Oil Da

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OIL DISAD – ENDI oil disad – endi....................................................................................................................1 backstopping 1nc................................................................................................................3 backstopping 1nc................................................................................................................4 2NC—Oil Prices Uniqueness................................................................................................5 2NC—Oil Prices Uniqueness................................................................................................6 2NC—AT: Slowing Demand Lowers Prices...........................................................................7 2NC—AT: Hoarding Causes Price Collapse..........................................................................8 Link Uniqueness: No Government Incentives Now..............................................................9 links – alternative energy causes a price crash................................................................10 links – alternative energy causes a price crash................................................................11 links – alternative energy causes a price crash................................................................12 links – u.s. key..................................................................................................................13 links – transportation policy..............................................................................................14 Link: Hybrid Cars...............................................................................................................15 links – climate change policies..........................................................................................16 2NC—Speculation Link......................................................................................................17 2NC—Link Magnifier..........................................................................................................18 at: NO LINK – PLAN IS TOO SMALL....................................................................................20 internal links – saudi perception.......................................................................................21 at: price drop will only be small........................................................................................22 2NC—AT: OPEC Lacks Spare Capacity..............................................................................23 2nc – at: opec lacks spare capacity..................................................................................24 at: opec won’t collapse prices because they won’t hurt themselves................................25 at: why didn’t the 1998 price collapse empirically deny your impact?.............................26 at: 1998 price crash denies the impact (russia)................................................................27 2NC—Russian Economy Impact—US/Russian War............................................................28 2NC—Russian Economy Impact—Global Economy............................................................29 2NC—Russian Economy Impact—Hegemony....................................................................30 2NC—High Oil Prices key to Russian Economy.................................................................31 2NC—Russian Economy—AT: Diversification Efforts Solve...............................................32 2NC—Russian Economy—Link Magnifier...........................................................................33 2NC—Russian Economy—AT: Dutch Disease....................................................................35 2NC—Russian Economy—AT: Dutch Disease....................................................................36 Extensions—Oil key to Reforms........................................................................................37 Extensions—Growth key to Medvedev..............................................................................38 2NC—Iraq Impact..............................................................................................................39 2NC—Iraq Impact..............................................................................................................40 Extensions—Oil Key to Iraqi Economy...............................................................................41 Extensions—Oil key to Iraqi Stability................................................................................42 2NC—Saudi Arabia Impact................................................................................................43 2NC—Saudi Economy Uniqueness....................................................................................44 Extensions—Oil Prices key to Saudi Stability....................................................................45 2NC—Saudi Arabia—AT: Dutch Disease............................................................................46 low prices turn the case....................................................................................................47 2NC—AT: High Oil Prices Hurt Economy...........................................................................48 2NC—AT: High Oil Prices Hurt Economy...........................................................................50 Extensions—High Oil Prices Don’t Hurt Economy.............................................................51 Extensions—AT: High Oil Prices Hurt Consumer Spending................................................52 2NC—AT: High Oil Prices Hurt the Dollar..........................................................................53 2NC—AT: High Prices Cause Terrorism.............................................................................54

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2AC—Oil DA—Uniqueness.................................................................................................55 1AR—Oil DA—Uniqueness—Speculators...........................................................................56 1AR—Oil DA—Uniqueness—Demand Crash......................................................................57 1AR—Oil DA—Uniqueness—AT: China Keeps Demand Up................................................58 2AC—Oil DA—Link Defense...............................................................................................59 2AC—Oil DA—Link Defense...............................................................................................60 2AC—AT: Russian Economy Impact..................................................................................61 Extensions—Russia Survives Oil Collapse.........................................................................63 1AR—AT: Saudi Arabia Impact..........................................................................................64 1AR—AT: Iraq Impact........................................................................................................65

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BACKSTOPPING 1NC New U.S. energy incentives to reduce oil consumption will cause Saudi Arabia to engineer a price crash Morse, 2002 - former Deputy Assistant Secretary of State for International Energy Policy (Edward, Foreign Affairs, March/April, ebsco) A simple fact explains this conclusion: 63 percent of the world's proven oil reserves are in the Middle East, 25 percent (or 261 billion barrels) in Saudi Arabia alone. As the largest single resource holder, Saudi Arabia has a unique petroleum policy that is designed to maximize the benefit of holding so much of the world's oil supply. Saudi Arabia's goal is to assure that oil's role in the international economy is maintained as long

as

possible. Hence Saudi policy has always denounced efforts by industrialized countries to wean themselves from oil dependence, whether through tax policy or regulation. Saudi strategy focuses on three different political arenas. The first involves the ties between the Saudi kingdom and other OPEC countries. The second concerns Riyadh's relationship with the non-OPEC producers: Mexico, Norway, and now Russia. Finally, there is Saudi Arabia's link to the major oil-importing regions -- most importantly North America, but also Europe and Asia. Given the size of the Saudi oil sector, the kingdom has a unique and critical role in setting world oil prices. Since its overriding objectives are maximizing revenues generated from oil exports and extending the life of its petroleum reserves, Riyadh aims to keep prices high as long as possible. But the price cannot be so high that it stifles demand or encourages other competitive sources of supply. Nor can it be so low that the kingdom cannot achieve minimum revenue targets. The critical balancing act of Saudi foreign policy, therefore, is to maintain oil prices within a reasonable price band. Stopping oil prices from falling below the minimum level requires cooperation from other OPEC countries and occasionally from non-OPEC producers. Preventing oil prices from rising too high requires keeping enough spare production capacity to use in an emergency. This latter feature is the signal characteristic of Saudi policy. The kingdom can afford to maintain this spare capacity because of the abundance of its oil reserves and the comparatively low cost of developing and producing its reserve base. In today's soft market, in which Saudi Arabia produces around 7.4 mbd, the kingdom has close to 3 mbd of spare capacity. Its spare capacity is usually ample enough to entirely displace the production of another large oil-exporting country if supply is disrupted or a producer tries to reduce output to increase prices. Not only does this spare capacity help the kingdom keep prices in check, but it also serves to link Riyadh with the United States and other key oil-importing countries. It is a blunt instrument that makes policymakers elsewhere beholden to Riyadh for energy security. This spare capacity is greater than the total exports of all other oil-exporting countries -except Russia. Saudi spare capacity is the energy equivalent of nuclear weapons, a powerful deterrent against those who try to challenge Saudi leadership and Saudi goals. It is also the centerpiece of the U.S.-Saudi relationship. The United States relies on that capacity as the cornerstone of its oil policy. That arrangement was fine as long as U.S. protection meant Riyadh would not "blackmail" Washington -- an assumption that is more difficult to accept after September 11. Saudi Arabia's OPEC partners must also cooperate with the kingdom in part to

prevent Riyadh from producing a glut and having prices collapse; spare capacity also serves to pressure key non-OPEC producers to cooperate with Saudi Arabia when necessary. But unlike the nuclear deterrent, the Saudi weapon is actively used when required. The kingdom has periodically (and brutally) demonstrated that it can use its spare capacity to destroy exports from countries challenging its market share. This tactic is the weapon that Saudi Arabia could use if Moscow ignores Riyadh's requests for cooperation.

Flooding the market to create sustained low oil prices will crush all other oil producers Mohamedi, 2003 - chief economist at PFC Energy (Fareed, Middle East Policy, Spring, proquest) A more aggressive strategy - and actually a better strategy for the Saudis in many ways over the longer term and for OPEC - would be to crash oil prices and not agree to accommodate Iraq. To do what they did in '99 and inadvertently discovered had some advantages: push the burden onto non-OPEC producers - the high-cost producers - and over time induce a decline in non-OPEC production, and then come back and take that share of demand for themselves. That would require a fairly low oil price, $14-$15 a barrel. You may ask, how can the oil producers' economies take that? They can barely take it at $30 a barrel. If you look at the macroeconomic situation in some of the Gulf countries - Saudi Arabia and Iran, even Algeria - they have accumulated a lot of assets and paid down a lot of their debt. Financially, they're doing a lot better than they were just a few years ago. To a certain extent, they have the war chest to do this if they have the will and the guts. In sharp contrast, this would be disastrous for Indonesia, Russia, Venezuela and Nigeria. None of these countries can take that type of low oil price for a period of 18 months to two years.

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BACKSTOPPING 1NC Lower oil prices devastate the Russian economy. Andrea Peters, 10/12/2007.“Russia: Putin launches electoral bid to retain power,” World Socialist Website, http://www.wsws.org/articles/2007/oct2007/puti-o12.shtml.

However, the Russian economy is plagued by serious problems. While investment in manufacturing and other industries has significantly increased over the past several years, the oil and gas industries are still the linchpin of Russia’s economic boom. This places the country in a precarious position, as any decline in energy prices on the world market, or challenges to its geopolitical position in the world’s oil producing and transportation areas, would be a significant blow to the country’s economy. That causes civil war—escalates and goes nuclear. Steven

David, Jan/Feb 1999. Prof. of political science at Johns Hopkins. Foreign Affairs, lexis.

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.

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2NC—OIL PRICES UNIQUENESS Oil prices will stay high because of growing Chinese demand—Goldman Sachs predictions prove.

Bloomberg, 5/6/2008. “Goldman's Murti Says Oil `Likely' to Reach $150-$200 (Update5),” http://www.bloomberg.com/apps/news?pid=20601087&sid=ayxRKcAZi630&refer=home.

oil may rise to between $150 and $200 a barrel within two years as growth in supply fails to keep pace with increased demand from developing nations, Goldman Sachs Group Inc. analysts led by Arjun N. Murti said in a report. New York-based Murti first wrote of a ``super spike'' in March 2005, when he said oil prices could range between $50 and $105 a barrel through 2009. The price of crude traded in New York averaged $56.71 in 2005, $66.23 May 6 (Bloomberg) -- Crude

in 2006 and $72.36 in 2007. Oil rose to an intraday record of $122.49 today on speculation demand will rise during the peak U.S. summer driving season. ``The possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty,'' the Goldman analysts wrote in the report dated May 5. A

report yesterday showed U.S. service industries expanded in April, signaling higher energy use. The Institute for Supply Management said its index of non-manufacturing businesses, which make up almost 90 percent of the economy, grew for the first time since

China is increasing refining capacity and boosting imports to meet rising demand for the Olympic Games. U.S. gasoline demand typically climbs going into the summer season when Americans December.

take to the highways for vacations. The peak-consumption period lasts from the Memorial Day weekend in late May to Labor Day in early September. Monthly fuel sales were the highest during August in five of the last six years, according to

China, the world's fastest-growing major economy, has more than doubled oil use since New York crude oil dropped to this decade's low of $16.70 a barrel on Nov. 19, 2001. Record prices have failed to stem rising consumption in developing nations, with demand led by China, India and the Middle East. Price forecasts for spot U.S. data from the Department of Energy. China Consumption

benchmark West Texas Intermediate crude oil for 2008 to 2011 were revised higher by Goldman. The 2008 price estimate was raised to $108 a barrel from $96, the 2009 forecast to $110 from $105, and 2010 to 2011 estimates are projected at $120 from $110, the analysts including Murti and Brian Singer said, citing slowing supply growth in Mexico and Russia, and low spare production capacity in OPEC. Deutsche Bank AG Chief Energy Economist Adam Sieminski,

who forecasts oil averaging $102.50 next year, today said Asian demand and limited extra supply will keep pushing oil to record levels. There's a ``huge risk'' that prices will rise to a level, perhaps $200, ``when demand finally collapses because ordinary people can no longer afford to burn as much energy as they are burning now,'' Sieminski said in an April 25 report.

Oil prices will stay high—the economy can handle higher prices and multiple factors point to high global demand. Oleg Mityaev, 1/16/2008. RIA Novosti economic commentator. “Whence the crisis?” http://en.rian.ru/analysis/20080116/97057980.html. A number of Russian experts subscribe to an even gloomier analysis. The so-called "concept of 2009" predicts that a recession in the U.S. would drive oil prices so low that Russia's impressive export surplus would quickly turn into an import surplus. Accustomed to an abundance of cheap imports, Russia would be unable to give them up at a moment's notice and start delving into its hard-currency reserves. These doomsayers, however, are in the minority. Too many factors point to oil prices (which exceeded $100 per barrel early in January for the first time in history) running at high levels for at least the next 10 years. Demand for oil grows consistently year after year.

Despite huge investment by consumer countries in alternative energy technology, their dependence on traditional hydrocarbons is only growing. Even if the U.S. economy slows down, China's 6% annual growth would continue to push demand for oil. Nor is the much talked about recession in the U.S. anywhere in sight. On the other hand, oil producing countries and companies take a very conservative view of investments in new fields and have no urge to flood the world with cheap oil. Goldman Sachs, an international bank famed for its prediction two years ago that oil would cost more than $100 per barrel, has now forecasted that average 2008 prices will be $95 per barrel. Curiously enough, the report's authors even stress that the world economy has learned how to handle high oil prices, and do not highlight them as a threat to global economic stability. If they are right, Russia may be able to enjoy prolonged high hydrocarbon prices without fear they might cause a global downturn and, as a result, a drop in raw materials prices.

