening shortages of coal, the production of industrial goods would be virtually halted. Yet, without these goods to sell, these nations would lack the cash needed to buy food elsewhere. And, even if they had the cash, there probably would not be any food to buy. Because of the worldwide drop in agricultural productivity, even the nations which formerly exported food would probably be hard pressed to keep their own people well fed. The terrible consequence of this would be a massive "die-off." Any country which exceeded one person per farmable acre would have to watch large numbers of its people starve to death or die of disease until its population was reduced to one person per farmable acre. Combined, Japan and South Korea would have to bury 147 million people, and each survivor would have to dig nine graves using only a shovel. China and India would have to dig over 1. 1 billion graves, and the nations of Europe would have to bury over 150 million victims of famine and disease. Japan would lose 90 percent of its people, and China 75 percent. In Europe, the population of West Germany would decrease by almost 70 percent. Even Britain would lose 68 percent of her people. The total death toll from this great catastrophe could easily exceed two or three billion people worldwide, or from 40 percent to 60 percent of the earth’s population. Table 6.5 shows how some of the nations of the world would be affected by this catastrophe. Of course, not everyone who died would starve to death. As people weakened they would become more susceptible to disease, and great epidemics of the age-old killers of people would sweep over the entire world. And, these horrifying conditions would undoubtedly lead to a complete breakdown of civilization and give birth to incredibly barbaric times, as people looted, stole, and killed in hopes of gaining enough food to survive, rather than starving to death. Starvation would push even ordinary people to incredible savagery. This is not the first warning of this great catastrophe. In 1954, in The Challenge of Man's Future, Harrison Brown wrote: If our energy resources dwindle, our industrial technology will dwindle, and life expectancy and population will slowly dwindle with it. Consumption of the earth's store of fossil fuels has barely started; yet, already we can see the end. The age of fossil fuels will be over, not to be repeated for perhaps another 100 million years. Will its passing mark the end of civilization and perhaps the beginning of the downward path to man's extinction? Later in the same book, Brown says "[The] collapse of machine civiliztion would be accompanied by starvation, disease, and death on a scale difficult to comprehend."' Of Harrison Brown's effort, Albert Einstein said, "We may well be grateful to Harrison Brown," and, "This objective book has high value."'

***Uniqueness*** Uniqueness- Price Dropping: Demand Oil prices are moderating now- slightly decreased US demand OilVoice, ‘08 [“Fear of Low Demand Pushes Oil Below 126 Dollars”, June 3, 2008, www.oilvoice.com]

The price of oil dropped to 126 dollars per barrel because of worries that the high prices are reducing the demands from the consumers. In addition, news of a probe being made into the futures trading by the U.S also contributed to the reduction in the price of oil. Within a week the New York crude fell by five dollars, while the London Brent dropped around four dollars, Oil futures are running low and the after effects of last week's heavy losses can still be felt in the market. Altogether at least eight dollars have been reduced from the peak 135.14 dollars of oil in London and 135.09 dollars of oil in New York. The anxiety over the record high fuel and energy prices, mainly in the U.S, has helped to pull oil down from the record $135.09 a barrel hit on May 22. The summer driving season has just started in the U.S and the data from several agencies including the U.S. Energy Department and Federal Highway Administration suggest that American consumers are driving less. Additionally, the decisions made by Asian countries like Indonesia and Taiwan, to lower the subsidies on crude oil products, also gave bearish impressions on the market.Increasing selling pressure occurred when the Commodity Futures Trading Commission made the declaration of conducting an investigation into the possibility of price manipulation in oil futures markets. Along with the declaration the commission also announced the new rules that are designed to encourage transparency in energy futures markets in the U.S. and

internationally. The recent fluctuations in the markets indicate that the market may have peaked. But on the other hand, even with the crude oil peaked off at $135 there are still factors that affect the supply of crude oil to the consumers. The Hurricane season is once of the main factors that can affect the supply of oil. Tropical Storm Arthur arrived one day before the Atlantic Hurricane season was to start. Even though the storm was weak, it caused Mexico to close two oil exports port. Tropical Storm Arthur was not expected to cause much damage but it can be clearly seen how hurricanes and storms can disrupt oil supply. Meanwhile investors have various reasons to worry about the supply. Henry Paulson, the U.S. Treasury Secretary, on a trip to the Mideast said that said there is "no quick fix" to the high oil prices as it is a problem of supply and demand. The demand for oil is strong globally but the production capacity has not seen any new growth for some time. At the same time the president of the Organization of Petroleum Exporting Countries again held the weak U.S. dollar, the subprime crisis and market speculation responsible for the escalation in the price of oil. Prices are cyclical- moderating now Press Trust of India 7/3 [http://www.ndtvprofit.com/2008/07/03194527/Oil-prices-to-come-down-in-nea.html] Global rating agency, Standard & Poor's has said that oil prices will come down in the near term even as the crude oil is nearing the $150 a barrel in the international market. S&P said that it continues to "believe that oil prices will come down in the short run but that they are cycling around a rising trend." On Thursday, crude prices were hovering around $145 a barrel. Pointing out that speculation in raising oil future prices are not likely to have much impact on spot prices, the agency said commodity funds are getting money.

A2- 200$ Oil 1. Extend the 1NC Yager evidence- demand decrease in the short term will moderate prices back to 100 dollars. 2. Your evidence doesn’t assume a recent report indicating a cut back in global oil consumption which is causing speculators to roll back bets 3. Evidence is terrible- it simply says some speculators are betting on 200$ oil. Our evidence is newer and comprehensive of all speculative betting.

***Links***

Link- 2NC Magnifier: Global Demand Major oil consumers will follow us cut in oil demand The Japan Times Online, ‘04 [“Renewable energy sources offer global chance to shed fossil fuels”, July 8, 2004] As the leading national consumer of fossil fuels, the United States churns out almost a quarter of all the industrial carbon dioxide worldwide. Apologists say this is the price that must be paid in exchange for driving the global economy. Realists see such hubris as eventually undermining human viability on Earth through pollution and climate change. U.S. inaction on its oil dependency is doubly frustrating because there are now "renewable" energy sources that offer practical alternatives to coal and oil. If the U.S. were to begin the switch to renewables now, there is every reason to expect a global win-win situation within decades, economically and environmentally. America's passive acceptance of fossil-fuel dependence is also particularly disheartening because it is the only nation with the wealth, technological expertise and international leverage needed to lead a global energy revolution. If the U.S. does not bring its own energy juggernaut under control, then

unprecedented international cooperation will be required for the world community to set a new and saner course. U.S. President George W. Bush has already proved himself wedded to U.S. and Saudi oil interests, meaning his administration will never seriously promote alternative energies. The probable Democratic Party presidential candidate, Sen. John Kerry, is a disappointment, too, for not championing this issue. His call for a "Manhattan Project" on energy appears limited to supporting more efficient cars and ethanol fuel, which -- being made from corn -- is cleaner than gasoline, but is more likely aimed at appeasing farmers than ending U.S. oil dependence. It is no wonder this year's election has environmentalists woefully uninspired. Still, there is reason for optimism, as well as a potential field day on the horizon for investors and socially responsible lobbyists.

Link – US Demand Perception is key – huge consumption keeps oil-producing nations focused on US policy. Paul Roberts, regular contributor for Harper’s Magazine, 2004 [The End of Oil: On the Edge of a Perilous New World, pg.95]

Within the oil world, no decision of any significance is made without reference to the U.S. market, nor is anything left to chance. Indeed, the world's oil players watch the American oil market as attentively as palace physicians once attended the royal bowels: every hour of every day, every oil state and company in the world keeps an unblinking watch on the United States and strains to find a sign of anything - from a shift in energy policy to a trend toward smaller cars to an unusually mild winter - that might affect the colossal U.S. consumption. For this reason, the most important day of the week for oil traders anywhere in the world is Wednesday, when the U.S. Department of Energy releases its weekly figures on American oil use, and when, as one analyst puts it, "the market makes up its mind whether to be bearish or bullish:' And woe to the markets should American consumers actually get excited about the issue. In late December of 1999, for example, as the world braced for blackouts, riots, and other fallout from a Y2K global computer meltdown, oil analysts were far more worried that American motorists might try to stock up on gasoline before the New Year. "Americans usually drive around with half-full tanks," one Saudi oil official told me. "If [they had all] decided to fill up their tanks that last week in December, the sudden demand would have completely disrupted world oil markets:"

SUVs make American demand key to high price. Fareed Zakaria, Newsweek, 9-6-2004 [lexis] What to do about this new reality? George Bush proposes increased U.S. production in Alaska. John Kerry calls for increased conservation. Bush is correct to argue that some increase in American production is important. In 1973, the United States imported one third of its oil from abroad. Today it imports two thirds. And exploration does not have to be ecologically devastating. Even if the major oilfields that are assumed to exist there were discovered in the Arctic National Wildlife Refuge, only a few thousand acres of the 19 million-acre refuge would be affected. But the more lasting solution to America's oil problem has to come from energy efficiency.

American demand is the gorilla fueling high oil prices--more than instability or the rise of China or anything else. Between 1990 and 2000 the global trade in oil increased by 9.5 billion barrels. Half of that was accounted for by the rise in U.S. imports. America is consuming more because it is growing more-but also because over the past two decades, it has become much less efficient in its use of gasoline, the only major industrial country to slide backward. The reason is simple: three letters--SUV. In 1990 sport utility vehicles made up 5 percent of America's cars. Today they make up 55 percent. They violate all energy-efficiency standards because of an absurd loophole in the law that allows them to be classified as trucks.

Largest demand means US policy will have the largest impact on the global energy market. Paul Roberts, regular contributor for Harper’s Magazine, 2004 (The End of Oil: On the Edge of a Perilous New World, pg.14-15) But by necessity, much of this book will focus on the United States. For all that the new energy economy is an international issue, no nation will play a greater role in the evolution of that economy than ours. Americans. are

the most profligate users of energy in the history of the world: a country with less than 5 percent of the world's population burns through 25 percent of the world's total energy. Some of this discrepancy is owing to the American economy, which is bigger than anyone else's and therefore uses more energy. But it is also true that the American lifestyle is twice as energy-intensive as that in Europe and Japan, and about ten times the global average. The United States is thus the most important of all energy players: its enormous demand makes it an essential customer for the big energy states like Saudi Arabia and

Russia. Its large imports hold the global energy market in thrall. (Indeed, the tiniest change in the U.S. energy economy - a colder winter, an increase in driving, a change in tax law - can send world markets into a tailspin.) And because American power flows from its dominance over a global economy that in turn depends mainly on oil and other fossil fuels, the United States sees itself as having no choice but to defend the global energy infrastructure from any threat and by nearly any means available - economic, diplomatic, even military.

Reducing demand depresses world oil prices. Kanovsky, Bar Ilon Economics Professor, Winter 91 [Orbis, pg. 90] In the 1970s and early 1980s, Saudi Arabia and other major oil exporters accepted the view of oil analysts that demand for their oil would continue to expand and the real price of oil would continue to rise. These countries have learned the bitter lessons of the bust which followed the boom. Until the mid-1980s, they tried to arrest the decline in prices by restricting production. It didn't work, and they began to compete vigorously for a larger share of the market. It is doubtful they will repeat the same mistake. In other words, when demand for their oil begins to diminish and prices soften, they will soon lower their prices and attempt to maintain their share of the market. Competition for market shares can only depress prices.

Link- Renewables/Flood The Market Investment in alternative energy causes OPEC to flood the market. Kole 07 [William, Associated Press Writer. http://nwitimes.com/articles/2007/09/08/business/business/doc7e79bb33cb7ec6f28625734f00723bfd.tx t.] If you remember what happened in the 1970's (look it up if you don't) you will find the biggest fear OPEC has. It is that oil prices will go up and stay high long enough to fuel investment into conservation and alternative energy sources to the point that a critical mass is reached and the need for their oil is greatly diminished or replaced by other energy sources they don't control. That's exactly what started happening in the 1970's and it took OPEC opening up the tap to make oil cheap again over a decade to reverse the trends. The result was that interest in conservation and alternative energy waned and investments dried up in the face of cheap oil again. We are once again nearing that point and you can expect to see OPEC flood the market again if they see us getting serious with conservation and alternative energy sources that compete with, or worse yet, actually replace demand for their oil. OPEC walks the fine line between price and demand and wants to keep us hooked up to their oil like a bunch of junkies on drugs while making as much money as possible.

Saudis have the capacity and will play hardball to destroy alternative energy—our ev cites experts with insider knowledge. Energy Tech 2008 [http://energytechstocks.com.previewmysite.com/wp/?cat=15&paged=2.] Saudi Arabia still has a lot of oil; nevertheless, the world doesn’t have enough to meet forecasted demand of roughly 115 million barrels a day by 2030, a more than 30% increase over today’s 87 million barrel daily consumption. Shorter term, should OPEC members feel threatened by new alternative energy technologies, they very well may flood the market, temporarily driving crude prices down in order to make the new technologies appear financially unattractive. That’s the analysis of

Valerie Marcel, a Dubai-based petro-politics expert and the author of “Oil Titans: National Oil Companies in the Middle East.” During a lengthy conversation, Marcel, who is an associate fellow at UK-based Chatham House, one of Europe’s leading foreign policy think-tanks, told EnergyTechStocks.com that she wasn’t optimistic that oil shortages can be avoided, despite growing recognition of the problem in major oil-consuming nations. Marcel further said that the Saudi national oil company – Saudi Aramco – appears worried about fuel cell vehicles and other attempts by the world to wean itself off oil, and that should it and other OPEC members feel threatened, they would “play hardball,” flooding the market in an attempt to derail the new technologies. Marcel said that after 36 separate interviews with oil company officials, she believes Saudi Arabia probably has about 75 years of reserves remaining at current production rates, and that the Kingdom is capable of raising daily production from around nine million barrels a day currently to a sustained 12.5 million per day, which is its plan. At the same time, Marcel said she understands why, given the Kingdom’s self-imposed secrecy surrounding its oil industry, the world keeps asking, “Why should we trust them?”

Alternative energy investment causes OPEC to flood the market. Goodstein 2007 [David, PhD, Vice Provost and Professor of Physics and Applied Physics at Caltech. Nature Physics 3.11] For decades, it has been the explicit policy of OPEC to keep the price of oil within certain limits: not too low, of course, to preserve revenue ; but also not too high, because that would encourage investment in alternative fuels. The implicit threat is this: if you put money into developing an alternative to oil, we will open the spigot, flood the market with cheap oil and wipe out your in vestment. In other words, the war with Iraq may also have been about preventing investment in alternative fuels.

Link- Speculation US investments in alternative energy cause speculators to value oil lower—that tanks prices. Yetiv and Feld 2007 [Professor of political science at Old Dominion University and senior international oil markets analyst at the U.S. Energy Information Administration until March 2006 World Policy Journal] As is typical of world oil markets, this situation soon changed. Low oil prices and resurgent economic growth spurred rapid oil demand growth in Asia and elsewhere. But supply couldn't keep up with demand. Oil companies' under-investment in world capacity and a series of oil crises in Venezuela, Nigeria, and Iraq led to a reversal of the spare capacity situation by 2003. Predictably, oil prices rose sharply, approaching $40 per barrel by the end of 2004, $60 per barrel by late 2005-when spare capacity bottomed out at 1-1.5 MMBD, the lowest it had ever been relative to total world oil supplyand close to $80 per barrel by the fall of 2007. If oil prices rise when spare capacity falls, what about the opposite? In fact, history shows that when spare capacity increases, as it did in the mid-1980s and in the late 1990s, oil prices fall. When spare capacity spikes, oil prices can even collapse, as occurred after-appropriately enough-the revolution in Iran during 1978 and 1979. The oil price collapse of 198586 resulted from the major oil price shock of the late 1970s, combined with a severe recession in the early 1980s. This concurrence slashed U.S. oil consumption by 3.6 mmbd in just five years, from 18.8 MMBD in 1978 to 15.2 mmbd in 1983. As a result, world spare oil production capacity surged, eventually leading to the collapse in oil prices-from nearly $40 per barrel in 1980 to just $10 per barrel

by early 1986. Today, there is strong reason to believe that an increase in world spare oil production capacity would cause oil prices to decline once again (if not to the same dramatic degree). Imagine that the United States cut its oil consumption from currently projected levels of 24 MMBD by 2020 by 3 MMBD over the next decade.1 Eventually, the American cut in consumption would increase world spare capacity from its current level of around 2 MMBD (almost all of which is in Saudi Arabia and Kuwait) to more than 5 MMBD. This would return world spare oil production capacity to levels not seen since late 1998 and early 1999, when oil prices plummeted to $10 per barrel. True, it is unlikely that we will see $ 10 per barrel again, but with a major reduction in the trajectory of U.S. oil demand and a concomitant increase in world spare capacity, we would likely see a sharp decrease from the $80-100 per barrel prices we are currently experiencing.2 How could the United States develop its latent oil market power? First and foremost, achieving this goal would require a serious shift in U.S. energy policy. Such a shift is achievable and could sharply decrease U.S. (and world) oil consumption, dramatically altering oil market psychology. Oil futures traders who largely set the price of oil would have to consider that demand for oil would drop from current expectations. As a result, they would likely decrease the purchase of oil futures, thus causing a drop in the price of oil. Even before the impact of America's new energy policies would be felt, oil prices would almost certainly fall on the expectation by oil traders of declining future U.S. oil demand. A major policy shift by the United States could also move world oil markets out of the high anxiety state they have been operating in for several years now: increase spare capacity and market anxiety almost inevitably will subside, because of the creation of a margin of error in the event of perceived threats to supply or actual disruptions.