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2NC—OIL PRICES UNIQUENESS Oil prices will stay high—the US slowdown will not go global and multiple factors ensure high demand growth for oil. The Economist, 3/6/2008. “The decoupling debate,” Tehran Times, http://www.tehrantimes.com/index_View.asp? code=165075. Many nasty words begin with the letter D: death, disease, depression, debt (when you drown in it) and deflation. “Decoupling”, on the other hand, has a nicer ring to it, even if it is the source of a great deal of controversy. Economists continue to argue about whether or not emerging economies will follow America into recession. The most pessimistic claim that “it makes no sense to talk about decoupling in an era of globalization”: economies have become more intertwined through trade and finance, which should make business cycles more synchronized, not less. The slide in emerging stock markets on Wall Street’s coat-tails appears to endorse their view. Yet recent data suggest decoupling is no myth. Indeed, it may yet save the world economy. Decoupling does not mean that an American recession will have no impact on developing countries. That would be daft. Such countries have become more integrated into the world economy (their exports have increased from just over 25 percent of their GDP in 1990 to almost 50 percent today). Sales to America will obviously weaken. The point is that their

GDP-growth rates will slow by much less than in previous American downturns. Most enjoyed strong growth during the fourth quarter of last year, and some speeded up, even as America’s economy ground to a virtual halt and its non-oil imports fell. One reason is that while exports to America have stumbled, those to other emerging economies have surged. China’s growth in exports to America slowed to only 5 percent (in dollar terms) in the year to January, but exports to Brazil, India and Russia were up by more than 60 percent, and those to oil exporters by 45 percent. Half of China’s exports now go to other emerging economies. Likewise, South Korea’s exports to the United States tumbled by 20 percent in the year to February, but its total exports rose by 20 percent, thanks to trade with other developing nations. A second supporting factor is that in many emerging markets domestic consumption and investment quickened

during 2007. Their consumer spending rose almost three times as fast as in the developed world. Investment seems to be holding up even better: according to HSBC, real capital spending rose by a staggering 17 percent in emerging economies last year, compared with only 1.2 percent in rich economies. Skeptics argue that much of this investment, especially in China, is in the export sector and so will collapse as sales to America weaken. But less than 15 percent of China’s investment is linked to exports. Over half is in infrastructure and property. It is not just China that is building power plants, roads and railways; a large chunk of the Gulf’s petrodollars are also being spent on gleaming skyscrapers and new airports -- not to mention ski-domes in the desert. Mexico, Brazil and Russia have also launched big infrastructure projects that will take years to complete. The four biggest emerging economies, which accounted for two-fifths of global GDP growth last year, are the least dependent on the United States: exports to America account for just 8 percent of China’s GDP, 4 percent of India’s, 3 percent of Brazil’s and 1 percent of Russia’s. Over 95 percent of China’s growth of 11.2 percent in the year to the fourth quarter came from domestic demand. China’s growth is widely expected to slow this year -- it needs to, since even Wen Jiabao, the prime minister, warned this week of overheating -- but to a still boisterous 9-10 percent. Smaller economies in Asia look more vulnerable. For example, Malaysia’s exports to America amount to 22 percent of its GDP, and they fell by 18 percent in the year to December. Yet its annual GDP growth jumped to 7.3 percent in the fourth quarter, thanks to consumer spending and a jump in government infrastructure investment. Mexico’s exports to America are an even larger 27 percent of its GDP. Real GDP growth held steady at 3.8 percent in the year to the fourth quarter, but manufacturing jobs are falling and workers’ remittances from abroad are falling. Retail sales grew by only 1 percent in the year to December. Yet the economy is holding up better than during previous American downturns, partly because high oil revenues have enabled the government to increase investment by around 50 percent over the past year. American downturns have often caused the prices of oil and other raw materials

to slump, but this time China’s surging demand is propping up prices and fuelling booms in Brazil, Russia and the Middle East. Brazil’s exports jumped by 26 percent in the year to February. In turn, if prices stay strong, so will China’s exports to commodity-producing countries. A sharp slowdown in China would hurt them more than an American recession will.

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2NC—AT: SLOWING DEMAND LOWERS PRICES Global demand is growing.

The Times (UK), 5/23/2008. “Growing demand in producing countries pushes up the price,”

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article3987513.ece.

Global demand is expected to rise to 86.8 million barrels a day this year, up from 85.8 million barrels last year, according to the International Energy Agency (IEA). Although demand from OECD member countries, such as the UK and the US, fell by 0.5 per cent in 2007 and is expected to weaken again this year, this is being more than offset by surging demand from developing countries. The growing thirst for oil in China and India is well known. However, this global surge in demand is being led by oil producers that are emerging as significant consumers, too, undermining their capacity to export when global supplies are tightening. Emerging economies are offsetting declining US demand. Gary Dorsch, 5/29/2008. Editor, Global Money Trends newsletter. “Is Crude Oil a “Bubble” Ready to Burst?” Gold Seek, http://news.goldseek.com/GoldSeek/1212041220.php.

China, India, Russia and the Middle East combined, are now consuming more crude oil than the US, burning 20.7 million barrels a day, up 4% from a year ago, according to the IEA. The emerging economies are picking-up the slack in the oil market, more than offsetting a -1.3% contraction in US oil demand to 20.3 million barrels this year. Thus, a mild recession in the Western economies and Japan might not weaken global demand for oil. Economies of big oil-exporters in Russia, Mexico, and OPEC itself are growing so fast that their need for energy within their own borders will limit how much they can sell abroad. Internal oil demand in Saudi Arabia, Russia, Norway, Iran and the United Arab Emirates, grew But such simple logic has its limitations.

6% last year, and their exports declined 3 percent. Mexico’s oil output fell -9% in the first four months of 2008, from the same period a year earlier. If these trends continue, global crude exports could fall by 2.5 million

barrels a day by the end of 2010, adding new strains to the global oil market. Supply limits offset any slowing in demand.

Bloomberg, 5/29/2008. “Crude Oil Falls as High Prices May Curb U.S., Asian Fuel Demand,” http://www.bloomberg.com/apps/news?pid=20601116&sid=aLcaZ1SHf9aM&refer=africa.

Prices rose yesterday because ``supply constraints are biting against the backdrop of still-strong global demand,'' Richard Berner, co-head of global economics at Morgan Stanley, said in a report. ``While prices are high enough to curb demand in the developed economies, we think that supply limits could easily take Brent crude quotes to $150 a barrel,'' Berner, who is based in New York, said in the report. Morgan Stanley is the second- biggest U.S. securities company.

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2NC—AT: HOARDING CAUSES PRICE COLLAPSE Empirically denied—inventories have not been released for two years since your evidence was written—this is only a link magnifier for the DA because when oil prices begin to decline, then speculators will sell all their hoarded oil.

Hoarding not occurring now.

The Economist, 5/29/2008. “Painful though it is, this oil shock will eventually spur huge change. Beware the hunt for scapegoats,” http://www.economist.com/opinion/displaystory.cfm?story_id=11454989.

politicians have been looking for scapegoats. Top of the list are the speculators profiting from other people's hardship. Some $260 billion is invested in commodity funds, 20 times the level of 2003. Surely all that hot money has supercharged the demand for oil? But that is plain wrong. Such speculators do not own real oil. Every barrel they buy in the futures markets they sell back again before the contract ends. That may raise the price of “paper barrels”, but not of the black stuff refiners turn into petrol. It is true that high futures prices could lead someone to hoard oil today in the hope of a higher price tomorrow. But inventories are not especially full just now and there are few signs of hoarding. Stuck for answers,

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LINK UNIQUENESS: NO GOVERNMENT INCENTIVES NOW Status quo incentives do not trigger the link The Independent 08 (May 2, “In search of some wind in their sails” Lexis) Yesterday ExxonMobil announced that it made $10.9bn (£6bn) in profits for the first three months of this year. It was one of the biggest quarterly profit reports in American corporate history. The US oil giant has achieved the remarkable feat of making earnings from Shell and BP, announced earlier this week, look modest. But as descendants of John D Rockefeller, America's original oil magnate, are vociferously pointing out, obsolescence beckons for ExxonMobil and other energy groups if they do not step up their search for alternative fuels and cleaner technologies. The Rockefeller family, still major shareholders in Exxon, are backing resolutions calling for the company to fund research into how climate change will affect developing nations. They are also demanding targets from the company for reducing carbon emissions from its output. They hope this will compel Exxon's management to bring less-polluting products than oil and gas to market. But it looks as though the family are fighting an uphill battle. Exxon has at least ceased to deny a link between fossil fuel emissions and climate change. But it has still invested no serious effort in cleaner energy technologies, even though this is the area into which the oil majors should manifestly be ploughing those vast profits. The evidence of this week suggests the energy producers need considerably firmer incentives from governments to make the strategic shift away from environmentally destructive fossil fuels towards renewable, clean power generation. Shell may have been concerned by the rising price of offshore wind, but it is seriously misguided if it thinks that concentrating its efforts on extracting the remaining fossil fuels is a better bet than renewables in the medium or long term. If the conservative-minded energy conglomerates do not stump up the necessary investment, then governments will have to intervene to see that they do. The stakes are too high for a business-as-usual approach to the challenge of meeting the world's energy needs. Current incentives are minor Edwards, 07 - Director of Tax Policy Studies at the Cato Institute, (Chris, May 24, testimony before the Senate Committee on Finance, “Energy Efficiency: Can Tax Incentives Reduce Consumption?” http://www.cato.org/testimony/ctce05242007.html) Current federal tax incentives for energy and conservation are not large. Total income tax expenditures for these items are valued at just $7 billion in 2007.9 That represents just 0.3 percent of total federal revenues. Thus, the discussion about tax incentives for energy and conservation is not a discussion about how high federal taxes ought to be.

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LINKS – ALTERNATIVE ENERGY CAUSES A PRICE CRASH OPEC will flood the market in response to competition with oil Campbell, 2002 - Oil Depletion Analysis Centre, London, (Colin, Population and Environment, November, proquest) Oil is traded on international markets at a price set by the marginal barrel, giving rise to an unpredictable volatility that obscures the underlying trends of supply and demand. Prices collapsed in 1998 from a combination of unseasonably warm weather; an Asian recession that reduced the demand for swing Middle East production; the devaluation of the Russian ruble, encouraging Russian exports; and under-estimation of supply by the International Energy Agency, which misled OPEC. Furthermore, there were more sinister motives to talk down the long-term price of oil, as oil companies and their financial advisers planned acquisitions and mergers, which successfully concealed their real predicament from the stock market. Budgets were slashed and staffs purged in a climate of uncertainty. There was an improvident draw on stocks as demand overtook supply. The OPEC countries, for their part, did everything possible to foster the notion that they could flood the world with cheap oil at the flick of a switch. It was a strategy aimed to inhibit investments in gas, nonconventional oil, renewable energy or energy saving that they feared might undermine the market for their oil, on which they utterly depend. Their populations are growing fast in an economy dominated by oil. Moves to promote alternative energy cause OPEC to flood the market and collapse the price Brandon, 2001 (Hembree, “OPEC as the Cheshire cat”, Delta Farm Press, 11/16, http://deltafarmpress.com/mag/farming_opec_cheshire_cat/) But just when it appears something will in fact be done toward increasing domestic energy supplies, getting serious about alternative sources, and making a long-term commitment toward reducing our dependence on foreign oil — well, miraculously, prices go down. OPEC magnanimously increases supply, refineries begin humming, and once again thoughts of a national energy policy fade like the Cheshire cat. Only the cat's grin is left. And the cat is OPEC and the energy industry. They've seen it all before. They know they have only to wait; that we in the United States have a short memory, and that as long as they toss us a sop of energy “bargains” from time to time, we'll moan and groan and pay their price the rest of the time. Saudi Arabia will flood the market in response to decreased U.S. demand or alternative energy development Stelzer, 2004 - senior fellow at the Hudson Institute, (Irwin, Sunday Times, 8/1, lexis) One British executive repeated what several Americans told me at a private dinner in Washington: "Prices go up, and prices go down." The fear of a price collapse induced by a decline in demand, the outbreak of peace and the consequent removal of the $ 7-$ 10 per barrel risk premium, or a move by Opec to open the taps to deter investment in alternative energy, is a real deterrent to long-term investment. OPEC will flood the market to prevent alternative energy development Milwaukee Journal Sentinel, 2000 (11/15, lexis) OPEC generally wants lower prices to encourage long-term growth in demand, discourage development of alternative energy sources and limit investment in non-OPEC oil fields. The group is concerned, however, that prices will sink if they produce too much oil, as they did in 1998 and sent the market to around $10 a barrel.

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LINKS – ALTERNATIVE ENERGY CAUSES A PRICE CRASH Increasing U.S. energy independence causes Saudi Arabia to flood the market and reduce prices to 5 dollars a barrel Davis and Bharee, 2003 (Bod and Bhushan, Deseret News, 3/18, lexis) The only time during the past three decades that U.S. oil imports have declined substantially was between 1979 and 1983 when they fell by 40 percent. One reason was the deepest recession since the Great Depression, which cut demand for energy. But another was that oil prices rose sharply in the wake of the Iranian revolution of 1979, when fears rose again of a cut-off in oil, and remained high for several years afterward. Automobile and light-truck fuel efficiency increased by about 15 percent between 1979 and 1983, as the U.S. first began enforcing the standards. Many Americans dumped gas guzzlers for smaller cars. At the same time, President Reagan ended oil-price controls, setting off a boom in domestic drilling and arresting, through the mid-1980s, the downward spiral in U.S. oil output. OPEC was spooked. Prices hit $40 a

barrel in 1979 -- $100 a barrel at today's prices, after accounting for inflation -- and were expected to double during subsequent years, to the delight of Algeria, Iran and others interested in boosting revenue. But Saudi Arabia, which has the world's largest oil reserves, worried that high prices would backfire. And to reduce U.S. imports, President Carter championed an $88 billion plan to develop synthetic oil from abundant U.S. reserves of coal and shale. So Saudi Arabia started selling oil at prices several dollars a barrel lower than the OPEC $34-a-barrel standard. Then, in 1985, as the cartel was facing increasing competition from Alaskan and North Sea oil fields, Saudi Arabia and Kuwait engineered a price crash. After a meeting in which OPEC decided to go after market share rather than prop up prices, Sheik Yamani, the Saudi oil minister, said to several reporters, let's see how the North Sea can produce oil when prices are at $5 a barrel. At low prices, the Persian Gulf countries have an unbeatable edge. In the mid-1980s, it cost them a couple of dollars a barrel to produce oil. It cost about $15 to produce a barrel off the coast of Britain and Norway or in the U.S. The move was a warning to the U.S.: Forget about energy independence. Besides being the world's largest consumer and importer of oil, the U.S. is also one of the largest producers. The price decline, to about $12 a barrel, was so devastating to the economies of Texas, Louisiana and other oil-rich states that then-Vice President George H.W. Bush toured the Persian Gulf in 1986, urging countries to rein in their output and raise prices. "Isn't that what you wanted? A free price in oil," OPEC's president, Rilwanu Lukman of Nigeria, goaded Bush when the two met in Kuwait. Bush eventually reached an understanding with Saudi Arabia's King Fahd, to limit production and seek a 50 percent rise in oil prices to a target price of $18 a barrel (or $30 a barrel in today's terms). Over the years, OPEC has adjusted its target range and now generally aims for between $22 and $28 a barrel. OPEC's strategy has largely worked. Since the mid-1980s, the U.S. thirst for oil has increased. President Carter's synthetic-fuel program couldn't compete with the new OPEC prices and was ridiculed for its massive, money-losing projects. Although the U.S. has deep reserves of coal and natural gas, neither can be tapped economically to make gasoline, the primary use for petroleum.

Move towards alternative energy will cause OPEC to flood the market BRANDON, 01 (Hembee, Southeast Farm Press 12/19/01, “OPEC now playing role as Chesire cat“ http://southwestfarmpress.com/mag/farming_opec_playing_role/) But just when it appears something will in fact be done toward increasing domestic energy supplies, getting serious about alternative sources, and making a long-term commitment toward reducing our dependence on foreign oil - well, miraculously, prices go down. OPEC magnanimously increases supply, refineries begin humming, and once again thoughts of a national energy policy fade like the Cheshire cat. Only the cat's grin is left. And the cat is OPEC and the energy industry. They've seen it all before. They know they have only to wait; that we in the United States have a short memory, and that as long as they toss us a sop of energy "bargains" from time to time, we'll moan and groan and pay their price the rest of the time. OPEC will flood the market - empirically Glanz, 2000 (James, New York Times, 10/22, “The Nation: Who Needs Oil?; Energy Independence”, http://query.nytimes.com/gst/fullpage.html?res=9D00EFDE1E3EF931A15753C1A9669C8B63) IF there was one thing America's scientists seemed sure of during the energy crisis of the 1970's, it was that new methods of generating energy from the wind, the sun, the ocean waves and other sources would soon free the country from its dependence on foreign oil. In particular, a form of nuclear energy called fusion promised clean, safe and inexhaustible energy. In an editorial in August 1975 that mirrored scientific optimism, The New York Times noted a recent "major breakthrough in fusion research" and predicted that a test reactor could be working "as early as the mid-1980's; commercial applications could become a reality a decade later." What happened? Why

couldn't President Clinton flood power grids with wind, solar or fusion energy during the recent oil squeeze? " In 1976, almost everybody said the price of oil would keep going up," said Dr. Steve Fetter, a professor of public policy at the University of Maryland. "In fact, that's what drove a lot of the optimism about nonfossil technology." Instead, the Organization of Petroleum Exporting Countries -- the monopoly -- opened the spigots again, new reserves of fossil fuels were found, energy prices fell and financing for alternative energy research plummeted.

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LINKS – ALTERNATIVE ENERGY CAUSES A PRICE CRASH OPEC will manipulate prices to make alternative energy not competitive.

AFP, 11/1/2007. “Future demand at risk because of high oil prices: Ecuador minister,” Agence France Presse, Lexis. Record high oil prices risk hurting future demand and OPEC must find a "price equilibrium", Ecuador's oil minister said in an interview published Thursday. Speaking to the Financial Times via telephone, Galo Chiriboga, whose country will re-join OPEC next month, said that crude oil prices topping 94 dollars a barrel could spark

increased investment in alternative energy sources. He said that the biggest challenge for the Organisation of Petroleum Exporting Countries in the coming years would be to "preserve a price equilibrium that keeps crude oil positioned favourably against other alternative energy sources." Empirically proven—OPEC lowers prices to drive off alternative fuels. Jim

Jeffords, 3/21/1991. Senator. Federal News Service, lexis.

But I'd like to talk to you about the piece that I have contributed as well as supporting the others. To me, the most important thing that we have to do is to ensure, to have an insurance policy and that's what my piece of the legislation is. It is an insurance policy that we can reach the point by 2010 where we have the option of becoming energy independent. And the only way we can do that is by isolating ourselves by the whims of OPEC and the price of oil. And how we do that, this provision, is to say okay, we just cannot allow the price to be set by OPEC. And so every time

we get excited about energy from alternative sources they lower the price below that which is competitive and run the alternative fuels businesses out of business.

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LINKS – U.S. KEY U.S. demand is the single most important factor keeping oil prices high Zakaria, 04 – phD in political science from Harvard and former managing editor of Foreign Affairs (Fareed, Newsweek, “Don't Blame the Saudis “, 9/6, http://www.fareedzakaria.com/ARTICLES/newsweek/090604.html) 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 energyefficiency standards because of an absurd loophole in the law that allows them to be classified as trucks. Any change in U.S. energy policies causes massive ripples in the oil market Roberts 2004 - journalist (Paul, The End of Oil p. p. 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 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.” American oil demand is the key factor driving oil markets Roberts 2004 - journalist (Paul, The End of Oil p. 94-95) At the same time, however, the sheer extent of American demand coupled with the country’s own booming production (the United States is still the number three oil producer), gives Uncle Sam a degree of influence over world oil markets and world oil politics that goes well beyond anything the U.S. might achieve militarily. America is not only the biggest oil market in the world, but the fastest-growing: in the 199os, American oil imports grew by 3.5 million barrels a day, more than the total oil consumption of any country except China and Japan, and that trend has continued in the first decade of the new millennium. After the United States, no other market offers exporters like Russia or Saudi Arabia the same opportunities for both growth and volume of sales, and no oil producer, whether country or company, can afford to miss out. Today, a producer’s share of the U.S. market is a critical measure of that producer’s political standing and future prospects. Saudi Arabia, for example, is so desperate to maintain its share of the U.S. market that it sells oil to Americans at a discount. Even oil states with profoundly anti-American sentiments — Venezuela, Libya, and until recently Iraq — are exceedingly cordial when it comes to selling or trying to sell oil to Americans. Lowering U.S. oil demand will collapse oil prices, hurting producers Georgia, 01 - Environmental Policy Analyst at the Competitive Enterprise Institute (Paul, “Energy Independence: It Doesn't Work”, http://www.cei.org/gencon/019,02192.cfm) Because America is such a large user of oil, policies that suppress U.S. energy use lower the world price for oil. And high-cost producers of oil, such as those here, are hurt more by lower prices than low cost producers, such as those in the Middle East and Latin America. Yet environmentalists and their cohorts in Congress, support raising CAFE standards even further, partly in the name of energy independence.

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LINKS – TRANSPORTATION POLICY Saudi Arabia is hypersensitive to maintaining oil’s role in transportation Carvalho, 2004 (Stanley, Gulf News, 9/29, lexis) The kingdom's concern is not just securing market share against non-Opec supplies but also to preserve oil's role in the global energy mix. "It means ensuring that oil prices that are too high do not encourage investments in non-Opec countries and do not choke off demand. It means a proactive attitude as far as environment regulations are concerned," she said, adding that it also entails keeping a close eye on alternative energy sources in the transport sector. "The main challenges today are the timing of capacity expansion, the fine-tuning of Opec production and reconciling social responsibilities and industrial priorities." Saudi Arabia lacks sup-remacy in the gas sector as the country only ranks fourth in reserves and eleventh in production in the world. This situation has led the kingdom to differentiate its gas approach from its oil policy and the recent focus on gas is driven by a surge in domestic demand, a growing demand and the importance of developing an industrial base fuelled by gas.

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LINK: HYBRID CARS Unique link – government incentives will allow hybrid cars to go from no market share to reducing oil dependence Washington Post 08 (May 18, “A Secret Cheer for Gas Prices”, Lexis) It's a territory we want to own," Ghosn said of the potential market for plug-in and other electrics. "We are bullish on zeroemission vehicles because of the social trend. The young generation is demanding this. The social trend will make electric vehicles more favorable." High fuel prices and government incentives to consumers, either through tax breaks or lower vehicle registration fees, will also help the sale of zero-emission cars and other electric vehicles, Ghosn said. Electric vehicle sales will grow considerably beyond the barely 1 percent market share, including fossil-fuel electric hybrids, they hold in the United States. But they are only one route to a more fuel-efficient future, said Uwe Grebe, GM's executive director of global advanced engineering. "There is no single silver bullet," Grebe said, speaking to reporters in GM's Washington office. "We are going to have a variety of technologies available at the same time. Each will have the goal of reducing our dependence on oil."

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LINKS – CLIMATE CHANGE POLICIES Saudi arabia will flood the market in response to climate change policies that reduce oil demand Williams, 2004 (Bob, Oil and Gas Journal, 3/30, (Al-Naimi is Saudi’s Oil Minister, http://www.peaceredding.org/Saudi%20oil%20minister%20Al-Naimi%20sees%20kingdom's%20continued%20role%20as %20key%20supplier%20of%20last%20resort.htm) Al-Naimi voiced his frustration at ulterior motives often ascribed to Saudi Arabia in oil markets. "We have no [disguised] intent; our policies are very open. We act upon them. We have delivered during a challenge. I don't why people say what they say about Saudi Arabia. What they say is wrong. "We have acted on our policy statement that we want stable oil markets. We want fair prices. We have maintained capacity to do so. We have done everything possible we know, other than just produce to flood the market, which would be damaging to the objective of a stable oil market." Threats to oil AlNaimi addressed two key threats to future oil market stability: a shift away from oil owing to concerns over postulated catastrophic climate change and a return to competition for market share among major producing countries. He contends that, regarding which solutions are implemented to combat the perceived threat of global warming, "whatever the world does should not be prejudiced against oil." "Actually, in the next 30 years at least, there is not really a substitute for [oil use in] transportation. . .that's where the bulk of oil is going. "Now if we are concerned about [carbon dioxide], I believe there is enough technology to sequester CO2 and to take CO2 out of the atmosphere. It doesn't make any sense to compare consumption of crude oil and pay subsidies to coal. To us, that is inconsistent with the objective of eliminating CO2. Now I think there may have been a political dimension to this." Nevertheless, given concerns about climate, working together to combat a perceived threat does not mean reducing or eliminating oil use, he said. "I think we should find a better ameliorating method than just shunting aside oil." Al-Naimi also recalled the lesson learned about market share competition in the oil price collapse of 1998-99.

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2NC—SPECULATION LINK US investments in alternative energy cause speculators to value oil lower—tanks prices. Steve A. Yetiv and Lowell Feld, Fall 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. “America's Oil Market Power: The Unused Weapon Against Iran,” World Policy Journal, Proquest. 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 supply-and 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 1985-86 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.

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2NC—LINK MAGNIFIER Oil prices are perception based—the plan triggers a massive sell-off. Robert Shiller, 11/8/2004. Prof. Econ @ Yale, The Edge Malaysia, “The perception of declining prices triggers a massive sell-off and price collapse”, 11-8, L/N.

what matters for oil prices now and in the foreseeable future is the perception of the story, not the If there is a perception that prices will be higher in the future, then prices will tend to be higher today. That is how markets work. If it is generally thought that oil prices will be higher in the future, owners But

ambiguities behind it.

of oil reserves will tend to postpone costly investments in exploration and expansion of production capacity, and they may pump oil at below capacity. They would rather sell their oil and invest later, when prices are higher, so they restrain

Expectations become self-fulfilling, oil prices rise and a speculative bubble is born. But if owners of oil reserves think that prices will fall in the long run, they gain an incentive to explore for oil and expand production now in order to sell as much oil as possible before the fall. The resulting supply surge drives down prices, reinforces expectations of further declines, and produces the inverse of a speculative bubble: a collapse in prices. increases in supply.

The price decline splinters OPEC—causes a race to the bottom in prices. Paul

Roberts, 2004. Journalist, “The End of Oil: On the Edge of a Perilous New World”, p. 323.

Falling oil prices would also splinter OPEC. As Saudi Arabia, Kuwait, the United Arab Emirates, and Nigeria all tried to compensate for lower prices by boosting oil production, analysts say the inevitable glut would drive prices down further. Oil revenues would fall so sharply that many OPEC countries would suffer profound civil unrest. Some analysts believe unstable countries like Saudi Arabia would collapse. Others, however, argue that such lender nations as the United States, Europe, and Japan would step in quickly with financing packages--but would condition any loan on a commitment to economic and political reform. In either case, OPEC's power over the oil market would decline dramatically--as would petrostates' ability to finance terrorism.

Perception that oil is losing value causes rapid decline. Andrew Leonard, 8/21/2006. Senior editor at Salon.com. “The oil bubble,” http://www.salon.com/tech/htww/2006/08/21/oil_bubble/index.html.

some portion of the spike in oil prices over the last couple of years is speculator driven. Traders are stockpiling oil for sale to buyers at some later date, hoping that in the intervening period prices will continue to rise. Such speculation naturally pushes the price of oil even higher. This is a classic pattern in markets, going back at least as far as The theory goes like this: First, there's the supposition that

the great tulip mania of the 17th century, and there's no reason why oil should be any different from any other traded

as with all bubbles, once traders start thinking that the price might fall, whoooosh -- the air rushes out. commodity. And

Herd mentality magnifies the link. The Globe Lexis.

and Mail (Canada), 10/12/2007. “Speculating on the future of those pesky oil and gas speculators,”

Oil analysts vary widely on this subject, but a sample of respected ones says the speculative premium in crude adds between $20 and $35 a barrel. What if these investment funds - and they're not all hedge funds - decide they want to short the market? Since they tend to move in a herd fashion, that would mean a big drop in oil prices. Probably not.

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AT: NO LINK – PLAN IS TOO SMALL The magnitude of the link is greater than the magnitude of the plan – plan mobilizes widespread government regulation Edwards, 07 - Director of Tax Policy Studies at the Cato Institute (Chris, May 24, testimony before the Senate Committee on Finance, “Energy Efficiency: Can Tax Incentives Reduce Consumption?” http://www.cato.org/testimony/ctce05242007.html) Proponents of tax incentives no doubt think that their favored activities deserve special attention. Many energy and environmental analysts argue that federal tax policies should be used to fix "externalities" in energy markets.10 But such an approach risks opening a Pandora's box of widespread social engineering through the code. Many interest groups, such as those promoting education, housing, and scientific research, argue that their favored activities are subject to externalities that need special tax code treatment. But, in theory, there are an endless number of externalities that governments could meddle in. At the risk of promoting bad ideas, tax lobbyists could champion tax credits for • Obesity. This is a serious and growing problem that imposes negative externalities on nonobese Americans through the health system and elsewhere. How about a tax credit for membership costs at Gold's Gym? • Neighborhood Beautification. Neat lawns and abundant greenery create positive externalities for neighborhoods. How about a tax credit for tree planting? • Guns. Some analysts say that if more households owned guns it would reduce crime through deterrence. How about a tax credit for gun ownership because of this safety externality? I'm not advocating these tax credits, but they illustrate the slippery slope of social engineering if Congress wanted to fix every externality through the tax code. Just this year, the CRS finds that more than 150 bills on energy efficiency and renewable energy have been introduced, with many proposing narrow tax breaks. I hope Congress resists the temptation to create more tax loopholes.