Speculation accounts for at least $35 of the price of oil Elliott 2008 [Larry, The Guardian (UK) Lexis] Opec's response has been to say that the market is adequately supplied with oil and the $35 rise in crude prices since the start of April are purely down to speculation. Peter Odell, professor of international energy studies at Erasmus University in Rotterdam, agreed, saying there is no fundamental mismatch between demand and supply. "At the moment the price depends on what is happening on the trading floor, where they are all on a high." Wadhwani said pension funds, hedge funds and rich individuals had all been piling in. "We are now at the bubble stage."

Link – Renewables Alternative energy lowers oil prices Newsday, April 7, 1996 IF SCIENTISTS discovered tomorrow that a clean and safe source of infinitely renewable energy could be cheaply derived from, say, ordinary sea water, we all know it would be an unmitigated boon for mankind. Well, not exactly. Because any such invention would necessarily cause a collapse of oil prices, and Texas, Louisiana and Oklahoma would become basket states. In Mexico, where petroleum is the chief national patrimony, the floor under a fragile economy, would disintegrate. The Middle East would become a destabilized mess as oil-rich regimes lost the resources through which they now control their populations. Russia and the many former constituent republics of the Soviet Union would lose export earnings critically important to the survival of their democracies. Billions invested in the extraction of North Sea oil would lose its value. Ripple effects running through the financial system as a result of the downsizing and bankruptcy of much of the existing oil industry are simply too terrifying to contemplate.

Rapid Shift to alternative energy sources that ignore market equillibreams collapses

the price of oil Maugeri, senior fellow Foreign Policy Association, 03 (Leonardo, Oil & Gas Journal December 15, 2003 L/N) Yet history has also shown major oil-producing countries that they are vulnerable to future price drops if alternative energy sources are developed in response to fears of rising energy prices. Given the full range of contrasting forces at play in any oil scenario, the wisest approach is simply to allow it to find its own equilibrium.

-- Plan causes the price of oil to drop. Gary Marchant, attorney, ENVIRONMENTAL LAW, Winter 1992, p. online. (DRGOC/D295) In fact, unilateral action by a single major country such as the United States or a group of nations such as the Organization for Economic Cooperation and Development could result in an increase in greenhouse gas emissions in other nations. Action to reduce CO[2] emissions by only some countries would cause a substantial decrease in world demand for fossil fuels, which would cause the price of these fuels to drop and encourage greater fuel consumption by nonparticipating countries. Renewables and efficiency gains would decrease demand and imports. John Carey, Business Week, 8-16-2004 [lexis] Plus, taking action brings a host of ancillary benefits. The main way to cut greenhouse-gas emissions is simply to burn less fossil fuel. Making cars and factories more energy-efficient and using alternative sources would make America less dependent on the Persian Gulf and sources of other imported oil.

Renewables or efficiency gains would lower demand for oil. Telegraph Herald, 12-16-2001 [p.A20] Mandating an increase in the fuel efficiency of vehicles and pursuing the development of renewable energy sources would enable the United States to free itself from dependency on the oil reserves of countries such as Saudi Arabia.

Link – Renewables US will use renewables to lower dependence on foreign oil, destroying demand. New York Times, 9-9-2002 [p.A3] Renewable energy, in fact, would bring huge benefits to the US: it would cut its reliance on foreign oil and thereby allow it more freedom to act on the international stage.

Plan causes buyers and sellers to bid down oil prices. Stephen Moore, Cato Institute economist, 1995 [True State of the Planet, p. 117]

The same law of supply and demand applies to natural resources. If there were an impending shortage of coal, copper, rubber, or tin, then buyers and sellers would consistently bid up their price. Conversely, if a huge new reserve of oil were discovered, or demand for oil were expected to drop because of the sudden introduction of an alternative energy source, buyers and sellers would consistently bid down oil prices. In sum, a rising price of a resource indicates increasing supply relative to demand; a falling price indicates declining supply relative to demand.

Link – Conservation Empirically, US conservation drops the price of oil. Hillard Huntington, Energy Modeling Forum at Stanford University, 1994 [Contemporary Economic Policy, p. 44]

In theory, US conservation can have a negative or positive effect on the world oil price and on the US import bill. Because the United States is a large oil- consuming nation its conservation puts downward pressure on the world oil price. However, some conservation measures make US oil demand more inelastic, giving a well-functioning OPEC cartel incentive to raise prices. Because most conservation measures only moderately affect the elasticity of oil demand, and because OPEC is a less than perfect cartel (Griffin, 1985; Dahl and Yucel, 1991), US conservation efforts generally reduce world oil prices and the US oil import bill.

Link- Cap and Trade (1NC) (A) Link – Plan causes oil prices to drop by $100. Krupp, '8 (Environmental Defense Fund, Earth: The Sequel to the Race to Reinvent Energy and Stop Global Warming, pg. 231)

A global cap-and-trade system would build a substantial industry providing alternatives to oil, and thus would cause the price of oil to fall to the price of alternatives—about $40 to $50 a barrel. "The extra dollars per barrel they're getting, the transfer of rents resulting from that monopoly market, adds up to about $1 trillion a year, which is more than enough to pay for climate solutions," says Pacal.

(B) Impacts -A return to 50 dollars will cause global recession and wreck producer economies Financial Times 9-14-07 (“Oil and recession,” http://us.ft.com/ftgateway/superpage.ft?news_id=fto091420070943513321&page=1) Imagine a world in recession, where oil costs $50 per barrel. Which economies would be most affected? There are some obvious losers. In Saudi Arabia, the world's largest oil producer, oil accounts for 90 per cent of exports, which in turn represent nearly two-thirds of the economy's output. Indeed the Organisation of Petroleum Exporting Countries are more dependent on oil now than when the oil price fell sharply in 1985-86 and 1997-98. Exports plummeted in value after the Opec basket price fell from $27 a barrel to $13.50, and from $18.70 to $12.30, respectively. But in 1985 and 1997 oil exports

represented just 21 per cent of Opec's gross domestic product, whereas they now represent 36 per cent. An oil price fall would have political as well as economic ramifications, of course, and not just in the Middle East. In Venezuela and Russia, policy is highly dependent on buoyant energy prices. Oil provides half of Venezuela's government revenues; oil and gas, combined, contribute more than half of Russian government income. Without oil and gas, Russia would be running a fiscal deficit of more than 4 per cent of GDP. So too would Norway, the world's third largest oil exporter, although it is far less dependent on oil than Russia. The country is a large net creditor – to the tune of more than 100 per cent of GDP according to Standard & Poor's – and manufacturing and services contribute more to GDP than oil and gas.

Link- Brazilian Ethanol Switch to Brazilian ethanol decrease US demand for oil Lytle 2007 [Kaylan, JD Candidate, 28 Energy Law Journal 69, Lexis] A major opponent of the tariff is the President of the United States. n110 This may conflict with his goals to increase domestic ethanol production. In the 2006 State of the Union, President Bush announced a goal to make "ethanol practical and competitive within six years." n111 In this speech, the President stressed the need for alternative fuel as a means of attaining energy independence. Similarly, upon signing the EPAct in 2005, President Bush emphasized how the Act is a step towards energy independence. When discussing the RFS portion of the EPAct, President Bush touted it as accomplishing many things, including reducing dependency on foreign energy. n112 The emphasis, however, is specifically placed on being independent from Middle Eastern energy sources. n113 If President Bush's goal is to reduce dependency solely on the Middle East, the ethanol tariff need not be renewed. The subsequent influx of alternative fuels from more "friendly" nations will not undermine his goals. However, Latin America, like the Middle East, has a history of political instability. If energy independence in general is President Bush's goal, it is questionable whether being less dependent on foreign oil is worth being more dependent on foreign ethanol.

Internal – Demand Reductions Snowball -- Demand reductions cause massive reductions in oil prices. John Carey, Business Week, 2-24-2003 [Taming the oil beast, lexis] Yet reducing oil use has to be done judiciously. A drastic or abrupt drop in demand could even be counterproductive. Why? Because even a very small change in capacity or demand ''can bring big swings in price,'' explains Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University's Robinson College of Business. For instance, the slowdown in Asia in the mid-1990s reduced demand only by about 1.5 million bbl. a day, but it caused oil prices to plunge to near $ 10 a barrel. So today, if the U.S. succeeded in abruptly curbing demand for oil, prices would plummet. Higher-cost producers such as Russia and the U.S. would either have to sell oil at a big loss or stand on the sidelines. The effect would be to concentrate power -- you guessed it -- in the hands of Middle Eastern nations, the lowest-cost producers and holders of two-thirds of the known oil reserves. That's why flawed energy policies, such as trying to override market forces by rushing to expand supplies or mandating big fuel efficiency gains, could do harm. The truth is, the post-1970s de facto policy of just letting the markets work hasn't been all bad. Painful oil shocks brought recessions. But they also touched off a remarkable increase in the energy efficiency of the U.S. economy. From the 1930s to the 1970s, America produced about $ 750 worth of output per barrel of oil. That number doubled, to $ 1,500, by the end of the 1980s. But the progress largely stopped in the past decade. Now we need policies to continue those fuel-efficiency gains, without the pain of sudden oil shocks.

Reducing oil prices will kill global producer country economies.

Eyerly, Central Missouri States Economic Policy, 2002 [http://www.politixgroup.com/comm89.htm]

The United States and Japan have been, and continue to be the worlds largest net importers, importing as much oil as the next 10 largest importing nations combined. They also happen to make up a lion's share of the world's economy. The money that those two nations have funneled into oil have fueled the growth that those major oil exporting nations have used to build their economies. But the economies have been poorly built, relying on the continued success of a single commodity that has had its day in the sun, and is about to be pushed to the side of prominence. The world has changed drastically in the last 10 years. The Soviet Union fell, giving way to foreign investment and the exploration and discovery of major oil pockets surrounding the Caspian Sea. Russia has also rebuilt its oil producing infrastructure to the point that while OPEC was cutting back production levels in the last two or three years, Russia was increasing production almost half a million barrels a day per year. Norway has steadily exposed pockets of oil in the North Sea and Mexico has developed its own reserves. The combination provides a legitimate threat to OPEC's position of dominance over the petroleum market. The rise of a collusive effort between those nations in concert with the United States would force the dissolution of OPEC, or at least a world attitude of apathy towards the decisions that they might make. OPEC's restrictions will no longer serve its member nations, but begin to cut into their profits as other nations fill the worlds demand. The member nations would universally abandon the imposed restriction and produce at will. With OPEC's fall the price per barrel on oil will be reduced to a free market price. The economies that have developed to exist on the inflated prices will be crushed. The weight of true market prices on those nations is so heavy that it will likely hurl much of the Middle East as well as several South American nations into economic depression. Economies built on a single good are subject to a single change. In America we've seen that very thing happen when cities that grew up around auto plants, or coal mining were crushed as plants closed or coal mines tapped out. The same effects that we saw on a small scale, layoffs, wage reductions, widespread unemployment, inability to repay credit issued, and population exodus will plague these nations, the very nations that are now considered to be "developing." The ripple effect will cross South America, as some of Venezuela's chief trading partners feel the crunch. African economies will be devastated, and Indonesia will fall, having much the same effect that it did in 1998 when a rupture in its economy plagued all of South East Asia. A fall in oil prices topples the developing world. Developed and diverse nations such as the U.S., Britain, Germany, Japan, and perhaps even China will wether the storm with greater ease, but such a shift in world economies will surely make them sluggish as demand for the goods they produce will be all but eliminated in much of the world. CONTINUES

The end result is that if the world doesn't wake up and pay attention to the fragile nature of the developing world that oil has created, a single economic shift, political move, or technological breakthrough, will destroy the economies and subsequent stability of those very nations.

A2- Speculation/Risk Premium = High Prices

1. Not mutually exclusive- speculation is still a short term predictor of long term supply and demand equations. If we win the aff sends the perception of a long term demand decrease then they cause a short term price drop- that’s the 1NC Feldstein evidence. 2. Speculation not driving oil prices- its demand The Economist 6/3/08 [http://www.economist.com/opinion/displaystory.cfm?story_id=11670357]

More importantly, neither index funds nor other speculators ever buy any physical oil. Instead, they buy futures and options which they settle with a cash payment when they fall due. In essence, these are bets on which way the oil price will move. Since the real currency of such contracts is cash, rather than barrels of crude, there is no limit to the number of bets that can be made. And since no oil is ever held back from the market, these bets do not affect the price of oil any more than bets on a football match affect the result. The market for nickel provides a good illustration of this. Speculative investment in the metal has been growing steadily over the past year, yet its price has fallen by half. By the same token, the prices of several commodities that are not traded on any exchanges, such as iron ore and rice, have been rising almost as fast as that of oil. Speculators do play an important role in setting the price of oil and other raw materials. But they do so based on their expectations of future trends in supply and demand, not on whims. If they had somehow managed to push prices to unjustified heights, then demand would contract, leaving unsold pools of oil.

A2 – Plan Only Effects Coal 1. Only affecting coal is irrelevant – our link is based of lower demand for oil caused by improvements in renewable energy sources. Energy efficiency and renewable energy development shifts investment away from all fossil fuels. 2. Coal disruptions affect oil. Dennis O’Brien, president International Assoc. for Energy Economics, 1997 [Harvard International Review] As electric power issues become increasingly important, new challenges to energy security will develop. Interaction between the markets for coal, a major fuel for electric power, oil, gas, and other fuels will intensify. Past interruptions to coal flows, due mainly to labor difficulties, have adversely affected the oil market, and this problem could intensify.

3. No solvency for warming – Oil accounts for more carbon emissions than coal. DOE, 7-28-1999 [Energy in the Americas, http://www.eia.doe.gov/emeu/cabs/theamericas.html] In South America, oil is responsible for the overwhelming majority (about 66%) of carbon emissions, with natural gas and coal far behind. In North America, oil accounts for about 44% of carbon emissions, followed by coal and natural gas. Carbon emissions by all three fossil fuel types (oil, gas, and coal) grew in North and South America between 1970 and 1998, and are projected to continue to grow through 2020.

Oil’s share of total carbon emissions is expected to remain nearly constant (at 44%) in North America through 2020. In South America, oil’s share is expected to fall sharply, from 66% in 1998 to 55% in 2020.

***Impacts*** Producer Country Internal – Mid East War High oil price is the only check against civil wars across the Mid East McKillop ‘04 (Andrew, energy economist, 4-19, Oil & Gas Journal, “Economic growth bolstered by high oil prices, strong oil demand,” lexis) The real impact of higher oil prices, certainly up to the range of about $ 60/bbl, is to increase economic growth at the composite worldwide level. This is the main reason why demographic oil demand during 1975, with oil prices at $ 40-65/bbl in 2003 dollars, was significantly higher than it is today. It should be clearly understood that if the demographic demand rate in 2003 was the same as in 1979, then world oil demand in 2003 would have been 95.4 million b/d. Relative to real total world oil demand at this time (about 78 million b/d), the additional capacity needed would be close to two times Saudi exports, more than three times Russia's export offer, or well above five times Venezuela's current export capacity. There is no certainty at all that world oil supply would or could have been able to meet this demand. Higher oil prices operate to stimulate first the world

economy, outside the member countries of the Organization for Economic Cooperation and Development, and then lead to increased growth inside the OECD. This is through the income, or revenue, effect on oil exporter countries, and then on metals, minerals, and agrocommodity exporter countries, most of them low income (per capita gross national product below $ 400/year). Almost all such countries have very high marginal propensity to consume. That is to say that any increase in revenues, due to prices of their export products increasing in line with the oil price, is very rapidly spent on purchasing manufactured goods and services of all kinds. During 1973-81, in which oil price rises before inflation were 405%, the New Industrial Countries (NICs) of that period -- notably the so-called "Asian Tigers" Taiwan, South Korea, and Singapore -- experienced very large and rapid increases in solvent demand for their export goods. In easily described macroeconomic terms, the revenue effect of higher oil prices "greasing economic growth" was and is much stronger than the price effect on industrial producers. NICs as a group or bloc of economies rapidly expanded their oil imports and increased their oil consumption as prices increased in 1974-81, because demand for their export goods had increased, due to the global economic impacts of

higher oil and "real resource" prices. This has very strong implications for oil demand of today's emerging

and giant NICs with large populations and immense internal markets: China, India, Brazil, Pakistan, and Iran. For the much smaller NICs of 1975-85, their oil import trends during 1974-81 show dramatic growth only slightly impacted by the major price rises of the period. In general terms, the NICs Taiwan, South Korea, and Singapore increased their oil demand by about 60-80% in volume terms in this period of a 405% increase in nominal prices (Table 2). Economic growth vital for future oil output This macroeconomic mechanism of

higher revenues for fast-spending poorer countries quickly levering up world economic growth (the very simplest type of Keynesianism, but at the global level) is rapidly and easily triggered by rising oil and other "real" resource prices. This flatly contradicts the arguments by those who contend that higher oil prices "hurt poorer countries the most." What is more important is to consider how the investment need for assuring that future world oil, gas, coal and renewable energy supplies will be developed without higher oil prices and faster global economy growth. Some idea of that need has recently been spelled out by ExxonMobil Corp. and by the International Energy Agency, which released its World Energy Investment Outlook report in November 2003, forecasting a need to spend an average of $ 103 billion/year for oil and $ 105 billion/year for gas through 2030. ExxonMobil has indicated (most recently in September 2003) that sustaining oil and gas production capacity itself requires the finding and development of 36 million b/d of replacement capacity by 2015. Can this be done without higher oil prices? Higher revenues for many low-income oil exporter countries -- notably for

the special cases of Nigeria, Saudi Arabia, and especially Iraq -- may be the only short-term way to stop these countries from falling into civil strife, insurrection, or ethnic war, let alone making vast investments to maintain or expand their current export capacity. In the case of Iraq, increased oil revenues are a question of life or death because higher revenues might prevent the country from becoming ungovernable and might give it some potential for stability. No immediate and instant recession can occur with oil at $ 50/bbl or even $ 60/bbl. Vastly higher oil prices than that would be needed to abort the worldwide mechanism of higher oil, energy, and real resource prices driving faster economic growth. Conversely,

low oil and energy prices entraining low real resource prices, combined with rising population numbers, surely aggravate the cycle of poverty in low-income commodity exporter countries. Deprived of sufficient revenues, such countries can become "basket case" indebted countries, subjected to draconian conditions by the Club of Paris, World Bank, and International Monetary Fund for debt refinancing and restructuring. The ability and capacity for investing huge amounts of capital into oil, gas, and other energy production infrastructures by low-income, indebted countries is realistically very low or zero. Yet estimates for world investment needs of the oil and gas industry through the next 10-15 years extend into the range of several thousand billion dollars. Without strong economic growth, it is unrealistic to expect that any "energy transition" can occur, for example, as predicated by the Kyoto Treaty on climate change. More critically, it also is unrealistic to expect that world oil supply can be increased at the rates required or as deemed feasible in such publications as the IEA's World Energy Outlook -- that is a net average increase of about 2.25 million b/d/year during 2003-20 (raising capacity to about 115 million b/d), over and above replacement of capacity lost through depletion. These gigantic investment needs are very obviously dependent on strong and sustained economic growth. Without

much higher and firmer oil prices, it is unlikely that global economic growth can be significantly increased from current low average annual rates for many key economies.

A2 – Peak Oil Means High Price Inevitable Peak oil does not take out any of our impacts – It does not solve our “high price good” impacts – it’s true that the oil peak will cause a gradual increase in the price of oil as supply decreases steadily, but peak oil is a long term impact. Hubbert originally introduced peak oil theory in 1956 to predict that we’d hit the peak in mid sixties. Ever since then scientists have been predicting it. Our price impacts are based off a short-term collapse in the price of oil, meaning that eventually peak oil would make the price go back up but by that time, we’d all already be dead. Peak oil impacts flow negative – in order to stave off the peak, we have to invest in unconventional oil and renewables – our evidence indicates that if the price of oil

falls – even only 20 dollars, then that makes tar sands and renewables uncompetitive. Even if the price will eventually go back up, any delay increases the probability of resource conflicts. The only way to solve peak oil and warming are to let the price gradually increase just like it is.

Peak Oil Impacts Oil peak will collapse the economy McPherson ‘7 (Guy, professor of Natural Resources, Ecology, and Evolutionary Biology at U of Arizona, “The end of civilization and the extinction of humanity,” 8-29, Energy Bulletin, http://www.energybulletin.net/34030.html) Oil supply -- at the level of the field, county, state, country, or world -- follows a bell-shaped curve; the top of the curve is called "Peak Oil," or "Hubbert's Peak." We passed Hubbert's Peak for world oil supply and began easing down the other side about two years ago. We'll fall off the oil-supply cliff next year. Because this country mainlines cheap oil, it is easy to envision the complete collapse of the U.S. economy within a decade. The Great Depression will seem like the good old days when unemployment approaches 100% and inflation is running at 1000% per year.

Oil peak will collapse the economy and kill off 80% of the world’s population McPherson ‘7 (Guy, professor of Natural Resources, Ecology, and Evolutionary Biology at U of Arizona, “The end of civilization and the extinction of humanity,” 8-29, Energy Bulletin, http://www.energybulletin.net/34030.html) Many experts who write about simply one of these issues -- Peak Oil -- predict complete economic collapse within a decade, followed shortly thereafter by utter chaos and the subsequent death of more than 80% of the world's population. After all, the exponential curve of human population growth matches perfectly the exponential growth of world energy supply, suggesting that the downturn of the energy curve will cause a large-scale die-off of human beings. And if you think chaos can't descend on this country, you weren't paying attention to New Orleans in the wake of hurricane Katrina. Horrible as that event was, nearly everybody involved knew it was a temporary inconvenience; I'm concerned how people might act when they recognize Peak Oil as a long emergency. One by one, starting in 2012, the world's cities will experience permanent blackouts; and once we enter the Dark Age, the Stone Age won't be too far behind. Bear in mind, I have mixed feelings about this. On one hand, I know the current culture -- the culture of make believe, or the culture of death, depending on how deeply you care to think about it -- is the worst possible route for most of the planet's species; as a conservation biologist, I realize the faster and more complete the collapse of Empire, the greater our biological legacy. On the other hand, the paralyzing hand of fear grips me every time I think about Peak Oil; a life in the ivory tower is damned poor preparation for Stone-Age living. Fortunately, I only think about it a few thousand times each day.

***Backstopping*** 1NC Backstopping Current prices are driving global renewables, plan undermines their competitiveness Williams, ‘08 [Selina, Dow Jones International News, “High Oil Price Boosts Renewables, But Lifts Costs”, May 23, 2008, global.factiva.com]

ABERDEEN, U.K. (Dow Jones)--Supercharged oil prices may have raised global awareness about the importance of energy security and boosted investment and interest in renewables, but they have also raised costs for the companies that are competing with the oil and gas sector for resources, delaying key projects, companies, developers and analysts told Dow Jones Newswires. The impact is particularly keenly felt in the marine renewables sector where the emerging technologies of wave and tidal power as well as small companies are struggling to get off the ground. It's also felt in offshore wind, which is in the process of ramping up capacity to meet stringent E.U. climate change targets by 2020. "There are limited resources to bring the renewables sector into being and when oil prices are over $100 a barrel the oil and gas sector will drag those resources away from renewables," said John Westwood, executive director of energy and renewables consultancy Douglas-Westwood. On Thursday, U.S. crude oil prices spiked up to over $135 a barrel - double where they were a year ago - on fears that supplies are set to decline while demand from China and India continues to roar ahead. And it looks like high prices are here to stay. In a recent report, U.S. investment bank Goldman Sachs predicted that oil prices will

move even higher, forecasting that a "super spike" of $150-$200/bbl within the next six to 24 months is looking increasingly likely. When the price of oil is high, oil companies working offshore are willing to pay a premium for the much sought after equipment needed at sea that includes vessels, rigs and supply ships as the high costs they pay can be recouped in big profits when the oil is sold on international markets. However, renewable energy companies are producing electricity and have less opportunity to reap big profits from selling power yet they are still exposed to the higher costs. "Renewables are in direct competition for resources with the oil sector and can't afford to pay the prices required as the electricity generated is less valuable than the oil and gas that's produced," said Gordon Edge, director of economics and markets at the British Wind Energy Association. The shortage of these key resources means that some projects can experience delays. Business Development Director Max Carcas of leading U.K. wave developer Pelamis Wave Power said day rates for the anchor handler vessel they had planned to use to deploy their wave device in the sea increased 20 times thanks to increased demand from the oil sector. As a result of difficulties finding the type of vessel needed, Pelamis decided to go back to the drawing board and redesign their mooring system so a smaller, cheaper ship could be used. Meanwhile, U.K.-based Marine Current Turbines, which this week completed installation of the world's first megawatt-scale tidal turbine off the coast of Northern Ireland, couldn't get a jack-up ship to install their turbine and also had to re-think the installation process. "We tried to get a jack-up rig to install SeaGen, but they were all too busy with the oil industry so we had to use a different approach," said MCT Managing Director Martin Wright. It's not all negative however as both companies said they had learnt valuable MCT has applied for three more patents as a result of what they learned from the altered installation process and is talking to other companies about acquiring a share in installation vessels for future deployment of their devices. Higher oil prices also have a knock-on effect on steel prices, manufacturing and transportation costs that can also impact the marine renewables sector - in particular the wind sector which requires a lot of steel to make the giant turbines needed to make offshore wind economically viable. Costs in the offshore wind sector have more than doubled to around GBP2.8 million per megawatt currently from GBP1.1 million per megawatt in 2002 due to higher commodity prices, according Westwood. Human resources such as engineers and other skilled personnel are also hard to find for the renewables industry as the smaller companies typical in the marine sector find it

hard to compete with the bumper salaries the cash-rich oil sector is offering. Ironically however, the high oil price also raises awareness of energy security. And as governments around the world boost grants and subsidies to alternative energy, investment interest also increases along with demand for key components and equipment. In the global wind industry where installed capacity is growing at a rate of just over 20% a year, there's a backlog of turbine orders worth $12 billion. "High oil prices are a double-edged sword," said Alan Mortimer, head of renewables policy at ScottishPower, which is the U.K.'s fifth largest energy company and itself an investor in wave and tidal power. There's more of a premium for oil and gas exploration which competes with the same services that our industry needs, but at the same time it also accelerates the day when renewables will become cheaper and the market will move ahead quicker," Mortimer said.

1NC- Backstopping

Renewables solve global warming Renewable Energy Report, ‘07 [ Renewable Energy Report, “Renewables techs could help avoid worst climate-change impacts: study” , June 11, 2007, global.factiva.com]

The cost of stabilizing the atmospheric greenhouse gas level so the worst impacts of global warming could be avoided could be reduced by trillions of dollars by improving six currently available technologies, including renewable energy systems, and deploying them on a widespread basis, a major US technology laboratory said in a report published in late May. Battelle Memorial Institute, a Columbus, Ohio-based science lab that holds several major contracts with the US Department of Energy, released the report at a news conference in Washington, DC. Global Energy Technology Strategy: Addressing Climate Change highlighted six technologies: CO2 capture and storage; biotechnology and Biomass; hydrogen energy and other advanced transportation technology systems; nuclear power; wind and solar power; and end-use energy technologies. The systems can be improved to help satisfy global energy needs in a carbon-constrained world, Battelle said. "Any technology strategy begins with technologies at hand, but the long-term cost and effectiveness of the strategy will depend on technology development and deployment over many decades," said James Edmonds, a laboratory fellow and chief scientist at the Joint Global Change Research Institute, an interdisciplinary research team involving DOE's Pacific Northwest National Laboratory and the University of Maryland. The six technologies highlighted in the report were selected because they could be deployed the quickest, Edmonds said. Battelle would explore the potential of other technologies, such as wave energy, in a future report, he added. The report found there is need for a portfolio of technologies to help "manage the risks and costs of climate change inherent in diverse national and regional energy systems, nature resource endowments, and rates of economic development and growth." But it noted that failing to improve and deploy any one of the six featured technologies will increase the

cost of stabilizing the GHG level and staving off the most dangerous impacts of global warming. Each of the technologies in the report is at different stages of development. "Some will play transitional roles or serve niche markets in certain regions of the world, while other regions might utilize these same technologies intensively," the report said. For example, even though there are many sites around the world that could potentially be used to sequester GHG emissions, they are not evenly distributed, the report noted. The United States, Canada and Australia have abundant reserve capacity, "which would allow them to maintain a more balanced energy portfolio" in a GHG-constrained world compared with other regions where the geology is unsuitable to store carbon, the report said. Extensive use of hydrogen as a fuel also poses challenges, including problems storing the gas, Edmonds said, which underscores the importance of continued investment in hydrogen research. The federal government has invested $1 billion in research under President Bush's Hydrogen Initiative. Finding economic and efficient ways to reduce GHG emissions "will remain an elusive goal without a long-term global technology strategy," according to the report. The challenge, it said, will be to develop policies that promote development, deployment and commercial adoption of advanced energy technologies.

Warming risks extinction --- any delay will multiply the impact Reuters ‘7 (1-18, “Crunch year for planet earth” http://www.cnn.com/2007/TECH/science/01/18/climate.crunch.reut/index.html) LONDON, England (Reuters) -- This will be a crunch year for action on the climate crisis, a leading environmental lobbyist said on Wednesday. Never have the opportunities been better and the danger from failure greater, Friends of the Earth chief Tony Juniper said in an interview with Reuters. "There is an urgency that wasn't there before," Juniper said. "The science is there, the economics is there and the politics is there ...If they don't take this opportunity then we really should start to think about the future of life on earth." The scientists who mind the "Doomsday Clock" moved it forward two minutes on Wednesday to five minutes until midnight, symbolizing the growing risk of the annihilation of civilization, and for the first time said global warming was a threat. (Full story) Early next month the International Panel on Climate Change will produce the first of four key reports this year assessing the latest scientific knowledge on global warming. This will be followed by a report in April on adaptation, one in May on mitigation and a final overview in November. A European Union-United States summit in April is expected to focus on energy security, and a Group of Eight summit in early June will highlight energy and climate.Sources close to the diplomatic process say British Prime Minister Tony Blair, seeking a lasting legacy from his decade in power before he stands down mid-year, wants the G-8 summit to agree an outline plan for further climate action. Most scientists agree temperatures will rise by between 2 and 6 degrees

Celsius this century, mainly because of increasing carbon emissions from burning fossil fuels for power and transport, putting millions of lives at risk from flood and famine.Former World Bank chief economist Nicholas Stern said in October that urgent action on global warming was vital, and that delay would multiply the cost 20 times.

2NC- Backstopping: Solves Renewables Better Than Aff

High prices are best way to incentivize switch to renewable- promotes tech development eNews ‘08 [“The role of oil prices in renewable energy”, eNews, January 10, 2008, www1.umn.edu] The University of Minnesota has discovered a silver lining in the increasing cost of oil. In November business leaders, government officials, and researchers who attended the U's E3 Conference on renewable energy were surveyed on what they think will promote sustainable energy research within their geographic domain. About 40 percent of the respondents said the cost of oil is the primary driver. In other words, the majority of the conference participants believe rising oil costs will jump start

renewable fuels and electricity research more than any other potential factor. Respondents were almost evenly split on two additional factors: government mandates (36 percent) and profitability of alternative/renewable energy production (35 percent). Rounding out the data, 29 percent think government incentives and public demand for renewable energy sources will be the main driver. Of the 400-plus people who attended E3, approximately 43 percent completed the survey. Those surveyed were asked to select up to three factors from a list of several possibilities. The percentages above reflect which factors they selected the most. Once again, we're finding that

economics will be a major driver of future developments in the renewable energy sector," says Richard Hemmingsen, director of the University of Minnesota's Initiative for Renewable Energy and the Environment (IREE), which hosted the conference. "With all the bad news recently about rising oil prices, maybe we finally have something to look forward to." The survey results also showed that nearly one-quarter of respondents think cellulosic biofuels will be the next big development in sustainable energy, while an additional 16 percent believe that solar technology has the most potential. One in 10 think sustainable energy will become more efficient to produce, and 8 percent believe that algae-to-energy has the most potential for reducing fossil fuel consumption. This year all proceeds, including admission, from the conference went to the creation of the University of Minnesota's first endowed scholarship to support students interested in pursuing a career in renewable energy and the environment. Millennium Research Inc. conducted the survey. The marketing-research and consulting company specializes in agriculture and outdoor industries.

***Russian Oil*** 1NC Russian Oil (READ WITH REST OF 1NC ON IMPACTS SUBPOINT IF YOU WANT TO GO ALL OUT) Soaring oil prices are key to the Russian economy Maital ‘8 (Shlomo, academic direction of the Technion Institute of Management in Tel Aviv, “Finders, Keepers,” 1-21, Jerusalem Post, lexis) Basically, Vladimir, you won the lottery. Russia is the world's second largest oil producer, just behind Saudi Arabia, and the world's largest natural gas producer. Oil and gas prices have soared. Without this, there would be no Russian economy. "Putin arrived on the scene at a good time in Russia's economic cycle," McFaul and Stoner-Weiss write, "and got even luckier as oil prices rose worldwide."