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INTERNAL LINKS – SAUDI PERCEPTION Saudi perception of demand reduction will trigger a production and dropping prices Meyer and Swartz, 08 (Gregory Meyer, Adjunct Professor, University of Phoenix, Spencer Swartz, staff writer for the Wall Street Journal, May 5, “ENERGY MATTERS: Saudi Fears Of High Oil Prices Fade With Demand” http://www.cattlenetwork.com/Content.asp?contentid=218898) This shift towards a higher price floor creates openings for competing energy sources. Saudi Arabia's role in the global oil market has sometimes been likened to the Federal Reserve, calibrating its output depending on market signals. Critical to this unique standing has been Saudi maintenance of a cushion of "spare capacity," now estimated at about two million barrels a day. For much of the recent period, the kingdom has refrained from tapping into all or most of its spare capacity. Within oil industry circles in places like Houston, the Saudi power has also carried a somewhat ominous connotation. Faced with growing production from the U.K., Mexico and other non-OPEC countries in the mid-1980s, Saudi Arabia flooded the market in an effort to drive out high-cost production and reassert its dominant market share. The 1986 oil price crash ushered in more than 15 years of mostly-lower crude prices, instilling a memory of economic hardship on the western oil industry that continues to be reflected in Big Oil's caution during these heady times. The shift to lower petroleum prices also impeded the development of renewable energy for about two decades. In his book, The Prize, Daniel Yergin compared the Saudi tactic in the 1980s to power plays by John Rockefeller and other heavyweights in the history of oil who have used a "good sweating" to drive out competitors. "No one is worrying about over-supply," Yergin said in an interview. Instead, the market is preoccupied with meeting growth in China, India and other fast-developing economies. "What (the Saudis) have discovered is that the tolerance level in consumers is higher than they thought," said Thomas Lippman, an adjunct scholar at the Middle East Institute, a Washington research institute. Given the specter of higher demand in Asia and the increased cost of bringing on new oil production, many analysts believe the long-term price of oil is in the $45-$60 a barrel range. Recent comments by Naimi suggest the Saudi official sees an even higher floor than that. "A line has been drawn now below which prices will not fall," Naimi said in March in an interview with PetroStrategies, a French energy publication. Citing the marginal costs of biofuels and Canadian tar-sands, Naimi defined the floor as "probably between $60 or $70." Naimi in April said Saudi Arabia was putting off a plan to expand oil capacity beyond 12.5 million barrels because of concerns about demand growth. "Unless we see really genuine demand, we have to pause right now and see what happens," Naimi told Petroleum Argus. Some energy analysts say the Saudi move suggested a more sober outlook on oil prices. "If they see a lot of risk on the demand side then you could see very low prices and potentially a lot of underutilized capacity down the road," said Ken Medlock, a fellow at Rice's Baker Institute. Saudi Arabia will over-supply the market if they fear alternative energy Meyer and Swartz, 08 (Gregory Meyer, Adjunct Professor, University of Phoenix, Spencer Swartz, staff writer for the Wall Street Journal, May 5, “ENERGY MATTERS: Saudi Fears Of High Oil Prices Fade With Demand” http://www.cattlenetwork.com/Content.asp?contentid=218898) The Saudi national most vocal in outlining the potential threat of renewable energy has been former petroleum minister Sheikh Ahmed Zaki Yamani, who held Naimi's job from 1962 to 1986. Perhaps Yamani's most oft-quoted statement was his prediction that "The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil." The comment has been cited as early as the 1970s, but Yamani has continued the mantra. Speaking last week, Yamani said his advice to OPEC is "to increase production and lower prices because this is harmful midterm (and) long term to OPEC itself," according to a report in Energy Intelligence. "It will increase the activities to find alternative sources of energy, and OPEC will remain helpless at that time." Yamani was unavailable for an interview, but the Centre made available its Executive Director, Fadhil Chalabi, who was Acting Secretary General of OPEC in 1983-1988. Chalabi said leading OPEC producers are being short-sighted in seeking ever-higher oil prices. While demand growth has been impressive in developing countries so far, Chalabi warned that China's use of coal, nuclear energy and other sources will displace oil. "It's a matter of time," Chalabi said.

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AT: PRICE DROP WILL ONLY BE SMALL Saudi Arabia won’t be able to control the price crash Oil and Gas Journal, 2000 (July 24, “OPEC eyes another output hike to cut oil prices” General Interest, Pg 31, Lexis) The move to boost production likely will trigger a scramble for markets that could cause a tumble of oil prices back to $ 20/bbl, said Fred Leuffer, senior managing partner and oil analyst at Bear, Sterns & Co. The proposed increase would boost OPEC's total production to 25.9 million b/d from the 25.4 million b/d that group members agreed to in June when they raised production by 708,000 b/d. Saudi officials had earlier indicated that they would undertake an increase of 500,000 b/d -- unilaterally, if necessary -- in an attempt to drive down high prices. Under the quotas proposed by Rodriguez, the Saudis would bear the brunt by adding 162,000 b/d of production to a total 8.4 million b/d. "The flood gates are now open. Saudi Arabia's decision to produce more oil means OPEC unity is out the window. The race is on to see which countries can capitalize on these high oil prices while they last," said Leuffer in a report issued last week. He said every OPEC member except Nigeria has cheated on its new production quota in the last 2 months. Saudi officials would like to push back world oil prices to a level of $ 25/bbl to prevent the US from increasing domestic oil exploration and development of alternative energy sources. But it is difficult to engineer a market price reduction, as other nations try to cash in before oil prices drop, Leuffer warned. "Once oil prices start to fall, it will be hard to stop them," he said.

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2NC—AT: OPEC LACKS SPARE CAPACITY OPEC has spare capacity and is investing to create more—they could accelerate that investment if necessary.

The National, 5/29/2008. “Opec investing to boost oil production,” http://www.thenational.ae/article/20080529/BUSINESS/531590541/-1/ART.

Opec members will invest US$160 billion (Dh587 billion) in oil development projects in the next three years to increase their production capacity by 15 per cent in response to growing demand, the organisation said yesterday. The announcement by Abdalla Salem el Badri, the secretary general of Opec, came a day after Gordon Brown, the prime minister of Britain, sought to put high oil prices at the top of the agenda for a summit in July of the Group of Eight (G8) most powerful nations. Mr Brown had said that a lack of investment in future production capacity was the main factor driving prices to record highs, but Mr Badri disputed this. “Even though we see no shortage of oil in the market, since the middle of 2007 we have seen a major disconnect between oil prices and market fundamentals. A number of factors have contributed to this, but primarily [it is] the massive role that speculators now play in the oil market,” Mr Badri said. He said Opec countries would add five million barrels per day (bpd)

of extra crude production capacity by 2012.

“Our members have already undertaken a $160bn investment programme to expand crude production capacity by close to five million bpd by 2012,” he said in emailed responses to The National. Opec pumped about 32 million bpd in April, equivalent to 40 per cent

of world oil consumption, and has about two million bpd of spare capacity. Mr Badri said Opec had plans for another $230-$500bn from 2012 to 2020, adding another nine million bpd, but he said there was uncertainty over demand. OPEC has spare capacity.

Forbes, 5/8/2008. “OPEC says oil market well supplied; 3 mln bpd spare capacity available if needed,” Thompson Financial News, http://www.forbes.com/markets/feeds/afx/2008/05/08/afx4986536.html.

OPEC announced Thursday that it believes oil markets remain well supplied with crude, despite recent record prices, but that it is willing to pump more crude if necessary to keep pace with demand. OPEC Secretary General Adbullah al-Badri said in a statement that the 13 member cartel had over 3 million barrels of spare capacity per day if needed. 'OPEC spare capacity continues to increase, with the figure currently standing above 3 million bpd. At the same time, crude oil movements indicate that some member countries are unable to find buyers for their additional supply,' he said in the statement. LONDON (Thomson Financial) -

OPEC has spare capacity but won’t use it now.

BBC, 5/29/2008. “Oil falls sharply on dollar rally,” http://news.bbc.co.uk/2/hi/business/7424989.stm. All but three of Optec's members are already at their maximum daily limits for oil output, but Saudi

Arabia, Kuwait and the UAE, which do have spare capacity, have so far resisted calls to lift quotas.

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2NC – AT: OPEC LACKS SPARE CAPACITY Fear of alternative energy will cause Saudi over-supply dropping oil to $50 Hamilton and Chinn, 07 (James D. Hamilton is Professor of Economics at the University of California, San Diego, Menzie Chinn is Professor of Public Affairs and Economics at the University of Wisconsin, Madison Feb 17, “Saudi oil production cuts” http://www.econbrowser.com/archives/2007/02/saudi_oil_produ_1.html) The first possibility is that the Saudis could still pump 10 mbd or more today if they wanted to, but they are cutting back production and exploring like mad because they put an extremely high value on having 2-3 mbd of excess capacity. If so, the recent price behavior suggests that the reason they would seek such capacity is not because they want to stabilize the price, but because it puts them in an incredibly powerful negotiating position. For example, the ability at any time to flood the market could be used at an opportune moment to undercut expensive alternatives such as oil sands that require an oil price over $50. Saudi massively increasing capacity Globe and Mail, 08 (Jan 16, “Bush urges Saudis to boost oil output”, Lexis) The organization has said its members worry that the global slowdown will undermine demand for their oil, and drive down prices. James Williams, an energy analyst with WTRG Economics, said Mr. Bush's plea to the Saudis comes as the kingdom has spent billions of dollars to increase its productive capacity. Saudi Arabia announced in 2005 that it intended to boost its capacity to 12 million barrels a day, up from about nine million. Mr. Williams said the Saudis are expected to soon bring into production 500,000 barrels a day of high-quality, light crude oil, which could displace some of its current volumes of heavier oil. So, while its overall volumes would remain the same, the additional supplies of light oil would put pressure on the benchmark crude prices, which track the higher-quality crude oil. The economist suggested there may be a quid pro quo at work between Mr. Bush and his Saudi allies. The president announced a $20-billion weapon sale to the Arab nation during his visit. "The deal would be: 'I'll come with new weapons; you come with more oil,' " Mr. Williams said. There is spare capacity Greeenwire, 08 (1-16, “OIL AND GAS: In wake of Saudi talks, Bush expresses 'hope' of OPEC production boost” Lexis) The cartel, which provides almost 40 percent of the world's oil, will next address output levels when it meets in Vienna early next month. Saudi Arabia currently pumps roughly 9 million barrels per day and has a production capacity of roughly 11 million. It holds about 80 percent of OPEC's spare capacity, according to the International Energy Agency. OPEC Secretary General Abdullah al-Badri told Agence France-Press that high prices are not the result of a shortage of supply. But he also said the cartel would consider a boost if the market demanded it. "Stressing that the organization saw no shortage, he said OPEC would be prepared to increase production if it saw evidence that supply and demand were out of balance," the news service reported.

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AT: OPEC WON’T COLLAPSE PRICES BECAUSE THEY WON’T HURT THEMSELVES Saudi Arabia is willing to suffer low prices to regain long-term market share Morse, 2002 - former Deputy Assistant Secretary of State for International Energy Policy, (Edward, Foreign Affairs, March/April, ebsco) Saudi Arabia has triggered its spare capacity twice in recent history, once when prices were especially low. Both cases demonstrated that the kingdom will accept those low prices so long as it suffers less than its targets do. In 1985, Saudi Arabia successfully waged a price war designed to force other oil producers to stop "free riding" on Saudi oil policy. That policy meant that those states had to cooperate with the kingdom by reining in production enough to allow Saudi Arabia to produce the minimum level that it targeted. Oil prices fell by more than half within a few months, and Saudi Arabia immediately regained the market share it had lost in the preceding four years, mainly to non-OPEC countries. Then, in the 1990s, OPEC member Venezuela challenged Saudi Arabia by deciding to maximize its production. Although Venezuela had an OPEC quota of 2.3 mbd, Caracas embarked on an ambitious policy designed to eventually triple its production capacity. Caracas knew it could not do this on its own, so it reopened its nationalized resource sector to foreign investment. By the winter of 1996-97, Caracas was producing 3 mbd, knocking Saudi Arabia from its position as number one supplier to the United States. In response, Riyadh first tried reasoning with Caracas. When diplomacy failed, Saudi Arabia raised its production by close to 1 mbd and induced the oil price collapse of 1998. Riyadh's actions were tough but effective. By engineering a price drop, it had to withstand a painful drop in income -- but it achieved its main goals. Saudi Arabia reasserted its OPEC leadership, reestablished itself as the prime supplier of oil to the United States, and induced non-OPEC producers Mexico and Norway to support OPEC's revenue-maximizing goals.

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AT: WHY DIDN’T THE 1998 PRICE COLLAPSE EMPIRICALLY DENY YOUR IMPACT? The 1998 price collapse was short-lived and caused by short-term factors. It wasn’t the sustained price drop required to eliminate competition with oil Campbell, 2002 - Oil Depletion Analysis Centre, London, (Colin, Population and Environment, November, proquest) Oil is traded on international markets at a price set by the marginal barrel, giving rise to an unpredictable volatility that obscures the underlying trends of supply and demand. Prices collapsed in 1998 from a combination of unseasonably warm weather; an Asian recession that reduced the demand for swing Middle East production; the devaluation of the Russian ruble, encouraging Russian exports; and under-estimation of supply by the International Energy Agency, which misled OPEC. Furthermore, there were more sinister motives to talk down the long-term price of oil, as oil companies and their financial advisers planned acquisitions and mergers, which successfully concealed their real predicament from the stock market. Budgets were slashed and staffs purged in a climate of uncertainty. There was an improvident draw on stocks as demand overtook supply. The OPEC countries, for their part, did everything possible to foster the notion that they could flood the world with cheap oil at the flick of a switch. It was a strategy aimed to inhibit investments in gas, nonconventional oil, renewable energy or energy saving that they feared might undermine the market for their oil, on which they utterly depend. Their populations are growing fast in an economy dominated by oil. But it was a short-lived price collapse. The underlying resource and depletion pressures soon manifested themselves again with prices rebounding with a staggering 300% increase in eighteen months, before another fall occurred at the end of 2000. At first, it was thought that prices would soon resume their upward path as there was clearly insufficient spare capacity to meet the historic trend of growing demand. But instead, the high prices triggered recession reducing pressure of price, which have remained weak. As of late 2001, the demand for oil was falling at about 1% a year, compared with the previous growth of about 2%. It sounds a small swing, but the highly volatile oil market overreacts to small imbalances, so the fall was enough to cause the price to collapse. Furthermore, OPEC had difficulty in supporting price by reducing production in the aftermath of the events of September 11th, fearing to take any action that might be perceived to be hostile to the United States.