Nuclear war David ‘99 (Steven, poli sci prof at Johns Hopkins, Foreign Affairs, Jan/Feb, lexis) Russians know they can no longer look to the state for personal security, law enforcement, education, sanitation, health care, or even electrical power. In the place of government authority, criminal groups -- the Russian Mafia -- increasingly hold sway. Expectations raised by the collapse of communism have been bitterly disappointed, and Moscow's inability to govern coherently raises the specter of civil unrest. If internal war does strike Russia, economic deterioration will be a prime cause. From 1989 to the present, the GDP has fallen by 50 percent. In a society where, ten years ago, unemployment scarcely existed, it reached 9.5 percent in 1997 with many economists declaring the true figure to be much higher. Twenty-two

percent of Russians live below the official poverty line (earning less than $ 70 a month). Modern Russia can neither collect taxes (it gathers only half the revenue it is due) nor significantly cut spending. Reformers tout privatization as the country's cure-all, but in a land without well-defined property rights or contract law and where subsidies remain a way of life, the prospects for transition to an American-style capitalist economy look remote at best. As the massive devaluation of the ruble and the current political crisis show, Russia's condition is even worse than most analysts feared. If conditions get worse, even the stoic Russian people will soon run out of patience. A future conflict would quickly draw in Russia's military. In the Soviet days civilian rule kept the powerful armed forces in check. But with the Communist Party out of office, what little civilian control remains relies on an exceedingly fragile foundation -- personal friendships between government leaders and military commanders. Meanwhile, the morale of Russian soldiers has fallen to a dangerous low. Drastic cuts in spending mean inadequate pay, housing, and medical care. A new emphasis on domestic missions has created an ideological split between the old and new guard in the military leadership, increasing the risk that disgruntled generals may enter the political fray and feeding the resentment of soldiers who dislike being used as a national police force. Newly enhanced ties between military units and local authorities pose another danger. Soldiers grow ever more dependent on local governments for housing, food, and wages. Draftees serve closer to home, and new laws have increased local control over the armed forces. Were a conflict to emerge between a regional power and Moscow, it is not at all clear which side the military would support. Divining the military's allegiance is crucial, however, since the structure of the Russian Federation makes it virtually certain that regional conflicts will continue to erupt. Russia's 89 republics, krais, and oblasts grow ever more independent in a system that does little to keep them together. As the central government finds itself unable to force its will beyond Moscow (if even that far), power devolves to the periphery. With the economy collapsing, republics feel less and less incentive to

pay taxes to Moscow when they receive so little in return. Three-quarters of them already have their own constitutions, nearly all of which make some claim to sovereignty. Strong ethnic bonds promoted by shortsighted Soviet policies may motivate non-Russians to secede from the Federation. Chechnya's successful revolt against Russian control inspired similar movements for autonomy and independence throughout the country. If these rebellions spread and Moscow responds with force, civil war is likely. Should Russia succumb to internal war, the consequences for the United States and Europe will be severe. A major power like Russia -- even though in decline -- does not suffer civil war quietly or alone. An embattled Russian Federation might provoke opportunistic attacks from enemies such as China. Massive flows of refugees would pour into central and western Europe. Armed struggles in Russia could easily spill into its neighbors. Damage from the fighting, particularly attacks on nuclear plants, would poison the environment of much of Europe and Asia. Within Russia, the consequences would be even worse. Just as the sheer brutality of the last Russian civil war laid the basis for the privations of Soviet communism, a second civil war might produce another horrific regime. Most alarming is the real possibility that the violent disintegration of Russia could lead to loss of control over its nuclear arsenal. No nuclear state has ever fallen victim to civil war, but even without a clear precedent the grim consequences can be foreseen. Russia retains some 20,000 nuclear weapons and the raw material for tens of thousands more, in scores of sites scattered throughout the country. So far, the government has managed to prevent the loss of any weapons or much material. If war erupts, however, Moscow's already weak grip on nuclear sites will slacken, making weapons and supplies available to a wide range of anti-American groups and states. Such dispersal of nuclear weapons represents the greatest physical threat America now faces. And it is hard to think of anything that would increase this threat more than the chaos that would follow a Russian civil war.

2NC Russian Oil High oil price key to Russian economy – each 1 dollar drop causes a 5 billion dollar loss Bahgat ‘4 (Gawdat, Centre for Middle Eastern Studies, Dept Political Science, Indiana U of Penn, OPEC Review “Russia's oil potential: prospects and implications” v28 i2 p. 133, June) Since the collapse of the Soviet Union, the Russian economy has been in a state of transition, from a state-run economy to a free-market one. A delicate process of restructuring and diversification is underway. Still, the Russian economy is heavily dependent on oil revenue. This revenue represents a

substantial proportion of the country's gross domestic product export earnings; in 2002, energy accounted for almost 20 percent of russia's gdp and 55 percent of export revenue. These figures indicate Russia's economy is extremely sensitive to global energy price fluctuations. The sensitivity implies a one dollar rise (drop) in the price of a barrel of Russia's urals blend benchmark leads to an increase (decline) in real GDP growth of about .5 percentage points and contributes to an estimated US $5 billion in extra earnings (losses). The relatively high and stable oil prices since 1999 brought a windfall in oil export revenue to the Russian economy, spurred strong growth in GDP and contributed to the overall economic recovery. Put differently, Russia's real GDP growth since 1999 has been an impressive 6.6 per cent per year. This strong recovery after the 1998 crisis can be explained by favourable external conditions in the form of high oil prices, as well as the effects of the sharp 1998-99 rouble devaluation/ Not suprisingly, in May 2003, The Russian government released its energy strategy to 2020, which designates the energy sector as the engine of economic growth.

A sudden decline in oil prices causes Russian oil firms to default on debts and wrecks economic development Zhdannikov ‘8 (Dmitry, correspondent for Reuters, “Russia oil firms need to shape up to grow abroad,” Reuters, 2-5, http://www.forbes.com/) He adds that a sudden decline in the oil price will not only hamper development plans by Gazprom and Rosneft, which together owe more than $70bn to credit institutions, but put at risk the Kremlin’s entire social development plan. Even if the price remains high, the Russian oil industry’s free cash flow would turn negative from 2011 if taxes are kept at current levels, according to predictions by BP’s Russian joint venture TNK-BP. But it probably won’t stop Gazprom from buying TNK-BP because of the political imperative to boost state control. “The level of state share in oil production will rise further. Probably to around 60%,” says Valery Nesterov from Troika Dialog, who predicts that oil major Lukoil will be the only large non-state producer to survive. Ian Bremmer, president of US-based Eurasia Group, which analyses political risks, says contrary to many views, Russian and Venezuelan resource nationalism are different in nature. “The Russians will have control but companies like Shell, BP, ExxonMobil are still going to make a lot because at the end of the day, Putin doesn’t want to lose. And I think Medvedev doesn’t want to lose these folks in the Russian economy.” Partnerships with Western majors will allow Russian firms to gain modern technology and swap reserves for assets abroad. Medvedev has already called on Russian businessmen to follow the example of China and invest actively abroad, regardless of what Russia often calls artificial barriers in the West. But Nesterov believes there is limited scope for acquisitions, even though foreign assets are becoming cheaper. “State firms are heavily leveraged and further borrowings abroad have become more expensive,” he said.

2NC Russian Oil Oil revenue key to investment into secondary industries Clarke ‘7 (Peter, economist for EE Times Europe, business investment publication, 6-18, “Oil revenues help fuel Russian tech revival,” http://www.eetimes.eu/199904409) Moscow -- By pumping the proceeds of its oil and natural-resources boom into the high-tech industry, Russia is creating an electronics bonanza and an unprecedented mood of optimism. But the country has a history of failed intervention in its semiconductor and electronics industries, which until the last couple of years had stagnated for more than a decade. So some observers continue to take a cautious position on the prospects for the Russian market and its players. At an exhibition and two-day

conference here organized by the Semiconductor Equipment and Materials International (SEMI) industry trade body, Alexander Kalinin, deputy chairman of the Russian Federal Fund for Electronics, announced that $3 billion would be invested in electronics from 2007 to 2011. That does not include investments in nanotechnology research, Kalinin said. That $3 billion does include some big-ticket items, such as $700 million in support of a proposed 300-mm wafer fab in Nizhny Novgorod and $500 million to help move JSC Mikron (Zelenograd) down to 90-nanometer manufacturing over the next three years. Nonetheless, Kalinin said, "our focus is in design." He went on to itemize 2007 spending in support of a number of design houses. But the Russian bureaucracy appears to have learned some lessons from watching the European Commission at work. Thanks to the economic boom and the revenue flowing into government coffers, it at last has some real money to dole out, but it is doing so on the basis of matching funds. That means that a project should have some sort of business case. It is hard to overestimate the strength of the current boom in Russia, driven by the supply of oil and gas to Europe. Alex Freedland, chairman and CEO of Mirantis Inc. (Foster City, Calif.), a supplier of offshoring services and consultancy in Russia, pointed out that Russian central bank reserves have grown rapidly to become the third largest in the world, exceeded only by those of China and Japan. The Russian stock market, valued at less than the capitalization of a single U.S. company--Cisco Systems Inc.--12 years ago, is now worth more than $1 trillion, Freedland said. Oil-and-gas giant Gazprom competes with Microsoft Corp. for the honor of being the world's most highly valued company. "Russia has a population of 140 million people, the largest national population in Europe," said Freedland, who also made the point that those Russians with newfound wealth tend to spend it conspicuously. On average, Russians spend much more and save much less of their income than citizens in other countries.

Russia Impact – Vodka Switch (A2 – Dutch Disease) High oil prices shift Russians away from vodka Sibun ‘8 (Jonathan, staff writer for the Sunday Telegraph, “Beer becomes the toast of Russia as vodka loses its popularity,” 1-13, lexis) In that environment brewers are increasingly focused on persuading consumers to buy premium or imported beers over local or mass-market brands. At a time when Russia is benefiting from soaring oil prices and a developing consumer finance market, that is a strategy that is reaping rewards. Nicholson says: "Disposable income is rising at such a pace that consumers are trading up and there is a lifestyle change away from vodka. We launched Foster's and Kronenbourg 18 months ago. Kronenbourg is the most expensive brand in the market but it has seen huge growth.''

Vodka keeps Russia out of the WTO Vaknin ‘5 (Sam, columnist for the Global Politician and PhD, “Russia's Vodka Wars” 11-4, http://www.newsback.com/forums/news-190-russias-vodka-wars.html) Vodka is a crucial component in Russian life. And in Russian death. Alcohol-related accidents and cardiac arrests have already decimated Russian life expectancy by well over a decade during the last decade alone. Vodka is also big business. The brand "Stolichnaya" sells $2 billion a year worldwide. Hence the interminable and inordinately bitter battle between the Russian ministry of agriculture and

SPI Spirits. The latter, still partly owned by the state, is the on and off owner of the haloed brand "Stolichnaya", James Bond's favorite. SPI's PR firm, Burson-Marsteller, posits this commercial conflict as a classic case of the violation of the property rights of hapless foreign shareholders by the avaricious and ruthless functionaries of an unreformed evil empire. They question Russia's readiness to accede to the WTO and its respect for the law. SPI's latest press release consists of the detailed history of this harrowing tale. The brand Stolichnaya, as well as 42 others, were privatized in 1992. The firm quotes a document, bearing the official seal of the maligned ministry, which states unambiguously: "VAO Sojuzplodoimport has the right to export Russian vodka to the USA under the following trademarks: Stolichnaya, Stolichnaya Cristall, Pertsovka, Limonnnaya, Privet, Privet Orange (Apelsinovaya), Russian and Okhotnichya." The privatization was completed in 1997 when the old SPI was sold to the new SPI Spirits. The new SPI claims to have assumed $40 million in debt and invested another $20 million to rebuild the company into "one of the world's leading vodka producers". Yet, the Russian government, as heavy handed as ever, clearly is unhappy with SPI. It says the privatization deal was dubious and that SPI paid only $300,000 (or maybe as little as $61,000 claim other sources) for the multibillion dollar brands, including "Stolichnaya", "Moskovskaya", and "Russkaya". The government values the brands at a far more reasonable $400 million. Other appraisers came up with a figure of $1.4 billion. The government, in a bout of new-found legal rectitude, also insists that the seller of the brands, the defunct (stateowned) SPI, was not their legal owner. It also questions the mysterious shareholders of the new SPI - including a holding company in tax-lenient Delaware. SPI's trademarks portfolio is represented by an Australian law firm, Mallesons Stephen Jaques. Putin himself set up a committee for the repatriation of these and other consumer brands to the state. He craves the beneficial effects the alcohol sector's tax revenues could have on the federal budget - and on its powers of patronage. A central state-owned brand-holding and distribution company was set up less than two years ago. Ever since then, the alcohol sector has been subjected to relentless state interference. SPI is not the most egregious case either. "The Observer" mentions that SPI currently runs most of its business from inscrutable Cyprus, a favorite destination for Russian money launderers, tycoon tax evaders, and mobsters. SPI's German distributor, Plodimex, is increasingly less active - as three new off shore distribution entities (in Cyprus, the Dutch Antilles, and Gibraltar) are increasingly more so. The FSB ordered Kaliningrad customs to prohibit bulk exports of Stolichnaya. Cases of the drink are routinely confiscated. Criminal charges were brought against directors and managers in the firm. The Deputy Minister of Agriculture is discrediting SPI in meetings with its distributors and business partners abroad. He is also accused by the firm of obstructing the court-mandated registration of its trademarks. The courts have lately been good to SPI, coming out with a spate of decisions against the government's conduct in this convoluted affair. But on February 1, the firm suffered a setback, when a Moscow court ruled against it and ordered 43 of its brands, the prized Stolichnaya included, returned to the government (i.e., re-nationalized). SPI is doing its best to placate the authorities. It is rumored to have offered last month to use its ample funds to supplement the federal budget. It has indicated last September that it is on the prowl for additional acquisitions in Russia - a bizarre statement for a firm claiming to have been victimized. "The Moscow Times" reported that it is planning to sign a $500,000 sponsorship agreement with the Russian Olympic Committee. Summit Communications, a country image specialist, placed this on its Web site in November 2001: "One example of a savvy Russian company that has managed to do well in the West by finding the right partner is the Soyuzplod import company (see also p. 14) [sic]. Soyuzplod import, or SPI, has the exclusive rights to export Stolichnaya, which vodka lovers in the U.S. fondly refer to as 'Stoli'. Some 50% of the company's export turnover comes from the United States, thanks mostly to its strategic alliance with Allied-Domecq for U.S. distribution. 'I'm not sure that all Americans know where Russia is on the map, but most of them know what Stolichnaya is,' muses Andrey Skurikhin, general director of SPI. 'I want the quality of Stolichnaya in America to create an image of Russia that is pure, strong and honest, just like the vodka. At SPI, we feel that we are like ambassadors and we will try to do everything to create a more objective and positive image of Russia in the U.S.'" SPI's troubles may

prove to be contagious. Allied Domecq, its British distributor in America and Mexico, now faces competition from Kryshtal International, a subsidiary of the troubled Kristal distillery, 51% owned by Rosspirtprom, a government agency. Kryshtal signed distribution contracts for "Stolichnaya" with distilleries backed by the Russian ministry of agriculture. Allied and Miller Brewing have announced a $50 million investment in product launch and marketing campaigns only five years ago. "Stolichnaya" (nicknamed "Stoli" in the States) sells 1 million 12-bottle cases a year in the USA (compared to Absolut's 3 million cases). The trouble started almost immediately with the first foreign investments in SPI. As early as 1991, Vneshposyltorg, a government foreign trade agency, tried to export Stolichnaya in Greece. This led to court action by the Greeks. Vodka wars also erupted between the newlyregistered Russian firm "Smirnov" and Grand Metropolitan over the brand "Smirnoff".The vodka wars are sad reminders of the long way ahead of Russia. Its legal system is rickety - different courts upheld government decisions and SPI's position almost simultaneously. Russia's bureaucrats - even when right - are abusive, venal, and obstructive. Russia's "entrepreneurs" are a penumbral lot, more enamored

with off-shore tax havens than with proper management. The rule of law and private property rights are still fantasies. The WTO - and the respectability it lends - are as far as ever.

Russia Impact – Vodka Switch (A2 – Dutch Disease) WTO accession solves commodity dependence and supports the economy Business Week ‘2 (“Suddenly, It's Big Business vs. Putin,” 3-18, http://www.businessweek.com/magazine/content/02_11/b3774139.htm) Daunting stuff. Yet Putin still believes that the benefits of joining WTO far outweigh the drawbacks. The President argues that WTO membership will help attract more foreign investment and stimulate diversification of an economy that is too dependent on commodities. Joining the body would also help eliminate discriminatory trade measures against Russian exports such as steel that now cost Russia $4 billion in lost imports annually. To be sure, Putin wants Russia to enter the WTO with protections for some sectors, particularly agriculture. But his proposals are unlikely to go far enough to satisfy the tycoons.

A2 – Russia Dutch Disease No conclusive evidence of Dutch Disease Oomes and Kalcheva ‘7 (Nienke and Katerina, of the Bank of Finland – Institute for Economies in Transition, “Diagnosing Dutch disease: Does Russia have the symptoms?” July, http://www.bof.fi/NR/rdonlyres/F9A915B539DE-45BB-92F2-B4C0ADFFE684/0/dp0707.pdf) However, it is difficult to conclude that the observed symptoms are indeed the result of Dutch Disease, because they can be explained by other factors as well. In particular, an increase in the relative size of the service sector may be a natural “transition” phenomenon, given that the manufacturing sector had received significant state support during Soviet times, while the service sector remained artificially undeveloped. Moreover, deindustrialization has been a natural phenomenon even in the United States and other advanced industrial countries that are not necessarily resource-rich, simply because, as households become richer, demand naturally tends to shift away from goods toward services. Similarly, the rapid observed wage growth in Russia since 2000 may well be the result of the deshadowization of wages, rapid productivity growth, and a rebound from the 1998 crisis.

***ME Relations Impacts*** 2NC- UAE Relations US-UAE relations high now- economic integration through oil UAE INTERACT 2007 [“US-UAE economic relations extraordinary, strong: US Treasury Dept. Undersecretary” EMIRATES NEWS AGENCY 10/30/07” http://www.uaeinteract.com/docs/USUAE_economic_relations_extraordinary,_strong_US_ Treasury_Dept._Undersecretary/27383.htm]

The United States and the United Arab Emirates maintain an already extraordinary and strong economic relationship and both countries are certainly committed to further integration in the future, stressed U.S. Treasury Undersecretary for International Affairs David McCormick. Speaking to reporters at a press briefing yesterday at the US Embassy in the UAE capital city of Abu Dhabi, McCormick expressed hopes that the United States and the UAE would conclude a Free Trade Agreement (FTA). He declined to comments on the dollar pegging currency policy of the Gulf countries which was set as a topic of recent meeting of the Gulf Cooperation Council." Only the US Federal Reserve is authorized to comment or give statements on such issue, explained McCormick. The senior US Treasury official arrived in Abu Dhabi City on Sunday starting a 2-day visit as part of a regional tour. He said his meetings today with UAE Central Bank Sultan Nasser Al Suwaidi and senior officials of Mubadala and Abu Dhabi Investment Authority (ADIA) were focused on further promoting a shared vision and understanding of strong bilateral relations between the two countries.