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AT: 1998 PRICE CRASH DENIES THE IMPACT (RUSSIA) It’s empirically true—Russia’s economy collapsed in 1998 because of the oil price crash Business and Finance, 2004 (9/9, lexis) 'There's no mystery to this. The Russian market crashed spectacularly in 1998. It followed the oil price, which fell to 10 dollars a barrel. Its subsequent and massive upward correction again followed the oil price, which is now over $ 40 a barrel. The oil price looks unlikely to weaken significantly any time soon. We have supply disruptions in Iraq, potential supply disruptions in Venezuela, and Yukos itself accounts for about 2% of global oil production. With the present tightness in the demand/supply equation, a serious collapse in demand from the US and from China would be required to produce a sharp fall in the oil price. Admittedly, this may happen, though if and when it does, there will be more than enough to be concerned about in the core markets of a diversified portfolio.

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2NC—RUSSIAN ECONOMY IMPACT—US/RUSSIAN WAR Civil war causes accidental US/Russian nuclear war. Stephen J. Cimbala, May 2007. Distinguished Professor of Political Science, Pennsylvania State University. “Russia's Strategic Nuclear Deterrent: Realistic or Uncertain?” Comparative Strategy 26.3, Ebsco.

War between Russia and America is unlikely, but misunderstanding and misperception with respect to their military ends and means are not. U.S. nuclear modernization plans impact on Russian perceptions of their great-power status and vice versa. The U.S. has a shared interest with Russia in the avoidance of inadvertent nuclear war or escalation. This is especially the case given Russia’s proclivities for nervous behavior during crises and its threat perceptions still blinkered by Cold War defeat and NATO expansion. Reassurance is an important component of both American and Russian conventional and nuclear deterrence. Russia must be reassured that NATO is not expanding for the purpose of shrinking Russia to pre-Petrine dimensions. As well, the U.S. has a security interest in maintaining a stable east and central Eurasia. That means, among other things, a viable Russian state not torn apart by regional or internal wars. That is the only scenario for extinction. Nick Bostrom, 2002. Professor of Philosophy and Global Studies at Yale. "Existential Risks: Analyzing Human Extinction Scenarios and Related Hazards," 38, www.transhumanist.com/volume9/risks.html. A much greater existential risk emerged with the build-up of nuclear arsenals in the US and the USSR. An all-out nuclear war was a possibility with both a substantial probability and with consequences that might have been persistent enough to qualify as global and terminal. There was a real worry among those best acquainted with the information available at the time that a nuclear Armageddon would occur and that it might annihilate our

species or permanently destroy human civilization. Russia and the US retain large nuclear arsenals that could be used in a future confrontation, either accidentally or deliberately. There is also a risk that other states may one day build up large nuclear arsenals. Note however that a smaller nuclear exchange, between India and Pakistan for instance, is not an existential risk, since it would not destroy or thwart humankind’s potential permanently.

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2NC—RUSSIAN ECONOMY IMPACT—GLOBAL ECONOMY Russian collapse kills global economy.

Australian Financial Review, 1/8/2K. afr.com As a big debtor nation, Russia’s ability to meet its financial obligations also matters to world markets – as the Russian rouble’s collapse and accompanying loan default in August 1998 starkly revealed. The crisis raised fears of a domino effect across emerging markets that could ultimately push the global economy into recession. That, in the end, didn’t occur. But an economist specializing in Russia at the European Bank for Reconstruction and Development, Ivan Szegvari, says the confidence of international investors in emerging markets, and transitional economies as a whole, is affected by what happens in Russia. In addition, Russia remains one of the most important clients of international financial institutions such as the International Monetary Fund. Russia’s economy has decoupled from the US and high oil prices overcome any recession—this Russian growth is the key to global growth. Martin Gilman, 1/16/2008. Former senior representative of the IMF in Russia and professor at the Higher School of Economics in Moscow. “Well-Placed to Weather an Economic Storm,” Moscow Times, http://www.moscowtimes.ru/stories/2008/01/16/008.html.

Faced with this gloomy global outlook, Russia is well placed to weather the storm. In fact, not only is the Russian economy likely to decouple largely from a sagging United States and even Europe, but its continuing boom -- mostly but not solely fueled by high energy revenues -- is sucking in both consumer and investment goods, and so acting as a motor of world growth. And the planned $1 trillion public investment program over the next decade should ensure that the country remains decoupled for years to come.

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2NC—RUSSIAN ECONOMY IMPACT—HEGEMONY Russian collapse will shift the balance of power away from the US towards China—this terminally jacks hegemony. Zeyno Baran et al, Summer 2007. Senior Fellow and Director Center for Eurasian Studies, Hudson Institute. “U.S. – RUSSIAN RELATIONS : IS CONFLICT INEVITABLE?” Hudson Institute Symposium on US-Russian Relations, www.hudson.org/files/pdf_upload/Russia-Web%20(2).pdf.

The West needs a stable Russia in order to maintain the global balance of power against China. In the event of Russia’s disintegration, her resources will go to China, not the West. The West cannot stop Russia’s slide into a systemic cri- sis, and can only help get out of it once it has begun. This is a challenge for the future. Currently, the West needs a “Cold War” only with Russia’s new masters, not with the Russian people. Russians are protesting against the politics of the Russian bureaucracy, and their protest should not be re-directed at the bureaucracy’s strategic partners in the West. If the West understands and accepts this, it needs to learn to acknowledge Russians’ rights to patriotism and to a normal level of freedom—not as a religious symbol, but as the only path to prosperity and justice. Russian “democrats” and “liberals” have forgotten these demands and rights, and therefore the terms “dem - o crat” and “liberal” are cursed in Russia. Official propa- ganda uses this to divert Russian citizens from asserting their interests and rights to fighting the West. The West needs to explain to Russia that these rights have been destroyed not by rivalry with the West, but solely by the avarice of the new Russian leaders. It is true that in the future, the issue of global competition will arise. Currently, however, there is only one key prob- lem—corruption (including, of course, corruption in the interests of the West) and a lack of bureaucratic integrity. After Russia experiences a systemic crisis the West must be able to say to Russians; “You see? We are for democracy, but not for “democrats,” for law, but not for lawyers, for prosperity, but not for prospering oligarchs.” All of these are things that the West could not say after the 1990s. Russia will be useful to the West if the West can side with Russia against China and global Islam in foreign policy and with the Russian people against the Russian bureaucracy in domestic policy. If the West attempts to transform Russia according to its own conceptualization of the correct societal order, or simply to seize

Russian raw materials, intellect, and money, it will destroy Russia and pay dearly for the rela- tively small gain. As a consequence of doing so, the West will experience large-scale, global systemic problems.

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2NC—HIGH OIL PRICES KEY TO RUSSIAN ECONOMY High oil prices key to the Russian economy—diversification efforts are underway but energy is still the lynchpin of the Russian economy—any decline in oil prices tanks their economy—that’s Peters.

Russia dependent on high oil prices—it fuels all other growth.

Quest Economics Database, 7/30/2007. “World of Information Europe Review World of Information,” Lexis. Russia's high growth rates over the past six years have been largely fuelled by energy exports, helped by the increase in oil production and high world oil prices. Russia's economy has become increasingly dependent on oil and natural gas exports, making it vulnerable to fluctuations in world oil prices. According to the IMF, a US$1 per barrel increase in Urals blend oil prices for a year is estimated to raise Russia's federal budget revenues by 0.35 per cent of GDP, or US$1.8 billion. The influence of oil on Russia's fiscal position cannot be ignored. According to the US Energy Information Administration (EIA) the government's stabilisation fund was estimated to be worth some US$52 billion by the end of 2005, or about 7 per cent of Russia's GDP. Raw materials, such as oil, natural gas, and metals, dominate exports and account for over two-thirds of all Russian export revenues. According to the EIA, the World Bank has

suggested that Russia's oil and gas sector accounted for up to 25 per cent of GDP in 2003 while employing less than 1 per cent of the population. The Kremlin's policy makers seem bent on advancing the state's influence in the energy sector, not on reducing it.

Alternative energy destroys Russia’s economy. Sheldon Drobny, 4/23/2005. Chairman Emeritus of Paradigm Group II, LLC. “Alternative Energy: The Grand Illusion,” Air America Radio, http://www.commondreams.org/views05/0423-27.htm. As the co-founder of Air America Radio (AAR), I naturally was listening today with interest to Jerry Springer. I remember trying to recruit Jerry about 18 months ago at a breakfast meeting in Chicago. He is a wonderful radio host and his style is very warm, thoughtful and informative, unlike most of talk radio today. That said (the most common cliché used today), his discussion about the development of alternative energy in the world was interesting, but he did not hit the points that are really causing the resistance to any meaningful change. And it is not just the politicians who are at fault. Jerry correctly pointed out that the politicians on both sides of the aisle are bought and paid for by the oil companies as they are with other predatory industries. He also spoke with Bobby Kennedy, Jr. about the fact that alternative

energy technology is and has been available for decades and the use of such technology would be a boon for the U.S. and world economy. So what is really stopping the logical transition from the piston engine to alternatives that have been available of several decades? The resistance is coming from the many countries whose economies are dependent upon oil. And I am not just talking about the Middle East. Today, there are several countries even friendly to the U.S. whose economies would collapse or be severely hampered if oil consumption were reduced or eliminated. Here are just a few; Venezuela, Mexico, UK, Canada, Russia, Central Asia/Caspian Sea. High prices key to the Russian economy. The National Interest, Summer 2003. “A low, dishonest decadence - Letter from Moscow,” http://findarticles.com/p/articles/mi_m2751/is_72/ai_105369906/pg_1.

The improved appearance of Moscow (although not the rest of the country) is indisputable, but it is mainly a product of the high price of oil. Every dollar difference in the price of oil translates into roughly $1 billion in budget revenue; a high price for oil has therefore become the key to the government's ability to balance the budget, pay state employees and repay Russia's foreign debt. If the price should fall significantly and stay relatively low, as it did in much of the 1980s and 1990s, Russia will be plunged into a severe economic crisis.

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2NC—RUSSIAN ECONOMY—AT: DIVERSIFICATION EFFORTS SOLVE Diversification efforts solve long term unsustainability but high oil prices are key to fund investment in diversification in the short-term.

What the Papers Say

(Russia), 11/28/2007. “Still Hooked on Oil,” Lexis.

Being hooked on oil is the trademark of the Russian economy, and Russian politics as well. But now we see Senior Deputy Prime Minister Sergei Ivanov smashing stereotypes. "Have we managed to end our dependence on oil and gas exports?" he asks. And he answers himself: "We haven't done it yet, but we're making progress." The arguments for this are well-known: "We are expecting economic growth of close to 8% this year. This is the best figure among developed Western nations. Oil and gas will contribute no more than 2% of this 8% growth." Even more convincing evidence can be found to show that we're not hooked on oil as much as we used to be. Look at the rise in industrial investment: according to the Federal State Statistics Service (RosStat), investment in basic capital grew by 19.6% in October. Experts are already saying that the economy is in danger of overheating. So far, however, this investment is maintaining economic growth prospects. Yes, the investment rise was started by oil revenues and ruble appreciation, but economic growth itself is becoming a factor in its own continuation. There's the government, with its innovation-based development policy and the corresponding state corporations. And there are RAO Unified Energy Systems (RAO UES), Gazprom, and Rosneft - whose interests are not consistent with a policy of developing an innovationbased economy. All the same, I wouldn't advise concluding that we're no longer hooked on oil.

The Russian economy's future is linked to an innovation-investment growth scenario. The resources to fund the transition to that track are oil revenues. Suffice it to recall that the founding capital for the numerous state corporations that are supposed to be the driving forces for innovation-based growth comes directly from the Stabilization Fund. But not even this is the main issue here. The point is that the transition to innovation-based development certainly won't be simple and smooth. Russia can’t handle low prices—any studies to the contrary use flawed data. Clifford Gaddy and Barry Ickes, December 2005. Fellow at Brookings at Associate Professor of Economics at Penn State. Eurasian Geography and Economics, 46.8, pp. 559-583(25).

What is distinctive for Russia, we would argue, is the scale of the informal rent redistribution. Like the part of the iceberg that lies beneath the surface, the informal rent categories may turn out to be most important in assessing current and future economic and political developments. To take one example, one frequently hears statements to the effect that a decline in oil prices would have little impact on the Russian economy. The government’s oil stabilization fund, it is said, absorbs the windfall. The core budget is sustainable at much lower oil prices. But this line of thinking is based on looking at formal taxes alone. In fact, we see that the formal taxes and the formal budget are only a part of the picture. Informal rent-sharing sustains a much broader part of the economy and society. Lower oil prices mean smaller overall rents, and thus less to be shared among all the categories – not just the part represented by formal taxes.

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2NC—RUSSIAN ECONOMY—LINK MAGNIFIER High oil prices are key to the perception of stability in Russia’s economy—this generates foreign investment necessary for growth in other sectors.

Moscow Times, 1/30/2006. “Russia's Future, Pinchuk's Lunch," lexis. Alexander Izosimov, CEO of VimpelCom, stood up to take issue with the premise that high oil prices are holding Russia back. He made the case that high oil prices bring a sense of stability, reduce the risk of

borrowing money and thus allow other sectors that require significant outlays of capital, such as telecommunications, to grow. "Look at the amount of money being borrowed in the West," Izosimov said, expanding on his remarks after the conclusion of the session, which like most sessions at Davos is off the record unless the speaker explicitly agrees to be quoted. "The accessibility of international money would not happen if

Russia were not perceived as stable." He was joined by Alexei Mordashov, head of Severstal, who said that in addition to creating stability, high oil prices generated demand and allowed for increases in public sector wages. And, any instability causes a decrease in foreign investment, magnifying the impact.

Forbes, 1/9/2008. “Putin's Price Problem,” http://www.forbes.com/markets/economy/2008/01/09/russia-inflationputin-markets-econ-cx_vr_0109markets12.html. Foreign companies, including Dell (nasdaq: DELL - news - people ) and Cisco (nyse: CSCO - news - people ), as well as energy heavy weights such as Exxon (nyse: XOM - news - people ), Royal Dutch Shell (nyse: RDSA - news - people ) and BP (nyse: BP - news - people ) have piled into Russia to take advantage of the country's vast energy reserves, and

During 2007, foreign direct investment in Russian more than doubled, rising to a staggering $100 billion, despite ongoing political tensions with countries such as Britain. (See: " Russia's Booming Economy") Maintaining a stable economy will prove crucial to continuing to attract foreign investment, which has been crucial to the growth of the economy, particularly as investors look to emerging markets in Brazil, China and India, where political relationships have largely been more favorable. burgeoning economy.

Foreign investment is the key for the Russian economy—current increases are driving growth now.

Russia Today, 10/22/2007. “Russian assets lure foreigners,” http://www.russiatoday.ru/business/news/15847. Real estate, retail and investment banking are some of the fastest-growing sectors of the Russian economy and foreign companies want in on the action. Those advising on foreign mergers and acquisitions, say we're only at the beginning of the growth cycle. "I think there's a myth outside Russia that its very hard to do a deal in Russia, but outside the strategic industries that's definitely not the case," Alan Broach, a partner in Deloitte in Moscow believes. "I think the biggest surge is coming in real estate. We get enquiries literally every day of the week from foreign companies wanting to invest in Russian real estate," he adds And even

when foreign investors buy into a Russian company and export much of the profit they make, the economy still gains. "The size of borrowing is linked to the value of the company. So, as a result, the higher the interest of foreign companies in Russian companies, the higher Russia's ability becomes to borrow internationally and to fund its growth," Natalya Orlova, Economist at Alfa-Bank in Moscow states. Although the biggest five last year were in energy and metals, the sheer volume of smaller deals in other sectors also contributed to a doubling in the value of the Russian M&A market last year. It grew from around $US50 billion in 2005 to more than $US 100 billion in 2006 with the vast majority of crossborder M&A coming from foreigners buying into Russia. The Russians are coming Leading M&A advisor Raiffeisen Investment believes that next year the major growth will be in the number of outbound and domestic transactions. According to Evgeny Sidorenko of Raiffeisen Investment, "we see the strong development of domestic retail chains, strong domestic retail business. We have clients, Russian clients, looking for acquisition opportunities in Europe, from the retail sector." But economists say Russia needs huge foreign investment to fund its

growth, and diversify the economy away from its dependence on oil and gas. So,

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increased competition between foreign and domestic players outside the strategic industries, looks set to be the name of the M&A game in 2008.

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2NC—RUSSIAN ECONOMY—AT: DUTCH DISEASE Medvedev will implement economic reforms now but needs continued economic growth to succeed. Aude Lagorce, 3/2/2008. Senior correspondent for MarketWatch in London. “Russia's new man could bring thaw, reform,” Market Watch, http://www.marketwatch.com/news/story/russia-vote-president-new-man/story.aspx?guid= %7B62A072D0-5FE0-4269-834D-B73388E418BE%7D&dist=hplatest. In an election whose outcome was almost certain before polling began, Medvedev won with 68% of the vote Sunday, according to Russian election officials. Medvedev built the insurmountable lead on returns from about half the nation's polling stations. Of the four candidates running, Medvedev, 42, who is deputy prime minister in the current government, had been widely predicted as victor since securing the endorsement of outgoing President Vladimir Putin, who still enjoys high levels of popularity. Opinion polls suggested Medvedev would win 60% to 80% of the vote. Given the almost guaranteed outcome, the most pressing question for markets is how much power will remain concentrated in Putin's hands, Credit Suisse analysts wrote in a note to clients. Putin has already accepted an offer to be Medvedev's prime minister. While the broker expects the former KGB man to remain involved in the day-to-day running of the government and to have a major say on domestic and international policies and economic strategy, it stressed that Medvedev's background, age and personality -- which are different from Putin's-- could have some impact on policy. More global news "Specifically Medvedev is considered more liberal in his economic and political views, and a more West-friendly figure than some other members of the current administration," Credit Suisse said. Market friendly reforms in sight Should Medvedev be elected, Credit Suisse expects more market-friendly institutional reforms, and economic policies

with a distinct social bias. Stocks directly or indirectly associated with Medvedev's roles so far, or exposed to liberal reforms, would benefit under his potential presidency, it said. The housing, agriculture and health-care sectors are expected to prosper because they've been the focus of Medvedev's work over the past two years. The broker singled out oil and gas giant Gazprom (UK:OGZD: news, chart, profile) , mortgage lender Sberbank (DE:A0B9N4: news, chart, profile) , construction group LSG Group and conglomerate AKF Sistema (UK:SSA: news, chart, profile) as likely to perform well. It added that Cherkizovo (UK:CHE: news, chart, profile) could benefit from agriculture subsidies and UES (UK:UESD: news, chart, profile) and OGK-1 from reforms in the utility sector. Analysts at UniCredit recently identified some of the same stocks, including Sberbank, Gazprom and Sistema as likely to thrive in 2008 because of their strong connections to the state. They also identified Lukoil (UK:LKOD: news, chart, profile) and Norilsk Nickel (UK:MNOD: news, chart, profile) as attractive stocks. Turning to potential reforms, Credit Suisse highlighted a

pension overhaul it said could provide flows to the stock market. Changes that may be implemented include allowing the Federal Pension Fund to invest in higher-yielding instruments, including equities, and encouraging pensioners to more actively pursue private pension schemes. "These changes could be vastly positive for the stock market in the long term," Credit Suisse said. Medvedev's declared economic platform, unveiled in mid-February, includes support for personal freedom, a pledge to fight corruption, a business-friendly promise of a reduction in the VAT rate and an intension to reform the judiciary system. More emerging market coverage. Gradual changes Any changes the likely next president chooses to implement, however, are likely to be undertaken gradually. About 100 million Russians are eligible to vote in Russia and abroad, with the polling staggered across the country's 11 time zones. "His popularity is mainly based on the promise of stability -- both political and economical -- imbedded in his campaign," ING analyst Tatiana Orlova stressed. She added that like many analysts, she expects Putin to remain the leader and the "main policy architect" of the PutinMedvedev pairing. Even though the likely outcome of the vote is widely expected, the results should give a boost to Russian equity markets, which have been unusually quiet in the past week or so as potential retail investors have preferred to stay on the sidelines until the new president is confirmed, Russiabased Deutsche Bank strategists told clients. "We expect flow to accelerate right after the presidential elections," the broker said. And a slight change in tone and policies could emerge quickly. Deutsche Bank said it would not be surprised if "tangible and market friendly" policy declarations were made in the wake of the presidential polls. Above all, the new leader's role will be to ensure continued prosperity for a country that has undergone a massive economic transformation over the last decade. In that time, Russia has pulled back from the brink of collapse and used its oil windfall to pay back debt and build up foreign reserves. Today it boasts a $1.3 trillion economy. Oil and gas, more than anything, have supported the country's rapid expansion. The share of oil and gas in Russia's GDP has increased, according to the Institute of Economic Analysis, from 12.7% in 1999 to 31.6% in 2007, allowing GDP per head to more than triple from 1998 to today.

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2NC—RUSSIAN ECONOMY—AT: DUTCH DISEASE Reforms will cause WTO membership. Kaveh L Afrasiabi and Natalia Gold, 3/21/2008. Teaches international relations at Bentley College, teaches business at Bentley College. “Medvedev holds key to WTO,” Asia Times, http://www.atimes.com/atimes/Central_Asia/JC21Ag01.html.

In the wake of this week's Moscow visit by US secretaries of state and defense, Condoleezza Rice and Robert Gates, and their showering of praise on Russia's president-elect Dmitry Medvedev as someone that the US "can do business with", eyes are now on Medvedev to see if the former protege of President Vladimir Putin will stamp his own mark, for example by accelerating the tempo of change in Russia, or whether it will be business as usual. The younger and more technocratic Medvedev may be more ready than his predecessor to steer the Russian

economy towards market liberalization and globalization, witness his decision to make a top priority of Russia's entry to the World Trade Organization (WTO). Russia's bid to join the WTO has moved forward slowly since 1993, yet expectations are rather high that all the required bilateral and multilateral agreements, as well as technical, legal and organizational issues, can be wrapped up within the next few months. In that event, Medvedev can then take credit for accomplishing something that eluded Putin, even though the latter paved the way for Russia's WTO accession by adopting many of the necessary economic and legal reforms. The country has agreed to substantial tariff cuts, such as an average of 8% on manufactured goods, and to permit complete foreign ownership of banks and investment companies on accession to the world body. However, just as Moscow has previously had to alter its forecast for WTO membership several times, the Kremlin's new boss may discover that unless the country adopts more economic changes and policy changes, accession to the WTO may need to be postponed yet again. That will diversify the economy—solves your long term dependence arguments. William J. Burns, 11/28/2006. U.S. Ambassador to Russia. “WTO and U.S.-Russian Relations — Remarks to the American Chamber of Commerce,” Department of State, http://usembassy.ru/bilateral/statement.php?record_id=73.

WTO membership will provide a strong impulse toward diversification of the Russian economy beyond oil and gas. It will help the modernization of Russia's aviation industry, making state of the art aircraft and plane parts more affordable and airlines better able to service Russia's eleven time zones. WTO membership will help Russian exporters and employers to expand in the ferrous and non-ferrous metals, chemicals, and telecommunications sectors. Chemical processing industries like those I visited in Volgograd ten days ago are likely to get a big boost. Russian consumers will see a broader range of goods at cheaper prices in stores and groceries. Russian food processors will have better access to import ingredients due to lower tariffs and fewer import restrictions. WTO membership will also allow Russian agricultural producers to better defend and promote their export interests.

Russia uses high oil revenues to invest in economic diversification—this will drive growth now.

The Guardian (UK), 1/25/2008. “Russia investment fund seeks $4 bln/year from 2011,” http://www.guardian.co.uk/feedarticle?id=7256415.

Russia, flush with windfall oil revenues, runs a strong budget surplus but has substantially loosened its fiscal policy to accommodate pension and wage hikes as well as infrastructure and industrial investment needs. The fund, which aims to introduce a concept of private-public partnership in Russia, has so far approved 20 projects worth 1 trillion roubles with the share of state budget financing at about 30 percent. The budget investment fund is one of several vehicles created in

Russia in recent years aimed at channelling oil wealth into improving infrastructure, diversifying the economy and boosting economic growth. Cash assigned to the Development Bank and other state-run institutions has so far only been used to support banking sector liquidity. Analysts see government spending as key for maintaining high growth rates in 2008.

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EXTENSIONS—OIL KEY TO REFORMS High oil prices key to ensure Russian reforms. Vladimir Chizhov, 5/8/2008. Russian Ambassador to the EU, former deputy Minister of Foreign Affairs. “Russian Ambassador: 'You will not live to see Putin and Medvedev in conflict,” EurActiv, http://www.euractiv.com/en/foreignaffairs/russian-ambassador-live-see-putin-medvedev-conflict/article-172227. I will not deny that

the high price of oil, which is not determined by Russia of course, continues to provide a

certain cushion for economic reforms in Russia. But I want to give you a more multi-faceted picture of what is happening in the Russian economy. Actually two thirds of the GDP is created outside the energy sector. Also three

the focus of the economic policies of the Government is to decrease the reliance on oil and gas exports and to use the money accumulated thanks to the high world prices to stimulate the development of other sectors, primarily the innovation sectors, nanotechnologies, high-tech, also improving the infrastructure, including transport infrastructure. The vast territory of the Russian Federation means that any quarters of Russian GDP is generated by the private sector. And indeed

king of infrastructure is very investment heavy.

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EXTENSIONS—GROWTH KEY TO MEDVEDEV Any economic problems will be blamed on Medvedev—tubes his popularity.

Business Week, 5/8/2008. “Russia's Medvedev Gets Down to Business,” http://www.businessweek.com/globalbiz/content/may2008/gb2008058_656858.htm? chan=globalbiz_europe+index+page_top+stories.

the same factors that have underpinned Medvedev's rise to power also make it difficult for him to emerge as a strong and independent leader. After the remarkable boom times of the Putin years, people will be quick to blame Medvedev if anything now goes wrong, yet continue to credit his predecessor if they don't. Perhaps Medvedev isn't so lucky after all. Ironically,

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2NC—IRAQ IMPACT Iraq politically and economically stable now but that depends on oil revenue.

RTT News Global Financial Newswire, 1/17/2008. “UN, IMF Predict Economic Growth, Political Stability In Iraq,” http://www.rttnews.com/sp/todaystop.asp?date=1%2F17%2F2008&item=25.

Assessments by the International Monetary Fund and the United Nations suggest that war-torn Iraq faces a period of economic growth and political progress in the next two years. The IMF predicts a 7% increase in growth in 2008 and 2009, while oil revenues from booming exports should be up by 200,000 bpd. "Of course all of this is conditional on oil production expansion and the security situation improving," Mohsin Khan, director of the IMF's Middle East and Central Asia department said.

evidence suggests there was also an "improvement in economic activity" in the second half of 2007, combined with an improvement in security, Khan added. Anecdotal

The entire economy depends on high oil revenues.

The Times (UK), 2/1/2008. “Beneath the desert sands flows lifeblood of economic recovery,” http://www.timesonline.co.uk/tol/news/world/iraq/article3285312.ece.

The US Army Corps of Engineers began building this $30 million (£15 million) Pipeline Exclusion Zone (PEZ) between Kirkuk and Baiji last July, and will finish it next month. It has already reduced dramatically the number of attacks by those Sunni insurgents who have been waging a second, less-noticed war over the past four years – not against US troops or Shias but against the oil industry on which Iraq’s entire economy depends. As a result, that industry is displaying unmistakable signs of recovery for the first time since the US invasion of 2003. Exports have risen almost to prewar levels, and with Iraq sitting on 113 billion barrels of proven reserves – the third largest in the world – that is welcome news not just for Baghdad but for a world reeling from record oil prices. The PEZ is only one measure taken by the US and Iraqi authorities to secure the Kirkuk to Baiji pipelines. They have also replaced Sunni and Shia soldiers with more aggressive, trustworthy Kurds such as Private Mustafa, and removed the 3rd Strategic Infantry Battalion which was, say US army officers, “deeply corrupt”. Its locally recruited members were almost certainly working with the insurgents – telling them when the oil was flowing, helping them to steal it, even staging fake assaults on their own positions to conceal their duplicity. Since August there have been just two attacks, both in areas where the PEZ

was unfinished, said Lieutenant-Colonel Kevin Hudie, of the 6th Field Artillery, who is in charge of oil infrastructure security for the Kirkuk region. The huge 46-inch wide pipeline that carries the crude 180 miles north from Baiji to the Turkish border is too long for a PEZ and a little less secure – 14 guards have been killed since September. But even there attacks have been greatly reduced, largely through coopting local tribes by giving their young men jobs in the Oil Police, the revamped, 31,000-strong mini-army that protects Iraq’s oil infrastructure. “If there are attacks in their sectors these people will be fired. If there are no attacks they will be rewarded,” said Manaa Abdullah, the wily, British-educated head of the state-owned Northern Oil Company. The results of this improved security are startling. The pipeline to Turkey was operational just 17 days in the first seven months of last year, and every day but five in the last quarter. Two-thirds of the 48 million barrels of oil exported from Kirkuk last year were exported in those last three months alone. A second $100 million PEZ will be constructed this year to protect the 13-mile line from Baiji to Baghdad. Kirkuk accounts for roughly a third of Iraq’s oil production. Fuelled by its recovery, Iraq is producing an average of 2.4 million barrels

a day – just below its prewar level of 2.6 million – with the Oil Ministry confidently predicting an output of 3.5 million by next year. That would match the level Iraq last achieved in 1979, just before the Iran-Iraq War. “It’s an ambitious goal, but it’s possible,” said a US official closely involved with the industry. Thanks to rising oil production, the International Monetary Fund believes that Iraq’s battered

economy will grow 7 per cent this year. And with oil prices near record highs, the US Special Inspector for Iraq this week forecast a $15 billion windfall for a country whose $48 billion budget for 2008 was calculated when oil, which accounts for 90 per cent of its revenues, fetched a mere $55 a barrel.