US-UAE RELATIONS KEY TO STOP TERRORISM, REBUILD IRAQ, HAVE FLYOVER ZONES, AND HAVE NAVY PORTS WHITE HOUSE PRESS RELEAES 07 [- President Bush, General Peter Pace, “FACT SHEET:US-UAE RELATIONS] http://www.whitehouse.gov/news/releases/2006/02/20060222-10.html F act Sheet: The United States–UAE Bilateral Relationship "But I also want to repeat something again, and that is, this is a company that has played by the rules, that has been cooperative with the United States, a country that's an ally in the War on Terror, and it would send a terrible signal to friends and allies not to let this transaction go through." - President Bush, 2/21/06 "[T]he military-to-military relationship with the United Arab Emirates is superb. ... They've got airfields that they allow us to use, and their airspace, their logistics support. They've got a world-class air-to-air training facility that they let us use and cooperate with them in the training of our pilots. In everything that we have asked and work with them on, they have proven to be very, very solid partners." - General Peter Pace, Chairman Of The Joint Chiefs Of Staff, 2/21/06 The United Arab Emirates (UAE) Is A Longstanding Friend And Ally Of The United States. The United States and UAE have a longstanding alliance. The UAE is a key partner of the United States in the War on Terror, helping to advance Middle East peace efforts. The UAE is also a vibrant trading partner and has provided critical support in the wake of Hurricane Katrina. The UAE Is A Key Partner In The War On Terror. The UAE provides U.S. and Coalition forces unprecedented access to its ports and territory, overflight clearances, and other critical and important logistical assistance. Today, the UAE is providing assistance to the missions in Afghanistan and Iraq, combating terrorists by cutting off their financing, and enhancing America's homeland security by actively participating in initiatives to screen shipments and containers. UAE Ports Host More U.S. Navy Ships Than Any Port Outside The United States. The UAE provides outstanding support for the U.S. Navy at the ports of Jebel Ali - which is managed by DP World - and Fujairah and for the U.S. Air Force at al Dhafra Air Base (tankers and surveillance and reconnaissance aircraft). The UAE also hosts the UAE Air Warfare Center, the leading fighter training center in the Middle East. The UAE Is A Partner In Shutting Down Terror Finance Networks. The UAE has worked with us to stop terrorist financing and money laundering, including by freezing accounts, enacting aggressive anti-money-laundering and counter-terrorist financing laws and regulations, and exchanging information on people and entities suspected of being involved in these activities.

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2NC- UAE Relations …Continued The UAE Is An Established Partner In Protecting America's Ports. Dubai was the first Middle Eastern entity to join the Container Security Initiative (CSI) - a multinational program to protect global trade from terrorism. Under CSI, a team of U.S. Customs and Border Protection officers is permanently stationed inside Dubai's ports, where they work closely with Dubai Customs to screen containers destined for the United States. Cooperation with Dubai officials has been outstanding and a model for other operations. Dubai was also the first Middle Eastern entity to join the Department of Energy's Megaports Initiative, a program aimed at stopping illicit shipments of nuclear and other radioactive material. The UAE Is A Critical Partner In Afghanistan. The UAE extends vital military and political support to Operation Enduring Freedom in Afghanistan and substantial financial and humanitarian support to Afghanistan and its people. The UAE Is Supporting The New Iraqi Government. The UAE

has provided significant monetary and materiel support to the Iraqi government, including a pledge of $215 million in economic and reconstruction assistance. The UAE Is Supporting Middle East Peace Efforts. The UAE is a moderate Arab state and a long-time supporter of all aspects of Middle East peace efforts. The U.S. and the UAE are also working together to create a stable economic, political and security environment in the Middle East.

The impact is extinction. Alexander, 02 (Inter-University Terrorism Studies Professor, Aug 28, Washington Times) Last week's brutal suicide bombings in Baghdad and Jerusalem have once again illustrated dramatically that the international community failed, thus far at least, to understand the magnitude and implications of the terrorist threats to the very survival of civilization itself. Even the United States and Israel have for decades tended to regard terrorism as a mere tactical nuisance or irritant rather than a critical strategic challenge to their national security concerns. It is not surprising, therefore, that on September 11, 2001, Americans were stunned by the unprecedented tragedy of 19 al Qaeda terrorists striking a devastating blow at the center of the nation's commercial and military powers. moribund peace process through the now revoked cease-fire arrangements [hudna]. Why are the United States and Israel, as well as scores of other countries affected by the universal nightmare of modern terrorism surprised by new terrorist "surprises"? There are many reasons, including misunderstanding of the manifold specific factors that contribute to terrorism's expansion, such as lack of a universal definition of terrorism, the religionization of politics, double standards of morality, weak punishment of terrorists, and the exploitation of the media by terrorist propaganda and psychological warfare. Unlike their historical counterparts, contemporary terrorists have introduced a new scale of violence in

terms of conventional and unconventional threats and impact. The internationalization and brutalization of current and future terrorism make it clear we have entered an Age of Super Terrorism [e.g. biological, chemical, radiological, nuclear and cyber] with its serious implications concerning national, regional and global security concerns.

2NC- Qatar Relations

UNIQUE INTERNAL LINK- QATARI FUELS KEY TO RELATIONS, CURRENTLY HIGH ALEXANDER’S GAS AND OIL CONNECTIONS 2003 [Source:forbes “Qatar promises cooperation in export of gas to US” 12/5/03] http://www.gasandoil.com/goc/company/cnm32359.htm 12-05-03 The emir of Qatar, Sheikh Hamad bin Khalifa al Thani, who has become a close strategic partner

of the US in the Gulf region of the Middle East, offered to provide the US with its "increasing needs of natural gas." The offer came during the US-Qatar Business Council dinner, which was attended by 400 business executives, diplomats and representatives of international organizations like the Arab League. The emir promised "cooperation in the export of Qatar gas to the US". He predicted "joint benefits" in the "shipping,

reception stations and marketing" of the gas, which is currently in short supply in the US Qatar, a small independent state on the eastern border of Saudi Arabia, claims 900 mm cf of natural gas, ranking third largest in the world behind Russia and Iran. The emir also suggested that US oil companies consider investing in "petrochemical industries such as aromatics and polypropylene" and encouraged US banks to help finance "Qatar oil, gas and petrochemical feeds." He mentionedthat Marathon Oil, ConocoPhillips, and a joint venture of ChevronTexaco and South Africa's Sasol already had submitted offers to Qatari Petroleum. Some $ 12 bn has been invested by US companies in Qatari oil, such as Anadarko Petroleum and ChevronTexaco, according to the US Commerce Department. Chevron Phillips Petrochemicals, another joint venture, is involved in two petrochemical production projects, according to the emir. Qatar, a small nation with about 800,000 citizens in 4,400 square miles, has become a crucial ally of the US since the disclosure that US military personnel currently stationed in Saudi Arabia will be moved to Qatar, which was headquarters for the planning of the war in Iraq. The 53-year-old emir, who took power in 1995, was praised at the dinner by Richard Haas, director of the Policy Planning Staff of the US State Department, for "collaboration against

terrorism, helping in the reconstruction of Afghanistan, and as a stalwart advocate for the road map for peace in the Middle East." But it was the emir's open offer to American oil companies to participate in the development of Qatar's natural resources that must have been welcome to the executives of Occidental Petroleum, ExxonMobil and others in attendance.

US-QATARI RELATIONS KEY TO PEACE PROCESS, MIDDLE EAST STABILITY, AND US REGIONAL MILITARY POWER THE ECONOMIST 6/5 [Economist print edition 6/5/08 “Small country, big ideas”] http://www.economist.com/world/africa/displaystory.cfm?story_id=11506776 IN 1952, the year that Sheikh Hamad bin Khalifa al Thani was born, Qatar had fewer than 40,000 people, most of them barefoot nomads and fishermen, and not a single school. The emirate he rules now hosts Education City, a complex of branch campuses from some of the world's most prestigious colleges. According to IMF figures, the country's 950,000 residents this year surpassed those of Luxembourg to become the world's richest. They enjoy an income per person of $80,870. Yet that plump figure belies the far greater private wealth of native Qatari citizens, who number fewer than 200,000 but who own nearly all the emirate's assets, as opposed to the army of foreign guest workers who serve them. Most of that wealth came easily, from oil. But Sheikh Hamad has succeeded in achieving something that other petro-despots have not. Qatar's emir has stamped this Jamaica-sized patch of flat, scorched desert, which sticks out of Saudi Arabia into the Gulf like a sore thumb, firmly on the map of international diplomacy. Last month he coaxed Lebanon's viciously bickering politicians into ending a crippling 18-month power struggle, flying them to his capital, Doha, to thrash out an agreement. Qatar has also mediated between insurgent clansmen and the government of Yemen, and acted as an increasingly well-trampled bridge between the Middle East's polarised camps: America and its pro-Western Arab allies on the one hand, and the “resistance” block that includes Iran, Syria and the Islamist parties Hamas in Palestine and Hizbullah in Lebanon on the other. The talk now is of Sheikh Hamad healing the rift between Hamas and Fatah, the secular party of the Palestinian president, Mahmoud Abbas, and fostering a rapprochement between Syria and its estranged Arab brothers. Qatar's oil money has certainly helped to make peace. A free week spent in one of Doha's six-star hotels would dull the meanest fighting spirit, and there are

Continues…

2NC- Qatar Relations …Continued

wags in Lebanon, for instance, who contend that their politicians pocketed other, bigger sweeteners. But there has been plenty of fast Qatari footwork too. Since Sheikh Hamad ousted his father in a bloodless coup in 1995, observers have questioned the apparently erratic course of Qatari foreign policy. But under the guidance of his distant cousin, Sheikh Hamad bin Jasim, the long-serving foreign minister, and more recently also prime minister, Qatar has cut the apron strings that traditionally tie smaller Gulf states to bigger, older regional powers such as Saudi Arabia and Egypt, and adopted a firmly independent line. The emirate has assiduously wooed the United States, inviting its Central Command to set up its forward headquarters at al-Udeid, an airbase near Doha, in time for the invasion of Iraq in 2003. The base has one of the biggest stocks of American military supplies anywhere in the world. Qatar has also pleased America by regularly hosting Israeli officials, and by sending a generous $100m in aid to help those hit by Hurricane Katrina in 2005. Yet the country has reached out to America's enemies, too. As host of the annual summit of Gulf Arab leaders this year, Sheikh Hamad broke with tradition to invite Iran's controversial president, Mahmoud Ahmadinejad, to attend. Following Hamas's election victory in 2006, the sheikh publicly scolded America for working to undermine the results of the democratic process in Palestine. He has sent aid to help Gazans under Israeli siege, and millions more to help reconstruct the mostly Shia parts of Lebanon that Israel bombed in its war in the summer of 2006 with Hizbullah, whose leader, Hassan Nasrallah, he is said to admire. Qatari property investment has also helped to bolster Syria's sagging economy. Meanwhile, both Sheikh Hamads have generously sponsored the Qatar-based satellite channel, al-Jazeera, whose lively, critical coverage and reform-Islamist leanings continue to attract high audience ratings, while annoying both pro-Israeli Americans as well as religiously conservative Saudis. But the apparent contradictions in Qatar's policy are now paying off. Other mediators failed in Lebanon, for instance, because they were not seen as neutral. And even if it is just Qatar's money that wins friends, there is plenty more of that coming. The emirate's output of liquid natural gas, its biggest export, is set to double in the next five years.

Impact is global nuclear war. Steinbach, DC Iraq Coalition, March 2002 [www.wagingpeace.org/articles/02.03/0331steinbachisrael.htm] Meanwhile, the existence of an arsenal of mass destruction in such an unstable region in turn has serious implications for future arms control and disarmament negotiations, and even the threat of nuclear war. Seymour Hersh warns, "Should war break out in the Middle East again,... or should any Arab nation fire missiles against Israel, as the Iraqis did, a nuclear escalation, once unthinkable except as a last resort, would now be a strong probability."(41) and Ezar Weissman, Israel's current President said "The nuclear issue is gaining momentum(and the) next war will not be conventional."(42) Russia and before it the Soviet Union has long been a major(if not the major) target of Israeli nukes. It is widely reported that the principal purpose of Jonathan Pollard's spying for Israel was to furnish satellite images of Soviet targets and other super sensitive data relating to U.S. nuclear targeting strategy. (43) (Since launching its own satellite in 1988, Israel no longer needs U.S. spy secrets.) Israeli nukes aimed at the Russian heartland seriously complicate disarmament and arms control negotiations and, at the very least, the unilateral possession of nuclear weapons by Israel is enormously destabilizing, and dramatically lowers the threshold for their actual use, if not for all out nuclear war. In the words of Mark Gaffney, "... if the familar pattern(Israel refining its weapons of mass destruction with U.S. complicity) is not reversed soon- for whatever reason- the deepening Middle East conflict could trigger a world conflagration."

***Iraqi Oil*** 2NC- Iraq Reconstruction High oil prices are key to sustaining the Iraqi economy and funding reconstruction Watkins ‘08 [ Eric, Senior Correspondent, “Iraq Could Benefit from Higher Oil Revenues, Report Says,” General Interest, Feb 11, Pg. 32, http://www.lexisnexis.com/us/lnacademic/results/docview/docview.do?docLinkInd=true&risb=21_T4 092862396&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T4092865109 &cisb=22_T4092865108&treeMax=true&treeWidth=0&csi=8039&docNo=2] The Iraqi government could earn an extra $19.2 billion in revenues this year because of higher oil prices and the revival of the country's oil industry, according to a US government report. The increased revenues are supported by figures set out in the latest quarterly report from Stuart Bowen, the special inspector general for Iraq reconstruction, who is accountable to the US Congress. Bowen's report says Iraq's budget plans are being drawn up on the assumption of an average international crude price of $64/bbl in 2008 but that the actual figure likely will be $85/bbl. Concerning Iraq's rise in revenues, Bowen's report says the country's average oil production this past quarter reached a postwar quarterly record of 2.38 million b/d, while average exports maintained the previous quarter's 1.94 million b/d record. "Taken together, these developments could cause a significant rise in available revenue for [Iraq] in 2008 and further underscore the need for [Iraq's government] to pass the pending hydrocarbon law," the report said. Iraq's 2008 budget is about $48 billion, an increase of 18% over 2007, with more than 84% funded by oil revenues. The potential increase in revenues brought by higher oil prices could generate a national income windfall for Iraq, providing new funds for Iraq's relief and reconstruction.

This spurs economic development that prevents conflict and terrorism Looney 08

[ Robert, professor of National Security Affairs, Department of National Security Affairs at the Naval Postgraduate School, Monterey, “Impediments to Stability in Iraq: The Illusive Economic Dimension,” March 16, http://www.globalpolitician.com/24281-iraq#_edn52] In order to achieve victory, in the short term, Iraq must make steady progress in fighting terrorists, meet political milestones, establish democratic institutions, and build standup security forces; in the medium term, Iraq must defeat terrorists and provide its own security, have a fully constitutional government in place, and be on its way to achieving its economic potential; and in the longer term, Iraq must be peaceful, united, stable and secure, well integrated into the international community, and a full partner in the war on terrorism. Along with developing democracy and providing security, then, reviving the economy is seen as one of the three most important issues for achieving victory in Iraq. In the economic area, U. S. and Coalition efforts focus on helping Iraq restore the country's neglected and damaged infrastructure, with the goal of restoring and expanding essential services. Other objectives include the creation of a market-based economy and greater transparency and accountability in the public sector.[2] The logic of this strategy is straightforward.[3] First, the rebuilding of Iraq's infrastructure and the provision of essential services would increase the confidence of Iraqis in their government and help convince them that the government is offering a brighter future. People would then be more likely to cooperate with the government and provide intelligence against the enemy, creating a less hospitable environment for terrorists and insurgents. Second, the reconstruction efforts have significant implications in the security realm when they focus on rebuilding post-conflict cities and towns. Compensation for civilians hurt by counter-terrorist operations and the restoration of some economic vibrancy to areas formerly under terrorist control could help ease resentment and win over an otherwise suspicious population. Third, economic growth and reform of Saddam-era laws and regulations would be critical to ensuring that Iraq could support and maintain the new security institutions that the country is developing, attract new investment to Iraq, and become a full and integrated member of the international community. Finally, economic growth and market reform--the promotion of Iraq's private sector--are necessary to expand job opportunities for the youthful Iraqi population and to decrease the unemployment that makes some Iraqis more vulnerable to terrorist or insurgent recruiting.