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2NC—IRAQ IMPACT Economic growth key to prevent Iraqi collapse.

NSC, 2005. “National Strategy for Victory in Iraq,” National Security Council, www.pi.energy.gov/documents/IraqNationalStrategy113005.pdf.

How will these efforts help the Iraqis – with Coalition support – defeat the enemy and achieve our larger goals? - The rebuilding of Iraq’s infrastructure and the provision of essential services will increase the confidence of Iraqis in their government and help convince them that the government is offering them a brighter future. People will then be more likely to cooperate with the government, and provide intelligence against the enemy, creating a less hospitable environment for the terrorists and insurgents. - Efforts in the reconstruction realm have significant implications in the security realm when they focus on rebuilding post-conflict cities and towns. Compensation for civilians hurt by counterterrorism operations and the restoration of some economic vibrancy to areas formerly under terrorist control can help ease resentment and win over an otherwise suspicious population. Economic growth and reform of Saddam-era laws and regulations will be critical to ensuring that Iraq can support and maintain the new security institutions that •

the country is developing, attract new investment to Iraq, and become a full, integrated member of the international

Economic growth and market reform – and the promotion of Iraq’s private sector – are necessary to expand job opportunities for the youthful Iraqi population and decrease unemployment that makes some Iraqis more vulnerable to terrorist or insurgent recruiting. economic community. -

Iraqi civil war causes World War III. Niall Ferguson, September-October Affairs, proquest.

2006. Professor of history at Harvard, “The Next War of the World,” Foreign

What makes the escalating civil war in Iraq so disturbing is that it has the potential to spill over into neighboring countries. The Iranian government is already taking more than a casual interest in the politics of post-Saddam Iraq. And yet Iran, with its Sunni and Kurdish minorities, is no more homogeneous than Iraq. Jordan, Saudi Arabia, and Syria cannot be expected to look on insouciantly if the Sunni minority in central Iraq begins to lose out to what may seem to be an Iranian-backed tyranny of the majority. The recent history of Lebanon offers a reminder that in the Middle East there is no such thing as a contained civil war. Neighbors are always likely to take an unhealthy interest in any country with fissiparous tendencies. The obvious conclusion is that a new "war of the world" may already be brewing in a region that, incredible though it may seem, has yet to sate its appetite for violence. And the ramifications of such a Middle Eastern conflagration would be truly global. Economically, the world would have to contend with oil at above $100 a barrel. Politically, those

countries in western Europe with substantial Muslim populations might also find themselves affected as sectarian tensions radiated outward. Meanwhile, the ethnic war between Jews and Arabs in Israel, the Gaza Strip, and the West Bank shows no sign of abating. Is it credible that the United States will remain unscathed if the Middle East erupts? Although such an outcome may seem to be a lowprobability, nightmare scenario, it is already more likely than the scenario of enduring peace in the region. If the history of the twentieth century is any guide, only economic stabilization and a credible reassertion of U.S. authority are likely to halt the drift toward chaos. Neither is a likely prospect. On the contrary, the speed with which responsibility for security in Iraq is being handed over to the predominantly Shiite and Kurdish security forces may accelerate the descent into internecine strife. Significantly, the audio statement released by Osama bin Laden in June excoriated not only the American-led "occupiers" of Iraq but also "certain sectors of the Iraqi people -- those who refused [neutrality] and stood to fight on the side of the crusaders." His allusions to "rejectionists," "traitors," and "agents of the Americans" were clearly intended to justify al Qaeda's policy of targeting Iraq's Shiites. The war of the worlds that H. G. Wells imagined never came to pass. But a war of the world did. The sobering possibility we urgently need to confront is that another global conflict is brewing today -- centered not on Poland or Manchuria, but more likely on Palestine and Mesopotamia.

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EXTENSIONS—OIL KEY TO IRAQI ECONOMY Oil prices boosting Iraqi economy now.

The Times (UK), 2/1/2008. “Iraq's revival boosted as oil production rises to 2.4m barrels a day,” http://www.timesonline.co.uk/tol/news/world/iraq/article3285580.ece.

The International Monetary Fund predicts that Iraq’s economy, boosted by rising oil revenues, will grow by more than 7 per cent this year, compared with 1.3 per cent last year. A new report from the US Inspector-General says that the Iraqi Government will receive a $15 billion (£7.5 billion) windfall to help its reconstruction efforts thanks to soaring oil prices. Oil revenue key to reconstruction. Joseph Giordono, 2/1/2008. “Report uncovers Parson Corp.’s failures in Iraq,” Stars and Stripes, http://www.stripes.com/article.asp?section=104&article=52092.

Reports issued this week by a government watchdog continue to fault the largest American construction firm in Iraq for project failures, but also gave hope that oil revenue could help the reconstruction process. The reports are from the Special Inspector General for Iraq Reconstruction. Previous reports have outlined some of the failings of Parsons Corp.’s work in Iraq, but this quarterly report went further and examined some 200 Parsons projects in 11 major “job orders,” totaling $365 million. The report said that eight of the 11 job orders were terminated by the U.S. government before completion, for reasons ranging from weak contract oversight and failures in reporting problems to poor supervision by the Army Corps of Engineers. The report also called 2008 a “year of transfer” for the reconstruction program, with several important milestones to be tracked. Three key developments are identified: the changing security situation and American troops’ roles in each province; the outcome of several Iraqi laws on provincial powers, elections and other issues; and the potential for a significant rise in national income because of oil prices and production. According to the report, Iraq’s oil production during the last quarter averaged 2.38 million barrels a day, the highest since the war began. Prewar averages were 2.6 million barrels per day.

Its 90% of their economy.

AP, 1/31/2008. “EU, Iraq Pursue Closer Energy Ties,” Associated Press, http://ap.google.com/article/ALeqM5g_dyk8aEsPbb__lv04T3Tsr6zU9wD8UH2M480.

Despite insurgent attacks on oil facilities and employees, oil exports account for more than 90 percent of revenues in Iraq, which has the world's third-largest crude oil reserves: an estimated 115 billion barrels.

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EXTENSIONS—OIL KEY TO IRAQI STABILITY High oil prices key to Iraqi stability. Andrew McKillop, 4/19/2004. Energy and Environmental Consultant. “A counterintuitive notion: economic growth bolstered by high oil prices, strong oil demand,” Oil & Gas Journal, Lexis.

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. Can this be done without

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2NC—SAUDI ARABIA IMPACT High prices key to prevent Saudi collapse. Steve Yetiv, 2/6/2008. Professor of political Science at Old Dominion University in Norfolk. “Why the Saudis aren't lifting a finger to ease oil prices,” Christian Science Monitor, http://www.csmonitor.com/2008/0206/p09s01-coop.html. Oil producers say that high prices are partly due to speculation in oil markets as well as to the dollar's decline, and not because oil is lacking. That may be true, but the high price, whatever the cause, remains a big problem. Saudi Arabia's reluctance to address sustained high oil prices, even in the face of a potential recession, represents an important break with past Saudi oil policy. Another explanation for no action could be that the Saudis may not want to look an oil horse in the mouth. Saudi Arabia's young population has nearly tripled since 1980, while oil export revenues in real terms have fallen by around one-quarter (despite recent increases). Each Saudi gets 72 percent less in trickle-down money today than in 1980. The nation needs oil export revenues to maintain high levels of subsidies (for food, fuel, you name it) to

sustain the population and to build massive infrastructure. Those funds help soothe a population that suffers from 13 percent unemployment. It also helps buy off Wahhabi radicals and antiregime elements who work against the royal family. Internal Saudi strife causes global depression.

David, professor of political science at Johns Hopkins, 1999

(Steven, Foreign Affairs, Jan/Feb, lexis)

Saudi Arabia suffers from the fact that the various threats to domestic peace all reinforce one another. The bad economy intensifies religious extremism, which in turn exacerbates divisions in the armed forces. The catalyst for civil war can therefore come from one of several different sources. A power struggle in the royal family over succession to the throne, squabbles over shares of an ever-shrinking economic pie, or disenchantment in the military with the royal family's selfish behavior could all set off a major conflagration. In a Saudi civil war, the oil fields will be a likely battle site, as belligerents seek the revenue and international As the above suggests,

recognition that come with control of petroleum. For either side to cripple oil production would not be difficult. The real risk lies not with the onshore oil wells themselves, which are spread over a 100-by-300 mile area, but in the country's dependence on only a few critical processing sites. Destruction of these facilities would paralyze production and take at least six months to repair. If unconventional weapons such as biological agents were used in the oil fields, production could be delayed for several more months until workers were convinced it was safe to return. Stanching the flow of Saudi oil would devastate the United States and much of the world community. Global demand for oil (especially in Asia) will increase in the coming decades, while non-Persian Gulf supplies are expected to diminish. A crisis in the planet's largest oil producer, with reserves estimated at 25 percent of the world's total, would have a massive and protracted impact on the price and availability of oil worldwide. As the disruptions of 1973 and 1979 showed, the mere threat of diminished oil supply can cause panic buying, national hysteria, gas lines, and infighting. Prices for oil shot up 400 percent in 1973, 150 percent in 1979, and 50 percent (in just 15 days) in 1990. The oil shocks of the 1970s threw the United States into recession, causing spiraling inflation and a decline in savings rates that plagues the U.S. economy even now. Trillions of dollars were lost worldwide. And all this occurred at a time when the United States was less dependent on foreign petroleum than it is now. Cutting the Saudi pipeline today would cause a severe worldwide recession or depression. Short of physical attack, it is the gravest threat imaginable to American interests.

Economic collapse causes global nuclear war. Walter Russell 28..

Mead, Summer 1992. Fellow at the

Council on Foreign Relations, NEW PERSPECTIVES QUARTERLY, p.

if the global economy stagnates - or even shrinks? In that case, we will face a new period of international conflict: South against North, rich against poor. Russia, China, India - these countries with their billions of people and their nuclear weapons will pose a much greater danger to world order than Germany and Japan did in the '30s. But what if it can't? What

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2NC—SAUDI ECONOMY UNIQUENESS High oil prices driving Saudi growth now. Brad Bourland, 5/9/2008. Chief Economist & Head of Research Jadwa Investment. “Oil's surge: what's behind it and what it means for Saudi Arabia,” http://www.saudi-us-relations.org/articles/2008/ioi/080509-bourland-oil.html.

Saudi Arabia's economic performance will benefit from high oil prices. This year we expect the current account surplus to hit an all-time high and nominal GDP growth and the budget surplus to be exceptionally robust. Lower oil prices over the following two years will make some of the headline numbers look less impressive, but the underlying momentum within the economy will strengthen, with inflation remaining a problem.

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EXTENSIONS—OIL PRICES KEY TO SAUDI STABILITY Oil revenues key to prevent social unrest and internal terrorism in Saudi Arabia.

ISN Security Watch, 12/12/2007. “Saudi Arabia's economic liberalization,” http://www.isn.ethz.ch/news/sw/details.cfm? id=18454. King Abdullah, who ascended to the throne in 2005, understands the urgency of reform. Ten years ago as crown prince, he conceded that the Saudi lifestyle would have to change. Demographic developments largely prompted the king's decision, as Saudi birth rates are among the highest in the region. According to the UN, the current population tally of 27.7 million is expected to have risen 6 percent by 2015. The population projection for 2025 is 34.8 million. The UN further estimates that the number will have reached a mind-boggling 45 million by 2050. Because of this, the creation of a dynamic economy and rapid job growth is a matter of utmost urgency. Current unemployment is an estimated 30 percent for men and 90 percent for women, and increasing at alarming rates. Forty percent of the population is younger than 15 years old.

Considering that the demographic pressure cooker is likely to cause cuts in welfare and play into the hands of recruiters from militant Islamist organizations, it becomes clear that economic reforms are not only economic. King Abdullah identified unemployment as the number one national security issue already at the turn of the millennium. But the king's view may be for naught. The fact that the Islamist insurgency intensified in 2003, the year of the US-led invasion of Iraq, during a time of relative wealth after decades of sinking per capita income levels, may mean that Saudi Arabia’s jihadist groups are driven more by pan-Islamic nationalism than domestic factors. If socioeconomic frustrations are not what motivate Saudi jihadists, economic reforms are not likely to affect this aspect of the security situation. Not implementing economic reforms, however, will surely have a negative effect on the regime's stability. In a country where demands for political reforms are exceedingly hard to make in public, calls for economic reforms, notably concerning financial transparency, are increasingly being heard.

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2NC—SAUDI ARABIA—AT: DUTCH DISEASE The link is false—High oil prices are causing economic reform and liberalization in Saudi Arabia.

ISN Security Watch, 12/12/2007. “Saudi Arabia's economic liberalization,” http://www.isn.ethz.ch/news/sw/details.cfm? id=18454.