2NC- Iraqi Oil The impact is extinction. Alexander, 02 (Inter-University Terrorism Studies Professor, Aug 28, Washington Times) Last week's brutal suicide bombings in Baghdad and Jerusalem have once again illustrated dramatically that the international community failed, thus far at least, to understand the magnitude and implications of the terrorist threats to the very survival of civilization itself. Even the United States and Israel have for decades tended to regard terrorism as a mere tactical nuisance or irritant rather than a critical strategic challenge to their national security concerns. It is not surprising, therefore, that on September 11, 2001, Americans were stunned by the unprecedented tragedy of 19 al Qaeda terrorists striking a devastating blow at the center of the nation's commercial and military powers. moribund peace process through the now revoked cease-fire arrangements [hudna]. Why are the United States and Israel, as well as scores of other countries affected by the universal nightmare of modern terrorism surprised by new terrorist "surprises"? There are many reasons, including misunderstanding of the manifold specific factors that contribute to terrorism's expansion, such as lack of a universal definition of terrorism, the religionization of politics, double standards of morality, weak punishment of terrorists, and the exploitation of the media by terrorist propaganda and psychological warfare.

Unlike their historical counterparts, contemporary terrorists have introduced a new scale of violence in

terms of conventional and unconventional threats and impact. The internationalization and brutalization of current and future terrorism make it clear we have entered an Age of Super Terrorism [e.g. biological, chemical, radiological, nuclear and cyber] with its serious implications concerning national, regional and global security concerns.

Iraq Reconstruction- Key to Check Terror Poverty fueled by failed reconstruction spurs terrorism Looney 06 [Robert, professor of National Security Affairs, Department of National Security Affairs at the Naval Postgraduate School, Monterey, “The Economics of Iraqi Reconstruction,” Strategic Insights, May 6, http://64.233.167.104/search?q=cache:0UeTWLsqKCAJ:www.ccc.nps.navy.mil/si/2006/May/looney May06.asp+%22iraqi+reconstruction+depends+on+oil%22&hl=en&ct=clnk&cd=1&gl=us] The combination of high unemployment, easily available weaponry, a fast widening gap between the rich and poor and a largely impotent government have combined to produce an environment characterized by poverty, despair and violence.[11] Specifically, the violence undermines the government’s ability to tackle the economy’s four basic problems: The security of the supply of oil, high levels of unemployment, and deficiencies in infrastructure and political difficulties in pushing through much-needed reforms. In turn, widespread poverty and frustrated expectations create an environment conduce to continued violence and increased conflict.

***Iran*** 2NC- Iran Regime Collapse Drop in oil prices would collapse the regime. Goodspeed ‘07 (Peter, reporter for National Post, Canda, “Iranian oil weapon could backfire: Dependent on exports,” 2-9, lexis) Iran has warned it is prepared to use its "oil weapon" to defend itself, threatening to choke off oil shipments through the Strait of Hormuz and creating a world oil crisis. But that threat reveals a strange and convoluted fact in the complicated power equations of the Middle East -- Iran may be hostage to its oil weapon. The country's fragile economy depends on oil. Between 80% to 90% of its exports and more than 50% of its national budget come from oil sales. That's all right, as long as oil prices are rising. But the minute oil prices fall, as they have done recently, Iran's economy feels the squeeze. The inability of Mahmoud Ahmadinejad, Iran's President, to sustain the economy in a time of falling oil prices could easily trigger a political crisis. That vulnerability is increased by another Iranian peculiarity -- although Iran is one of the world's leading oil exporters, it has to import about a third of its petroleum. This is because it still has not replaced the refineries that were damaged or destroyed nearly 20 years ago during the Iran-Iraq war. As a result, Iran has little more than a 45-day supply of gasoline on hand at any one time. If a crisis restricted its access to gasoline and drove oil prices down, Tehran would quickly face bankruptcy and possible internal political turmoil. A U.S. naval blockade of Iran's oil ports, accompanied by a brief surge in Saudi oil production to maintain international oil supplies, might create an economic nightmare.

Iranian regime instability spills-over to Russia and worsens the Chechen conflict. Clawson & Eisenstadt, 06

(Deputy director for research of the Washington Institute for Near East Policy & Senior Fellow -Washington Institute, Nov, www.washingtoninstitute.org/pubPDFs/PolicyFocus62.pdf) Fear of instability. Although Russia fears a nuclear Iran, it also fears instability in Iran, and it may worry that pressure will lead to such an outcome. That concern is not unreasonable; the U.S. experience in Iraq demonstrates the potential for instability when the established order in a strong state is overturned. Furthermore, instability in Iran could easily spill over into Russia, which already faces many problems in Muslimmajority regions near Iran, such as Chechnya. Russia also worries about potential unrest among the million or so ethnic Azeris living in Russia (many in Moscow); at least 10 million ethnic Azeris live in Iran.

Nuclear war Blank ‘02 (Stephen, security studies prof at the Strategic Studies Institute of the U.S. Army War College, “Putin's Twelve-Step Program,” Washington Quarterly, http://muse.jhu.edu/journals/washington_quarterly/v025/25.1blank.html#authbio) The absence of effective democratic control over the army, together with the military's obsession with vengeance and vindication, continues along with Moscow's inability to sustain the large numbers of troops needed to envision even a remote victory. As a result, Russia is engaged in an endless war that has no definable or attainable objectives and is the most terrible war imaginable because it could easily become war solely for its own sake. In that case, all of Russia would become the theater or theaters of war, with Moscow as its center of gravity and internal war as its own justification. As [End Page 149] a result, failure to win will place Russia's integrity at risk, as may already be happening. 4 Indeed, some analysts now urge the use of tactical nuclear weapons in Chechnya. 5 Meanwhile, Putin risks Russia's integrity and stability by waging an unwinnable war to gain personal power.

Internal – Oil Key to Iranian Regime -- High oil prices key to the Iranian economy and political stability. CSIS, '6 (http://www.csis.org/media/csis/pubs/060919_20questions.pdf) The Iranian government has little popular legitimacy, and the public tolerates it only because of pervasive government subsidies. The economy is already fragile, with high unemployment, serious infl ation, and a deteriorating infrastructure. Ninety percent of government revenue comes from oil sales, but the Oil Stabilization Fund has far less cash than it should because the government raids it even in boom times in order to meet its budget. A drop in oil prices would quickly necessitate rolling back most subsidies, and upwardly spiraling prices would eliminate the one tangible benefi t that Iranians have derived from their government. The reaction would be fierce and swift. The last time Iran had a substantially more active political opposition movement was in the 1990s—a time when oil prices were falling. The government needed to act nimbly to accommodate public unrest. To a large degree, then-president Khatami’s reformist agenda was a part of that reaction. Since then, oil prices have climbed rapidly and the Iranian government has grown much less supple. The hard-liners in offi ce today are far less disposed to being accommodating than Khatami was, and the public’s faith in an alternative reformist course is much diminished. An explosion is likely.

-- Collapsing the price of oil destroys Iran’s regime.

Stern, 1-9-8 (national security and energy policy analyst in the Oil, Energy and the Middle East Program at Princeton University, http://www.iht.com/bin/printfriendly.php?id=9103897) Tehran seems unimpressed by administration war talk, perhaps because it has confidence in its navy. Lots of other people are scared, though. Take oil traders. Oil prices used to have a tight relationship with Saudi spare capacity. When capacity went up, prices went down. After two years of escalating threats between Tehran and Washington, however, new capacity no longer calms the market. Under the old market rules, prices would be $50, not $100. So war talk sends an extra $20 billion a year to Tehran. The Bush administration's bellicose rhetoric thus makes a mockery of the president's pledge to "do everything in our power to defeat the terrorists." If it wanted to honor this commitment, the administration would stop saying things that drive up oil prices. As it is, the long parade of threats just makes the mullahs richer. Yet they spend their $90 a barrel windfall faster than ever, trying to buy legitimacy with pork. Deeply unpopular, the Iranian regime now relies on constantly rising oil prices for survival.

A2 – No Government Collapse -- Iranian government on the brink of collapse – fall in prices would collapse the regime. CSIS, '6 (http://www.csis.org/media/csis/pubs/060919_20questions.pdf) Windfall profi ts from high oil prices have sustained the Iranian government for far longer than would be expected. The country’s overwhelmingly young population—35 percent between 15 and 30 years of age—must cope with stifl ing social controls, devastating unemployment, and rising intravenous drug use. Infrastructure is crumbling, and public institutions are badly overcrowded. The economy is a wreck, with almost 30 percent under the control of para-statal foundations allied with the clerics. These economic powerhouses neither pay taxes nor have any accountability. The current government has been able to sustain matters through populist chest-beating and heavy subsidies on staples, including gasoline. These two factors combine to produce a sort of grudging acceptance. But the hard fact is that the rhetoric of the Islamic revolution long ago lost its allure, and people have tired of clerical control. When oil prices go down, Iranian citizens will not only see the true costs of the government’s reckless adventurism, but they will feel it in their already empty pocketbooks. They will rise up to demand change.

-- Iran's economy is on the brink now – it must translate oil profits into reforms now. Cirincione & Grotto, ‘6 (CEIP Senior Researchers, http://www.americanprogress.org/issues/2007/02/pdf/iran_report.pdf) If Iran fails to modernize its economy, it risks a growing cohort of unemployed youth—a dangerous situation for any country. Iran has tempered this crisis to some extent by heavily subsidizing basic services through the government’s oil revenues, but this revenue stream is in danger. The main effect of U.S. sanctions such as the 1995 invocation of the International Emergency Economic Powers Act by President Clinton and the 2006 renewal of the Iran-Libya Sanctions Act on Iran has been a dramatic reduction of financing to improve Iran’s oil infrastructure.28 The recent UN and unilateral U.S. sanctions on Iranian banks further deter investors.

A2 – Oil Prices = Iranian Terror Iran will choose guns over butter – lower oil price wouldn’t stop Iran from building the bomb or from supporting terror Nissenson ‘07 (Michael, OMedia Online, “Saudi Interests Lower Oil Prices,” 2-7, online) Dr Even explains that lower oil prices would probably not affect Iran’s support for terror organizations such as Hizbollah: “Iran mainly supports Lebanon and Hizbollah. The sums Iran gives are marginal relative to its oil revenues. Even if oil prices fell a bit I still don’t think it would be so significant as to stop Iran from implementing its plans in this regard. They would simply use Iran’s foreign currency balances pay for it or spend less on other things.” To affect Iran you would need to stop it producing oil. It would be necessary to drastically affect oil production for a long time. That would have a serious impact on Iran and cause it to reconsider the continuing pursuit of its policies. A decrease in oil prices such as that caused by the Saudis would not affect it rapidly.

A2 – Iranian Oil Peak/Refining Turn Iran is addressing refining capacity with foreign investment and multiple new projects Eqbali ‘07 (Aresu, Platt’s Oilgram News, “Iran targets billion dollar refining spend,” 2-20, lexis) Iran needs $15 billion to build new refineries and upgrade existing ones to produce oil products that would be priced and sold at international oil prices, Oil Minister Kazem Vaziri Hamaneh and senior oil officials said over the weekend. "The new policy is to attract foreign and domestic private companies to invest in the fundamental projects of this industry," the official Iranian news agency IRNA quoted Vaziri Hamaneh as saying. Elaborating on the new policy, the deputy oil minister in charge of refining and distribution of oil products, Mohammed Reza Nematzadeh, said the refined products "would be priced and sold at an international price." Both Vaziri Hamaneh and Nematzadeh spoke at an international refining conference in Tehran. Iran's refineries do not have enough capacity to meet all of the country's demand for oil products, forcing the government to import an estimated 190,000 b/d of gasoline, which it sells at subsidized prices. Tehran spent more than $6 billion last year to import gasoline while the subsidies cost the treasury an additional $8.5 billion. The country's nine refineries are state-owned and use subsidized feedstock. "The primary materials will be purchased and the products sold at an international price," Nematzadeh explained. He said new regulations for this mechanism would be approved by April. "New units will be built in those

refineries...and the objective is to cut off the dependence of these units on the government and bring in foreign and domestic private sector companies," he said. "The National Iranian Oil Products Refining and Distribution wants to have less than a 50% share in the new investments with the private sector," said Nematzadeh, who is also head of the NIORDC. As for selling off the shares of state-owned refineries on Iran's stock market, Nematzadeh said: "We are waiting for the government to announce the related policies." He singled out Asian countries, particularly China and India, as the target partners either for investment in their countries or in Iran under joint ventures. "In less than one year, Iran has signed six contracts worth more than $4 billion with foreign and domestic contractors in upgrading and expansion projects," Nematzadeh said, adding that he hoped contracts of a similar value would be signed in the next three months. Indonesia's Pertamina plans to refine heavy crude oil from Iran's Soroush and Nowruz oil fields at a newly built 300,000 b/d refinery, a company official told delegates to the Tehran conference February 17. "A refinery has been built with a capacity of 300,000 b/d and it will be fed by crude from Soroush and Nowruz," Pertamina chairman Maizar Rahman told the conference, as reported by IRNA. Iranian officials say the offshore Soroush and Nowruz oil fields are producing around 180,000 b/d, slightly

below a target of 190,000 b/d. The two fields were developed by Shell under a buyback contract before being handed over to the state-owned National Iranian Oil Company. But Iran faced problems marketing the crude in 2005 and had to halt production and hire tankers to store the oil because of a lack of customers. Iran has started to refine the high sulfur oil in its own refineries rather than try to export the crude. A day earlier, Nematzadeh invited foreign companies to invest in a new project to build a 1 million b/d capacity oil pipeline to carry Caspian Sea crude from the north to export terminals in the south, IRNA reported. Addressing the inaugural session of the conference, he said: "We would like to negotiate and exchange views with interested countries and investors to implement the project." Nematzadeh also said Iran would open up its refining industry to investors, who could in turn engage in what he called "direct or indirect activities" and would serve as a "bridge of friendship and cooperation" between Iran and their respective companies. Iran currently takes Caspian crude from other countries bordering the Caspian and runs it in its refineries in the north for domestic consumption, freeing up Iranian crude of similar quality for export on their behalf. Nematzadeh told a conference in Dubai last November that Iran's crude oil refining capacity is expected to rise from the current level of 1.7 million b/d to reach 3.2 million b/d by 2012, when the OPEC producer will have implemented the expansion plan. Iran currently produces an average of just under 4 million b/d of crude, of which it exports around 2.4 million b/d. Construction of new refineries and upgrading existing refineries would raise conversion rates for gasoline to 34% from 16%, assuming all the projects materialized, he said at the time. Iran has established joint ventures with Indonesia, Singapore, Malaysia

and China for oil refining. These projects, once implemented, would produce a total of 925,000 b/d of refined products. Under the expansion plans, the Isfahan refinery's output is expected to increase to 375,000 b/d from 320,000 b/d, the Abadan refinery to 385,000 b/d from 335,000 b/d and Bandar Abbas to 320,000 b/d from 232,000 b/d.

High oil prices are fueling Iran’s revenue and enhancing investment Platts Oilgram ‘07 (Platts Oilgram News, “Iran says crude sales earnings jumped 17%;” 8-28, lexis) Iran, OPEC's second-biggest oil producer and exporter, earned $51 billion from crude oil sales in the year ended March 20, 2007, an increase of 17% over the previous year, the oil ministry news agency Shana reported August 27. Shana, quoting information provided by the government, said exports averaged 2.415 million b/d, an increase of 1.7% over the prior year. The figures point to higher oil prices rather than any significant volume gain as contributing to the increased income. Crude output rose an average 51,000 b/d, the report said, but gave no total figure. Iranian crude production has been running at just under 4 million b/d, a level believed to be close to capacity. Iran also concluded agreements worth $37.915 billion during the period relating to the energy industry. Investments in the sector amounted to $14.235 billion, up 9.1%. The figures show Iran added 3.52 billion barrels in crude reserves from newly discovered fields. Iran's reserves are estimated at 125.8 billion barrels, the second largest after Saudi Arabia.

A2 – Iranian Oil Peak/Refining Turn New development projects underway Platts Oilgram ‘07 (Platts Oilgram News, “Iran says crude sales earnings jumped 17%;” 8-28, lexis) The ministry's priority is to develop the massive South Pars gas field, the world's biggest concentration of non-associated gas. "We are inviting international and domestic companies to come and invest in these fields," the minister said. The government figures show investment in South Pars since President Mahmoud Ahmadinejad came to power in August 2005 has increased by 38%. There was no comparison given. Shana quoted Pars Oil and Gas Company as saying funds allocated to the company's projects rose to over $2.7 billion last year compared with $1.97 billion allocated in the 2005-06 Iranian year. This is set to increase to $3 billion by the end of the current year. South Pars is being developed in phases, some in association with foreign companies awarded so-called buyback

contracts, whereby they are remunerated from proceeds of a finished project under previously agreed terms. Iran's constitution does not allow production sharing.

AT – No Refining Capacity (Stern Argument) Stern’s analysis is wrong – it doesn't assume expansion of production facilities or Chinese oil demand Washington Post ‘07 (“A Paper Tiger?” 1-1, lexis) We don't know whether Mr. Stern is right. The paper assumes that the country's leadership will be unable to meet the challenge of modernizing and expanding production facilities and that Chinese investment won't be available to ensure that exports continue at the rate China's own increasingly voracious appetite for oil requires. What's more, even if Iran faces major problems, it's not clear that would make it less dangerous or more pliant to international will. It could do the opposite.

***A2 – Econ Turn*** AT – High Price Hurts Economy – 1/3 High prices slow the global economy but don’t do serious damage—the prices are demand-driven and are not being passed on to consumers. Bourland 5/9/2008 [Brad, Chief Economist & Head of Research Jadwa Investment. http://www.saudi-usrelations.org/articles/2008/ioi/080509-bourland-oil.html] We think it would take clear evidence of a slowdown in demand for oil for prices to retreat. Higher

oil prices are hurting the global economy, but not by as much as analysts had expected. A benchmark study by the International Energy Agency (in conjunction with the IMF and OECD) in 2004 concluded that a 40 percent increase in oil prices takes around 1 percent off global GDP. Since the end of 2002, oil prices have risen by nearly 500 percent, yet global growth last year was 4.9 percent and even with recession looming in the US, it is expected to be around 3.7 percent this year, above its 20-year average. In part, the resilience of the global

economy to the ongoing run-up in oil prices is because the price rise is the result of a shift in demand rather than a shock to supply (as was the case with the price surges in the mid-1970s and the early 1980s). In addition, the full extent of the prices rises has not been passed on to the consumer for the following reasons: *In many emerging markets gasoline is sold at a fixed price that is not adjusted in line with movements in the global oil price. In China, for example, the retail price for gasoline has been increased by 95 percent since the end of 2002. In most Middle Eastern countries, prices have not been changed at all and in some cases they have been cut (Jordan is a notable exception; it removed all oil subsidies in February). *In Western Europe fuel is heavily taxed. In the UK, for example, tax accounts for 55 percent of the retail

price of gasoline. As crude oil prices account for less than half of the final retail price (refining, transportation and other costs make up around 10 percent of the total) the impact of the run-up in oil prices on final prices is less pronounced. Since the end of 2002, the retail price of gasoline in the UK has climbed by only 80 percent. *The weakness of the dollar against most leading currencies over the last five years has offset some of the rise in international oil prices, which are denominated in dollars. For example, in euros the oil price has increased by just less than half of the increase in dollar terms. *In the US, taxes are much lower than in Western Europe (they account for around 26 percent of the gasoline price) and there has been not been a beneficial exchange rate impact. Nonetheless, the retail price of gasoline is up by only 140 percent, as refiners have absorbed much the higher costs. Margins for US West Coast refiners have plunged since the middle of last year, from over $22 per barrel to less than $6 per barrel. As a percent of the oil price the decline is even more marked. Analysts assumed that higher crude prices would pass

more directly to final consumers and this would cause inflation, leading central banks to raise interest rates and ultimately slowing economic growth. It is the lack of impact on inflation to date that explains why high crude prices have not significantly slowed global GDP growth. High oil prices don’t hurt the economy. CCTV International, 1/3/2008 [http://www.cctv.com/program/bizchina/20080103/102837.shtml] Analysts say the high oil prices will continue, but are not likely to have a big impact on the world economy in the long run. Although the price of crude oil has been rising consistently in recent years, the world economy has maintained a growth rate of around 5 percent, and international trade has grown at a rate of between 7 to 9 percent. Analysts say, the impact of oil prices on the world economy is weakening. The main reason is energy-saving measures and new technology, which are improving the efficiency of energy consumption. The economic growth is less reliant on high consumption of oil. Secondly, the integration of global economies and technology innovation have raised production efficiency and reduced costs around the world, which has led to an increase in disposable incomes. Consumption has therefore remained strong. Another reason is that the world economy is in a phase of expansion, and macro-economic policies in many countries have been in place to withstand the impact of high oil prices. However, the International Energy Agency has estimated that until 2030, the demand for crude oil will increase by 35 percent to 116 million barrels per day and crude oil prices will remain high for the longer term. It will force the economies to change their growth model, innovate energy-saving technologies, and explore new energy resources to achieve sustainable development.

AT -- High Prices Hurts Economy- 2/3 There’s no risk of a turn – price would have to rise to 200 to hurt the economy Sunday Times ‘04 (“Oil soars again, but no need to panic just yet,” 8-15, lexis) The Bank also pointed out that all advanced economies have become less sensitive to oil, Britain particularly so. The decline of heavy, energy-intensive manufacturing means that OECD countries use just over half as much oil for a given level of gross domestic product (GDP) as in 1970. In Britain the decline has been even more pronounced -the oil intensity of GDP is only 40% of what it was three decades ago. Just to be clear, this does not mean we use less oil now; it means that oil consumption has risen much more slowly over time than GDP. Adding these two bits of information together produces

an interesting result. For high oil prices to have the same effect on the economy as in the 1970s we need to adjust both for the fact that real oil prices were higher in the past and that economies were more oil-sensitive. I calculate that it would need an oil price of just over $ 200 (£110) to produce the same kind of inflationary and recessionary shocks as in the past. That would be uncharted territory and is not remotely on the agenda. According to CSFB, the highest-ever oil price, in today's prices, was $ 95 a barrel in the late 19th century.

Revenue recycling prevents economic downturn Business Week ‘04 (10-25, lexis) With oil prices touching $54 per barrel on Oct. 12, OPEC and other oil-producing nations are on their way to a windfall in export revenues. What will they do with their gains, and how will this transfer of wealth from oil-consuming countries to oil producers play out in the global economy? Ultimately, oil revenues end up getting recycled back into the global economy in two ways: They can go to buy more goods and services from abroad, or they can be invested in foreign securities. For global growth, the former is preferable to the latter. The more oil producers increase their imports from oil consumers, the less oil-consuming nations will feel the shock of their lost wealth. And that could be a plus this time, compared with past experience. Economists at UBS Securities in London note that OPEC has shown an increasing propensity in recent years to import more when oil revenues rise. From 1999 to 2003, OPEC spent 85% of its petrodollars on imports. Excluding Iraq, which was under U.N. sanctions, the figure is about 90%. Either rate is well up from the 65% of 1979 to 1984. Moreover, petrodollars are being recycled back into global trade more quickly than in the past. After each of the two oil shocks of the 1970s, OPEC's outlays lagged its revenues by three years, says economist John Llewellyn at Lehman Brothers Inc. But from 1998 to 2003, he says, OPEC spending has largely kept pace with oil revenues, although the rapid rise of oil prices in 2004 will undoubtedly create some drag. Clearly, the revenue windfall will be a boon for the governments of oil-exporting nations since it bolsters fiscal positions and helps to repay debts. For example, Russia may well be able to restore its investmentgrade credit rating as a result.

Dollar depreciation means price rise will not hurt economy Dyer ‘07 (Gwynne, London-based independent journalist whose articles are published in 45 countries, Canberra Times, 8-6, lexis) The spike at $US78.40 in July 2006 didn't cause a recession, so why should this one? Indeed, why would even $US100 a barrel cause a global economic crisis, given that $US100 today is only worth about the same in most other currencies as $US78.40 was a year ago? Oil sales are almost all denominated in US dollars, which are worth almost a third less in euros, pounds or yen than they were two years ago, so the countries of the Organisation of Petroleum Exporting Countries are not rolling in sudden wealth. The oil exporters spend most of their income in other currencies, so from their point of view the recent surge in the oil price only restores the purchasing power that had they lost over the previous two years because of the US dollar's slide. More importantly, most of the big importers of oil in the industrialised world are not really paying much more for oil than they were two years ago. The rising dollar price has been largely cancelled out by the fall in the value of the dollar, so it's not really busting their budgets. American consumers are feeling victimised, but they get little sympathy in the Middle Eastern countries that dominate OPEC, as most of these governments believe that George W. Bush's invasion of Iraq has made their neighbourhood a far more dangerous place. OPEC is not going to pump more oil out of gratitude for Bush's policies. As for the steep fall in the value of the US dollar, that's what happens to your currency when you try to fight an expensive foreign war without raising taxes at home (as Richard Nixon found out over Vietnam in 1971).

Seventy-six dollars a barrel will not cause world economic growth to stall and even $US100 a barrel might not do so.

AT – High Price Hurts Economy – 3/3 Economic factors make it impossible for high prices to hurt growth Alhajji ’04 (AF, researcher at Ohio Northern University, Oil & Gas Journal, 8-23, lexis) While those experts focus on the similarities between the current situation and that of the 1970s, they ignore several significant differences. The recent increase in oil prices is different from all the price increases in the past, including that of 1990-91. These differences play an important role in explaining how the impact of the recent increase in oil prices on economic growth is different from that of the past. n1 These differences indicate that conventional wisdom is still correct -- but under certain conditions. These conditions include rising interest rates, decreasing government spending, decreasing military expenditures, and semifixed exchange rates. Since these conditions do not currently exist, conventional wisdom does not apply. The past 2 years are the only period in OECD history when oil prices, economic growth, government expenditures, and military spending all have increased at a time when interest rates and the value of the dollar have continued to decrease. In addition, OECD economies started from rock bottom after the terrorist attacks on the US on Sept. 11, 2001, which makes it impossible for high oil prices to reverse the upward trend in economic growth.

Conventional wisdom based on past shocks is wrong – current situation is not analogous Alhajji ’04 (AF, researcher at Ohio Northern University, Oil & Gas Journal, 8-23, lexis) Summing up Conventional wisdom states that high oil prices slow economic growth. This conventional wisdom does not apply to the recent period of high oil prices. The conditions surrounding the recent period of high oil prices are different from the conditions that prevailed in the 1970s and that helped form the conventional wisdom. The conventional wisdom generally holds if all the variables other than oil prices and economic growth remain virtually constant. These other variables include exchange rates, government expenditures, military expenditures, interest rates, and expectations. Based on the conventional wisdom, the impact of high oil prices on the economy is worse when government expenditures decrease and interest rates increase, which was the case in the 1970s. The current situation is different. The increase in oil prices in the 1970s was sudden, unexpected, and significant. People expected prices to continue increasing as several reports indicated that the world was running out of oil. The recent depreciation of the dollar relative to the euro and the yen limited the impact of high oil prices to the US. Several factors limited the impact of high oil prices on US economic growth. These factors include an unprecedented increase in government expenditures and an unprecedented continuous decrease in interest rates. Unlike the 1970s, oil prices have increased slowly and gradually. Traders and experts expected the increase.

***AFF*** Current Prices Bad Current prices unsustainable- need to switch to renewable to prevent catastrophic collapse in prices Armentano ‘08 [Dom ,Professor of economics, , Harvard University, “The Coming Collapse of Oil Prices”, May 26, 2008, www.lewrockwell.com/] Bold economic predictions are dangerous, and I've been wrong before, but here goes: Oil prices are about to tumble. There are several important reasons to believe that crude oil prices of roughly $130/barrel are simply not sustainable. The first is that world-wide economic growth,

and hence the demand for crude oil, has slowed markedly due to the credit crunch and the bursting real estate bubble. The second reason is that the Federal Reserve has finally decided to stop lowering interest rates and/or creating credit as if it were the Tooth Fairy; a stronger dollar will mean lower oil prices. Third, the already record high crude oil and gasoline prices have created strong incentives for consumer and business conservation and that has lowered overall demand. Yet the most fundamental reason to expect prices to fall is that the gap between the price of crude oil and the cost of producing it is just way, way too large to be sustained long-run. According to the Energy Information Administration, the average cost (in constant dollars) of finding, lifting, and storing onshore domestic and/or foreign oil between 1980 and 2004 has been approximately $20 per barrel; between 2004 and 2006 that average cost rose to approximately $25 per barrel and is slightly higher now. (The cost of producing offshore oil is more than double onshore costs). Yet the price of crude oil has risen to approximately $130 per barrel (doubling in the last year alone) creating large profits for most producers and integrated oil

companies. Marginal suppliers around the world with costs above $30 per barrel but still far below current prices now have overwhelming incentives to uncap wells, engage in secondary and tertiary techniques to recover more oil from existing wells, drill additional wells, and otherwise expand production. (Houston is currently booming with oil production investment as is Brazil). Any serious output expansion will take time but the increasing supply coupled with lower demand will lead inexorably to lower prices; indeed, sharply lower prices. To be sure, speculators have helped bid up the price of crude oil. Most of the speculation centers around legitimate concerns about "supply disruptions" and some wider war in the Middle East Gulf region. My guess is that roughly 20% of the current price is a supply disruption premium while another 10% is associated with our own debasement of the currency (the dollar) by our own central bank. (This can be proven by comparing oil prices in dollars with oil prices in Euros). When (if) these speculations prove unwarranted, oil prices will decline sharply into (my guess) the $80 per barrel range. But if we get a new war, all bets are off. Public policy can encourage this bursting bubble scenario. The Democrats want to tax the oil companies or use the antitrust laws against them. Big mistake. More taxes get you LESS oil and "concentration" in the oil industry is not really the problem. The on-going Congressional hearings "investigating" oil prices and profits is a charade and is purely political theater. The very same federal and state governments that complain about high oil prices continue to tax gasoline at a rate (40 cents per gallon) far higher than the profit rate for the oil companies. So much for government concern about consumers. On the other hand, public policy can and must change to allow energy companies to explore for and develop domestic and offshore supplies of crude oil. Obstacles to expanding and building new oil refineries domestically must be removed, and quickly. Alternative energy

sources, if they are cheaper, must be allowed to proceed (including and especially nuclear) but direct subsidies to ALL energy companies (including to oil companies, if any) should end. We need the contributions of wind, solar, etc., but only if and when their real costs and prices are comparable with oil and natural gas. Competitive energy suppliers will work to produce in our interest if we free up the markets and let them.

Current Prices Bad Price collapse inevitable—high prices causing a recession in the US and China cannot offset the decrease in demand. Lachman 5/30/2008 [Desmond, Resident fellow at the American Enterprise Institute, The American, http://www.american.com/archive/2008/may-05-08/will-oil-really-hit-200-a-barrel.] Yet by focusing exclusively on supply limitations and on the emergence of China and India, the market is overlooking a key point, namely, that oil price increases are qualitatively different from

other commodity price increases. Unlike other commodities, oil is an essential industrial input and it forms a vital part of every household’s consumption basket. As such, large increases in oil prices can and do have highly deleterious effects on the global economy. The degree to which oil can affect the global economy is brought home when one considers that the United States, Europe, and Japan each have to import approximately 15 million barrels of oil a day. This means that oil price increases should be seen as the equivalent of a consumption tax levied by foreign governments on the major industrialized economies at a most inopportune time. The market is also ignoring the fact that the recent increase in oil prices is not occurring in isolation. Rather, it is occurring at a time when the U.S. economy is suffering from the biggest housing market bust of the past 70 years. The housing crisis has contributed to a sharp decline in U.S. consumer sentiment, which has plunged to its lowest level since the early 1980s. Worse still, the recent oil price spike is experiencing “the mother of all crises” (in the colorful words of former Federal Reserve chairman Paul Volcker). Past experience suggests that

if the recent run-up in oil prices is sustained, it alone will subtract more than a full percentage point from U.S. GDP growth in 2008. That experience also suggests that, over the longer haul, the recent doubling in oil prices will subtract another full percentage point from U.S. GDP growth beyond 2008. Since these oil price increases have occurred in the context of a housing bust and a credit crunch, one must assume that the U.S. economy is facing the real risk of a recession that is both deeper and more protracted than the postwar average. And if the recent spike in oil prices threatens to tip the U.S. economy into recession, just imagine what a further run-up in prices—say, to the $150 to $200 a barrel range—would do. But here’s the catch: if soaring oil prices were to push the United States and other

industrialized nations into recession, is it plausible to think that the export-oriented Chinese economy could continue to grow at its present pace and make up for the lower oil demand in the West? No. In other words, oil prices cannot keep increasing without ultimately triggering a significant reduction in demand, which, in turn, would bring prices back down.

Current Prices Bad- Makes Link Inevitable

High prices cause price collapse and depression Sunday Times 6/29/2008 [http://business.timesonline.co.uk/tol/business/economics/article4232875.ece] When Wall Street slumped on Thursday, in response to the oil price surging above $140 a barrel and renewed fears about the banking system, the alarm bells rang more loudly than usual. Barring a miraculous recovery tomorrow, the Dow Jones industrial average is heading for its worst June since 1930, when it plunged by almost 18%. That month is ingrained in the Wall Street psyche. After the crash of October 1929, the stock market continued to slide through the winter. By the spring the worst seemed to be over. Then shares lurched low in June 1930, signalling deep problems for the economy and the stock market. America entered depression and the stock market went into a deep freeze that lasted a quarter of a century, taking until 1954 to get back to its precrash high. Are there any parallels with today? Although it is eight months since the Dow peaked at 14,164, its performance since then has defied gloomy predictions. Despite most economists declaring the economy to be in recession, the index was above 13,000 as recently as last month. This month, however, reality has hit home. “Some of it is clearly to do with the oil price but

essentially what we are seeing is a slow-motion car crash,” said George Magnus, senior economic adviser at UBS. “The first act was the housing market, the second act was the credit crunch, and what we are now seeing in this third act is the bigger picture of a downturn that has a long way to run.” Few are gloomier about that prospect than Albert Edwards, strategist at Société Générale in London. “America is leading the way, diving into deep recession as a collapse in consumer confidence induces the great unwind,” he said. Edwards compares the economy with a pyramid scheme that is poised to crash to earth and interest-rate changes can do nothing to avert it. He thinks Wall Street and the other main markets have a lot further to drop, and will end up 70% below the peaks of last year. That would imply a level of just 500 for the S&P 500, which was at 1,280 on Friday, and 4,500 for the Dow, compared with Friday’s closing level of 11,346. The FTSE 100, which closed at 5,530 on Friday, will plunge to 3,000, he predicts. The good news is that he expects the oil price, which was above $142 on

Friday, to

slump to $60 a barrel. The bad news is that he sees this occurring as a result of “deep” recession in the advanced economies and a sharp slowdown in emerging markets. The gloom on Wall Street, where the stock market dropped again on Friday, is almost allpervading. Veteran banking analyst Richard Bove of Ladenburg Thalmann said there was “an absolute unwillingness among clients to talk about anything other than how bad things are”. Investors wanted to know which bank would be the next to blow up or be forced to raise capital. Even though there were hopeful signs of recovery in the sector, albeit from a low base, many in the market had “lost perspective”, he said. “The last time loan losses were at these levels was 1934,” he added. “I don’t believe we are going back to a 1930s enviro nment with people living in tents.” Bove predicts bank losses will at least stabilise in the coming months. However, Scott Anderson, senior economist at Wells Fargo, summed up why the markets are so gloomy. The economy is caught between the twin problems of near-recession and sharply rising inflation. “Consumer confidence levels are at their worst since the early 1980s, we have record oil prices and the Fed will have to react to that and start raising rates by the end of the year if they don’t recapitulate soon,” he said. “That would certainly drag out the housing correction and be a further drag on consumers.” He has scaled back his forecasts for the end of this year and into 2009. “One half [of Wall Street] is worried about growth, and they are scared,” he said. “The other half are worried about inflation, and they are scared too. Sell in May and go away may have been the best strategy this year.” A drop in the oil price would be the best remedy for jittery markets and a shaky economy, though it could also cause problems. One fear is that a sharp fall in oil and other commodity prices would bring a new wave of troubles for investment banks and hedge funds. As it is, most have been revising up their forecasts for the oil price.

A2- Unconventional Oil No link to the impact- unconventional oil competitive with oil at 30$ RESPONSIBLE ENERGY 2005 [ “EnergyBridges” ]http://www.responsiblenergy.org/tarsands.asp “Peak oil” means that oil production rises rapidly, plateaus, and then drops off. What this means is that at some point between now and 2020, the world’s oil production will likely peak and then enter a slow, but relentless decline. Oil reserves will not dry up the day after production peaks, but current world production of 85 million barrels per day might total only 75 million barrels per day 10 years down the road. If oil production fell by 10 million barrels per day over a 10-year period in the future, consumers could face $200/barrel oil and $6/gallon gasoline. Oil thirsty importers like the US and China might go to war for oil. The global transportation and shipping system would grind to a halt and along with it, the global economy. For these reasons, all major energy consuming countries must aggressively pursue a strategy that uses energy bridges as a stepping-stone to new technologies and energy sources. With today’s high oil prices, a new player has come onto the world oil stage—“non-conventional oil.” “Non-conventional oil” means bitumen deposits, oil shale, and tar sands that cannot be pumped the way conventional crude oil can. They must be either mined and processed, or heated underground and the oil pumped out. Bitumen consists of tar that is recovered by drilling wells in the deposit and injecting steam to liquefy the tarry bitumen so that it can be pumped to the surface. The process is technically difficult and more expensive than conventional crude oil production. Nonetheless, production costs for tar sands oil have fallen to around $15 per barrel, making them a viable fuel source at today’s $50+ per barrel prices. Similarly, Shell Oil has found a way to extract oil from oil shale that is competitive at world prices of $30/barrel.

A2- UAE Relations US-UAE RELATIONS LOW ALLBuisness 2006 [“Ports and politics: sinking US-UAE relations” Abdelsamad, Omar] http://www.allbusiness.com/sector-92-public-administration/national/11878271.html} The attempted takeover of six US port terminals by Dubai Ports World (DPW), based in the United Arab Emirates (UAE), has strained the historically amicable US-UAE relationship. The future looks grim: a recent Gulf News poll reported 64 percent of readers claimed the deal's dismissal "changed their opinion for the worst" regarding investing in the United States. The rejection of the ports deal was based largely on vote-garnering political moves, and the economic barrier imposed by the US Senate does not bode well for future business and political relations with the UAE and other foreign investors.

A2- Iraq Reconstruction Iraqi economic restoration fails- 8 reasons Looney 08 [ Robert, professor of National Security Affairs, Department of National Security Affairs at the Naval Postgraduate School, Monterey, “Impediments to Stability in Iraq: The Illusive Economic Dimension,” March 16, http://www.globalpolitician.com/24281-iraq#_edn52] Even without the insurgency, Iraq's reconstruction would have been a monumental undertaking. Saddam Hussein's economic legacy will be present for some time. In particular, that regime's questionable economic policies and mismanagement of the economy together with political repression, internal conflicts, wars, and sanctions left a number of serious impediments to recovery and growth. Initial reconstruction efforts dealt largely with correcting and reversing the effects of debilitating forces that had built up over the years.[11] Such efforts included the restoration of government economic functions after looting and state collapse; the prevention of currency collapse, hyperinflation, and economic chaos; the rebuilding of infrastructure ravaged by war, sanctions, looting, and neglect; the rehabilitation of a health care system cut off from medical advances for two decades; the dismantling of corrupt, dysfunctional state economic controls; and the stimulation of the growth of a private sector that had been stunted by government interference. A number of major successes did occur, especially under the CPA. The CPA reestablished a nationwide food-ration system and rehabilitated several thousand schools, health clinics, and hospitals. Furthermore, it provided public services to populations deprived under Saddam, as well as funded small projects across Iraq to meet critical community needs. The CPA also was responsible for increasing electrical generation and output. On an economic level, the provisional government introduced a new currency and stabilized the exchange rate; liberated most prices without igniting inflation; rebuilt the government's economic ministries; and promulgated market-oriented banking, taxation, foreign trade, investment, and business regulations. Still, the Coalition's economic accomplishments

were overshadowed by its unfulfilled promises. During the occupation, the CPA was unable to prevent rampant looting of infrastructure and production facilities. It failed to attract foreign investment, implement its newly enacted economic regulations, restructure state-owned industries, or fulfill promises of substantial job creation. Similarly, the CPA did not meet targets for electricity production--despite increases--restore oil production to prewar levels, eliminate costly distorting energy and food subsidies, or combat corruption in reconstruction projects. The Coalition was unable to spend more than a fraction of the $18.4 billion the U.S. Congress allocated for Iraq's reconstruction. In sum, the net result of postwar economic efforts has been disappointing, though some economic obstacles and distortions are lessening thanks to the reforms put in place by the CPA.[12] Many problems were created or reinforced through postwar policy errors and miscalculations.[13] The net result is an economy wherein the oil sector dominates the economy, accounting for around 74 percent

of GDP.[14] Iraq now depends solely on oil exports for finance of investment and consumption expenditures, for government revenues--of which oil export proceeds exceed 93 percent--and for 98 percent of foreign currency earnings. Another setback is that centralized decisionmaking and intrusion of the state into economic life have distorted the pricing structure in many sectors to the extent that prices often do not reflect the real value of the product or service. In turn, distorted prices have caused inefficiencies and waste. The public sector is overrepresented in the economy, leading to inefficiency and decreased growth. Many state enterprises are currently dormant. The weakness of the private sector has limited its role in economic development, increasing the lack of diversification. Additional problems plague the public sector. Poor governance practices are common, including widespread nepotism in public appointments and corruption among public servants. The lack of accountability and transparency in managing state resources has abetted corruption and increased its corrosive effect on growth and efficiency. Iraq's decades-long isolation has resulted in the digital divide, as well as in outdated institutions, administrative systems, and know-how. Technological stagnation and the use of outmoded production methods have weakened the economy as a whole; and public sector institutions have witnessed serious looting, theft, and destruction. Another legacy of the past was the total dependence on monetary expansion to finance the budget deficit, which led to an average inflation rate of 50 percent annually during the 1990s. While monetary policy is now on sounder footing, the inflation psychology and lack of a developed government bond market together with supply-side shocks have resulted in volatile movements in price and an inflation rate still in double digits. Moreover, social inequalities are widespread in a broad range of fields covering health, education, public services, and social services to low-income groups, the disabled, internally displaced persons, refugees, single-parent households, and other vulnerable groups across geographic areas. Unemployment ranges to about 50 percent, and the absolute poverty level--in which the population depends on the government's rationed food basket--is more than 60 percent. Unemployment has led to an increase in demands for social assistance. Furthermore, with over 50 percent of the population under 24 years of age, rapid rates of population growth are likely for many years. Many in this large demographic group are alienated due to violence and limited access to education, training, and career prospects. The traditional family unit and the community have remained the core of Iraqi society, ensuring solidarity and social cohesion against all odds. However, conflict and inequality have eroded the social fabric of communities and families throughout the past three decades. In Iraq, social capital establishes an important relation between incomes and human capability to withstand shocks. Iraqis have witnessed a depletion of social capital, which has led to social deprivation in most sectors of society. Civic participation and recognition of human rights were denied during the previous regime. They remain poorly understood and lack ancillary support structures. Finally, a large informal economy coexists alongside the

formal sector. This informal economy may account for as much as 65 percent of GDP.[15] Even more worrisome is the large criminal element that controls large segments of the informal sector.[16]

A2- Iraq Reconstruction Impact inevitable- corruption BBC 05 [“Iraq Reconstruction Funds Missing,” BBC News Service, Jan 30, http://news.bbc.co.uk/2/hi/programmes /file_on_4/4216853.stm] The BBC's File On 4 programme has learnt that out of over $20bn raised in oil revenues during US-led rule, the use of $8.8bn is unaccounted for. US government auditors criticise the Coalition Provisional Authority for failing to manage the money properly. In one case, auditors say the key to a safe holding millions of dollars was kept in an open backpack in an office. "There was insufficient internal control to assure that money was spent for the benefit of the Iraqis, as the UN Security Council resolution mandated," said the auditors' chief of staff, Ms Ginger Cruz. "We contend that since the CPA was in control and did have a responsibility to be an effective steward of those monies, that it was to be expected that there was more supervision of what happened to that money," she said. Even allowing

for the chaos in the aftermath of war, the auditors still believe the management of the money should have been a great deal tighter. An earlier auditors' report from last year revealed evidence of wholesale carelessness with large amounts of cash. On one occasion, $1.4bn had to be transported to a bank in three helicopters, as it weighed 14 tons, but no deposit slip was obtained when it was paid in. It [the liberation of Iraq] was such a key moment and a great opportunity was lost by the way it was handled The CPA has also come under attack for failing to prevent widespread fraud. One US company is accused of massively inflating its profits by setting up sham companies to send fake invoices which the coalition paid. Others are alleged to have demanded dubious commissions which then came out of Iraqi funds. Even some Coalition

officials are said to have openly demanded bribes of up to $300,000 in cash.

Turn- High oil prices keep terrorist organizations afloat through smuggling Looney 05 [Robert, professor of National Security Affairs at the Naval Postgraduate School in Monterey, “The Business of Insurgency,” National Interest, Fall,] Yet, paradoxically for a country so rich in oil, toward the end of 2004 it became incredibly difficult for average Iraqis to buy the fuels they need. Despite rationing, queues at gasoline stations were often days long. Diesel for generators and kerosene for heaters were in short supply, leaving many parts of Baghdad in complete darkness. Conspiracy theories abound: many believe the shortages are a form of punishment inflicted by the government. Another popular theory is that the shortages stem from the Coalition forces plundering of Iraq’s oil reserves. In actuality, most of the problem can be found by simply examining the country’s petroleum distribution network. Carefully targeted insurgent attacks on pipelines and truck convoys have crippled Iraq’s oil infrastructure and have largely isolated the capital. Oil wells have been shut in while pipelines are repaired; oil derivatives sit in storage tanks in Umm Qasr while truckers spurn the long, dangerous drive to Baghdad. There is plenty of blame to go around. Oil Minister Thamir Al-Ghadhban summed up the present situation by noting: “We do not have a fuel crisis as much as we have a crisis of honesty.” In a speech to Iraq’s interim parliament, Deputy Prime Minister Barham Salih blamed “sabotage” of the country ’s main pipelines and “administrative corruption.” An energy source in the capital said insurgents had managed to hit pipelines bringing fuel to Baghdad’s main refinery as well as the distribution grid for refined products. However, an inspector for the capital’s oil distribution company said the crisis was “manufactured” rather than real—storage depots were full, but oil ministry officials and station

owners were collaborating in selling wholesale to smugglers. An economic explanation for much of the crisis starts with the fact that the insurgent attacks have created a possibility whereby unscrupulous Iraqi officials and oil traders together with organized criminals have the opportunity to make huge profits buying gasoline at the official price, and then selling it on the black market. According to an Oil Ministry report leaked to the Baghdad paper Al- Furat, a gas station owner selling a tanker- load of gasoline at the official price could expect to make about $340 in profit while selling the same gas on the black market would net more than $4,800. The government has already begun to clamp down on those officials and gas station owners who are allowing the gasoline to leak into the black market. The distribution director in Al-Amarah (south of Baghdad) has been arrested for selling most of the governorate’s gasoline on the black market, three

managing directors in the Oil Ministry have been suspended and several government-owned gas stations closed pending investigation. However, the insurgents continue to thrive, largely outside the government’s reach. They control many of the distribution routes in the country. Leveraging this advantage they have been able to profit from the differential between the official, subsidized price and the international market price for gasoline by smuggling the fuel out of the country. This not only allows insurgents to raise huge amounts of money to fund their operations, but also helps them to inflame popular opposition to the occupation. To add insult to injury, the insurgents often simply sell, through various front organizations, the gasoline back to the government to begin another cycle. While no hard data exists on the profits earned by the insurgency through black market arbitrage, a safe guess is that it is likely to be in the high millions. The cost to the government stemming from providing subsidized gasoline amounts to $5 billion in lost revenues, or about $200 per Iraqi. The effect on the country’s stability is two-pronged. With rising reconstruction and security costs, the government’s ability to fight the insurgency declines at the same time effectively subsidizing insurgent activities. Outright theft and smuggling compound the losses to the country stemming from black market arbitrage. CPA officials estimated in early 2004 that smugglers were able to steal up to $200,000 worth of oil a day. Unfortunately for the government very few solutions to the problem present themselves. Increasing the price of oil derivatives would remove the price differential and prevent insurgents from profiteering at the expense of the average Iraqi—but unfortunately the average Iraqi is likely to interpret any price increase as the government profiteering at his expense. Clamping down on the officials who are selling the products onto the

black market should help, but when corruption has become so pervasive it is difficult to imagine that the

government will ever be able to stem the tide entirely.

2AC – Iranian Oil -- No risk of Iranian government collapse. CSIS, '6 (http://www.csis.org/media/csis/pubs/060919_20questions.pdf) Westerners have long asserted the fragility of the Islamic Republic’s government, since their ties are overwhelmingly to Westernized elites who lost ground after the Islamic revolution. In fact, the Iranian government has truly deep populist roots, nurtured by its dedication to social justice. Not only do all Iranians receive subsidized goods, but access to education and jobs has been opened to groups that were systematically marginalized under the shah. Automobile ownership is a sign of this prosperity; though many bemoan the crowded roads, the mobility it affords Iranians of modest means is a widespread benefi t. The government has proven a skilled manager of popular frustration, consistently getting ahead of protests and putting them down with minimal use of force. More than a quarter century after the Iranian revolution, no popular alternative to the government has emerged, and no signifi cant protest movement has taken root. Iran is an authoritarian state to be sure, but it is not a totalitarian one, and it uses its fl exibility to create stability.

-- Drop in oil prices won’t effect the regime. CSIS, '6 (http://www.csis.org/media/csis/pubs/060919_20questions.pdf) Sustained high oil prices have fi lled the coffers of the Iranian government and added signifi cantly to their reserves. Unlike some Gulf neighbors, which have plowed oil windfalls into conspicuous consumption, the Iranian government has been pouring billions every year into an “Oil Stabilization Fund” for leaner times. In addition, the Iranian government has almost complete control of the domestic mass media, has done a thorough job of preempting opposition movements from arising in the country, and has an effective and often ruthless intelligence apparatus. Although Iranians can—and do—complain that the government diverts too much of the national wealth for its own purposes, Iranians have been unable to organize in a way that even begins to threaten the government. In addition, expatriate opposition groups have little local appeal. A fall in oil prices would certainly constrain the Iranian government, but all indications are that it would narrow the options of that government rather than provoke a crisis.

2AC – Iranian Oil -- Collapse of Iran’s oil industry is inevitable. Stern, 1-8-7 (Princeton,http://www.iht.com/articles/2007/01/08/opinion/edstern.php) Iran has ensnared itself in a petroleum crisis that could drive its oil exports to zero by 2015. While Iran has the third- largest oil reserves in the world, its exports may be shrinking by 10 to 12 percent per year. How can this be happening? Heavy industry infrastructure must be maintained to remain productive. This is especially so for oil, because each oil well's output declines slightly every year. If new wells are not drilled to offset natural decline, production will fall. This is what is happening in Iran, which has failed to reinvest in new production. Why? For the mullahs, the short-run political return on investment in oil production is zero. They are reluctant to wait the 4 to 6 years it takes for a

drilling investment to yield revenue. So rather than reinvest to refresh production, the Islamic Republic starves its petroleum sector, diverting oil profits to a vast, inefficient welfare state. Employment in the loss-making state-supported firms of this welfare state is essential to the regime's political survival. Another threat to exports is the growth in domestic demand. Iranian oil demand is not just growing, it's exploding, driven by a subsidized gasoline price of about 9 cents a liter. This has created a 6 percent growth in demand, the highest in the world. So Iran burns its candle at both ends, producing less and less while consuming more and more. Absent some change in Iranian policy, a rapid decline in exports seems likely. Policy gridlock and a Soviet-style command economy make practical problem-solving almost impossible. The regime could help itself by making it easier for foreign firms to invest in new production. Remarkably, it has not done this even though the decline in exports, which provide more than 70 percent of state revenue, directly threatens its survival.