According to conventional wisdom, high oil prices would render economic reform in oil-rich countries a poor chance of success with increases in state income lessening the pressure for such change. In a time of sky-high oil prices, Saudi Arabia proves that conventional wisdom sometimes misses the mark. Saudi oil export revenues constituted a meager US$34.3 billion in 1998, but rose to US$46.8 billion in 1999 and US$65.5 billion in 2002. SABB, one of the kingdom's largest banks, projects oil revenues of US$165 billion this year. Even though the Saudi state has thus gradually gained access to a greatly increased volume of external rent, it has somewhat paradoxically loosened its tight grip on the economy, opened up its markets for privatization and foreign investment and actively strengthened its private sector. Non-oil portions of the private sector have grown more significantly in the last six years than oil-based. Export of non-oil-based products increased at a rate of 20 percent annually between 2000 and 2006. The International Monetary Fund (IMF) is one of the many agencies that note the new Saudi business climate, in which diversification and privatization seem to be paramount. The improved business climate is illustrated clearly by incoming foreign direct investment (FDI) related to the Saudi gross fixed capital formation (GFCF), a common macroeconomic indicator of business activity. The numbers from the World Investment Report from the UN Conference on Trade and Development (UNCTAD) released in mid-October reveals a baffling development in this regard. Inward flow of FDI as a percentage of the GFCF increased from a level of 1 percent in the period 1990-2000 to 4.5 percent in 2001, 24.0 percent in 2005, and a staggering 32.1 percent in 2006. Not only is that more than any other Gulf country, including the United Arab Emirates, it turns Saudi Arabia into the top FDI recipient of the Arab world with a staggering US$18 billion. The ripple of liberalization The rise of incoming FDI is most likely related to the extensive economic liberalization in the kingdom that began in 2000. Nevertheless, according to Dr F Gregory Gause of the University of Vermont, an expert on Saudi Arabia, it is hard to disentangle the effects of Saudi economic reforms from the upward

trajectory of oil prices. "In the end, I am sure that the oil price increase has more to do with the economic boom in Saudi Arabia than any policy steps," Gause told ISN Security Watch. "However, it is interesting that, during this boom, private sector growth is exceeding state sector growth rates. That is at least one indication that the private sector in Saudi Arabia is more developed and sophisticated than it was during the oil boom of the 1970s and early 1980s."

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LOW PRICES TURN THE CASE Low prices increase oil consumption and discourage alternative energy Coy, 1997 (Peter, Business Week, http://www.businessweek.com/1997/44/b3551008.htm) The expensive oil of the 1970s and early 1980s had one virtue: By discouraging consumption, it lessened the pollution caused by the burning of gasoline, diesel, and other petroleum products. Environmentalists hoped rising oil prices would promote a switch to cleaner energy sources, such as solar power. If oil instead remains cheap for decades to come, the harm to the environment from sulfur dioxide, carbon monoxide, particulates, and other poisons could be enormous. Combustion of oil, coal, and other carbon-based fuels may also overheat the planet by creating an insulating layer of carbon dioxide. Indeed, cheap oil is bound to complicate efforts to achieve a treaty on global warming in Kyoto, Japan, this December (page 158). Sustained low prices will turn their solvency Renner, 2003 - Worldwatch Institute (Michael, United Press International, 2/6, lexis) Sustained low prices would critically undermine the fledgling efforts to build wind, solar, and hydrogen industries, kick away the economic incentive to use energy more prudently, and effectively destroy the Kyoto protocol. Wind power in particular has come a long way, growing by more than 30 percent annually in recent years and now cost-competitive with most conventional sources of energy. Such advances could fall victim to artificially cheap oil -- a fuel whose considerable ecological and security costs are not properly accounted for. Low oil prices increase oil dependence and turn the case Plourde, 1995 (Andre, Dept of economics at the University of Ottawa, Energy Journal, #2, ebsco) A literal reading of the above statements yields the following argument. A decrease in the price of oil brings a substitution towards oil and out of other energy sources used as inputs in production. An increase in oil consumption, coupled with limited domestic production capabilities at prevailing world prices, implies that oil imports increase. An increased reliance on imports threatens energy security (or, brings energy insecurity). Energy insecurity increases the probability of an oil shock of the sort experienced in the 1970s and, were such a shock to occur, its effects will be felt more strongly by a given country's economy, the more dependent on imported oil is this country. Therefore, energy security at large, and security of oil supply in particular, should be a cornerstone of energy policy.[2]

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2NC—AT: HIGH OIL PRICES HURT ECONOMY 1. The impact is empirically denied—oil prices have been high for years but global GDP growth is still positive— even if there is a slowdown its not enough to collapse the economy to the point that it would cause war.

2. 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. Brad Bourland, 5/9/2008. Chief Economist & Head of Research Jadwa Investment. “Oil's surge: what's behind it and what it means for Saudi Arabia,” http://www.saudi-us-relations.org/articles/2008/ioi/080509-bourland-oil.html.

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 We think it would take clear evidence of a slowdown in demand for oil for prices to retreat.

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 mid1970s 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 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 price of gasoline.

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) retail price of gasoline is up by only 140 percent, as refiners have absorbed much the higher costs. Margins for US West and there has been not been a beneficial exchange rate impact. Nonetheless, the

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. 3. High oil prices don’t hurt the economy.

CCTV International, 1/3/2008. “Oil prices not to have big impact on world economy in long term,” 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

ENDI 08 49 Oil disad 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.

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2NC—AT: HIGH OIL PRICES HURT ECONOMY 4. Economic decline doesn’t cause war—statistics prove. Charles R. Boehmer, December 2007. Ph.D. from Pennsylvania State University and an Assistant Professor of Political Science at The University of Texas at El Paso. “The Effects of Economic Crisis, Domestic Discord, and State Efficacy on the Decision to Initiate Interstate Conflict,” Politics & Policy 35.4, Ebsco.

lower rates of growth suppress participation in foreign conflicts, particularly concerning conflict initiation and escalation to combat. To sustain combat, states need to be militarily prepared and not open up a second front when they are already fighting, or may fear, domestic opposition. A good example would be when the various Afghani The theory presented earlier predicts that

resistance fighters expelled the Soviet Union from their territory, but the Taliban crumbled when it had to face the combined forces of the United States and Northern Alliance insurrection. Yet the coefficient for GDP growth and MID initiations was negative but insignificant. However, considering that there are many reasons why states fight, the logic presented earlier should hold especially in regard to the risk of participating in more severe conflicts. Threats to use military force may be safe to make and may be made with both external and internal actors in mind, but in the end may remain mere cheap talk that does not risk escalation if there is a chance to back down. Chiozza and Goemans (2004b) found that secure leaders were more likely to become involved in war than insecure leaders, supporting the theory and evidence presented here. We should find that leaders who face domestic opposition and a poorly performing economy shy away from situations that could escalate to combat if doing so would compromise their ability to retain power. Table 5 presents the results where the external conflict measure is Fatal MID onset. A few points are in order before discussing the results. First, I measure growth in this model with a three-year moving average considering that the decision to engage in foreign clashes, which involve combat, may likely be based on several years of growth or domestic stability, although the results are similar for a one-year lag or moving averages of other durations between two and four years. Second, although my theory specifies a directional relationship claiming that economic growth should increase the likelihood of conflict, the results are presented based on a two-tailed test to be consistent with the rest of the models. Thus, the results are biased against my theory and the statistical significance is stronger than presented. Economic growth is positively related to the onset of foreign conflicts that lead to fatalities and this is significant below the .05 level with a one-tailed test. This part of my theory is thus supported. The baseline probability of a Fatal MID in this model is .048, as depicted in Table 6. A one standard deviation in GDP growth, protest, and rebellion all have the same approximate substantive increase in probability of .006 to .007, whereas democracy and development have a similar pacifying effect of -.01. Figures 4 through 6 map the range of probabilities of GDP growth, protest, and rebellion respectively. Economic Growth increases the risk of a Fatal MID whereas regime change becomes less likely (Figure 4).14 Again though, a graph can give us a more complete picture compared to the information in Table 6. Figure 5 shows that the effect on political protest is more severe over the full range of the scale. Whereas the risk of a Fatal MID levels off and drops, the relationship between protest and regime change is linear and continues upward. We see a similar pattern in Figure 6 with regard to rebellion. Therefore, when we look at the middle range of probabilities for the three variables, they appear to have similar effects, but at the highest levels of domestic conflict (beyond one standard deviation), the risk of a Fatal MID actually decreases. In this manner, there is support for the theory that economic growth indeed raises the probability of interstate conflicts that result in fatalities, whereas domestic conflict likewise increases this risk, but only to a point. The highest levels of domestic conflict actually reduce MID initiation, MID targets, and Fatal MIDs. Hence, if state leaders attempt to

divert because of domestic conflict, they clearly avoid escalating external conflicts to the point of fatalities and risking war.

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EXTENSIONS—HIGH OIL PRICES DON’T HURT ECONOMY Growth in emerging markets offsets small-scale declines—it creates new markets for US goods. Kevin A. Hassett, 1/28/2008. Senior fellow and director of economic policy studies at AEI. “Who's Afraid of $100 a Barrel?” http://www.aei.org/publications/filter.all,pubID.27426/pub_detail.asp.

the oil story is much different this time around: There is every reason to expect that high energy prices will do far less harm to the U.S. economy than they have in the past. The reason is apparent in the attached chart. It shows the relative increase in oil demand for many of the world's countries. For the large developed countries, including the U.S., oil demand has inched up only a smidgen in recent years. But the world's less-developed nations, especially China and India, have ratcheted up their consumption year after year. The size of this increase is astonishing, with China, for example, increasing its oil consumption a whopping 146 percent from 1993 to 2006. Increasing demand puts pressure on supply and drives up prices just as effectively as a supply disruption. But when supply is disrupted, as it was by war in 1956, it is unambiguously bad news. When high demand drives up prices, on the other hand, the story is more ambiguous. Less-developed nations are driving up the price of oil because they are growing so much, but that growth produces higher incomes, and a swarm of new customers for the products produced by developed nations. We often think that countries compete the way companies do, but the world doesn't work that way. When the rest of the world is reeling, our growth is lower and our recessions worse. With oil less and less important to our economy, its high price might even be good news. Except that

Productivity growth and Asian growth offsets the impact. Oliver Blanchard, 1/31/2008. The Class of 1941 Professor of Economics, is a former MIT economics department head. “Economist sees US better withstanding high oil prices - Peak oil,” Cherry Creek News, http://www.thecherrycreeknews.com/content/view/2359/2/. Q: Four

price-doubling oil shocks have occurred in 35 years-1973, 1979, 1999 and now. How have economic reactions differed? A: In the 1970s, there were two sharp recessions and sharply higher inflation. This time around, the economy has remained strong, and inflation has barely bulged. Q: What's behind the differences? Why was 1973 so different from 2007? A: In the 1970s, the adverse effects of oil price increases were compounded by other adverse shocks-a sharp slowdown in productivity growth and large increases in the price of raw materials.

In the 2000s, the effects of oil price increases have been partly offset by other shocks, this time favorable-sustained productivity growth and strong Asian growth, for example. Q: Higher oil prices make dramatic news, yet your research indicates oil actually affects the U.S. economy less than it did 35 years ago. Why is that? A: Those previous large increases in the price of oil did their job: they led to decreased demand. The share of oil and gas in U.S. production and consumption today is roughly two thirds of what it was in the 1970s. Thus, any given increase in the price of oil has only two-thirds of the impact it had then. Fuel efficiency blunts the impact.

Wall Street Journal, 9/29/2007. “How Economy Could Survive Oil at $100 a Barrel,” lexis. Growing fuel efficiency could also blunt the blow of higher prices. James Barnes, a Union Pacific Corp. spokesman, says the railroad has bought more fuel-efficient locomotives and trained engineers to operate trains in ways that conserve fuel. "From a macro level, we would anticipate that rising oil costs will make us more competitive (with trucks) and potentially drive more business our way," Mr. Barnes says. Saudia Arabia and Russia will reinvest profit—solves the impact

Wall Street Journal, 9/29/2007. “How Economy Could Survive Oil at $100 a Barrel,” lexis. High oil prices also mean more money for oil-producing nations such as Russia and Saudi Arabia to invest globally. "If resource owners are now getting a bigger piece of the pie to spend and invest, then $100 oil shouldn't be a problem" in the absence of a U.S. recession, says independent energy economist Philip Verleger Jr. "And that investment is happening." Such sanguine views, while they are far from universal, reflect a Economists see global growth slowing but still chugging along at a relatively healthy 3 percent this year and next.

fundamental shift in economists' understanding of how energy prices affect the economy.

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EXTENSIONS—AT: HIGH OIL PRICES HURT CONSUMER SPENDING Bourland answers this warrant—emerging markets sell gas at a fixed price and in the US the refineries have absorbed the majority of the increase in prices—this prevents the costs from being passed on to consumers.

Aff doesn’t solve—high food prices and the housing market slowdown ensure consumer spending will stay low.

Stimulus package and rate cuts solve consumer spending and recession. Shawn Tully, 2/6/2008. Editor at Large of CNN Money. “Recession? Where to put your money now,” CNN Money, http://money.cnn.com/2008/02/05/news/economy/recession_invest.fortune/. But any slump is likely to be short and mild, mainly because Washington is on the case. Since mid-September, Federal Reserve chairman Ben Bernanke has reduced the target for the Fed funds rate by 2.25 percentage points, with the biggest move, a sudden 75basis-point cut, coming on Jan. 22. On Jan. 30, the Fed cut another half-point, bringing the target to 3%. It usually takes six to nine months for a

Fed rate cut to bolster consumer and business spending. By midyear the flood of liquidity will be channeled into new loans for companies and consumers. A resurgence in easy credit - stoking the appetite for everything from big-screen TVs to capital equipment - will be practically irresistible. Consumer spending will get another boost from the roughly $150 billion economic stimulus plan Congress is poised to approve. Checks that could range from $1,000 to well over $2,000 are likely to start going out to families this summer. The easy money doesn't stop there. The Fed has practically promised even more rate cuts. The markets are predicting that the Fed funds rate will be 2% to 2.5% by year-end. With that kind of aggressive stimulus, look for growth to jump back to the 3% to 3.5% range in the second half of the year. Says Brian Wesbury, chief economist at First Trust Advisors: "You simply don't get recessions when the Fed funds rate is at 3% or below, and the Fed is in a strongly expansionary mode." Wal-Mart effect solves.

Wall Street Journal, 9/29/2007. “How Economy Could Survive Oil at $100 a Barrel,” lexis. For all the concern, the world today is better equipped to swallow expensive oil than it was when Jimmy Carter was installing solar panels and a wood-burning stove in the White House. The main reason has to do with what some call the Wal-Mart effect. For every extra dollar taken from drivers' pockets at the pump in the form of higher prices in recent years, low-cost exporters from China and elsewhere have put roughly $1.50 back in the form of cheaper retail goods. Even at today's near-record prices, U.S. households today spend less than 4 percent of their disposable income at the pump, vs. over 6 percent in 1980.

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2NC—AT: HIGH OIL PRICES HURT THE DOLLAR Any decline in the dollar is small and self-correcting. Trevor Williams, 1/15/2008. Lloyds TSB Financial Markets. “Macroeconomic themes for 2008: another strong performance by emerging economies,” FX Street Economics Weekly, http://www.fxstreet.com/fundamental/analysisreports/economics-weekly/2008-01-15.html.

Economic growth to be strong once again… Despite the doubling of oil prices and the credit crisis, global economic growth last year was above the long run average for a fifth year in succession. It was also clear that though growth in the main economies held up very well, this strong outcome was primarily due to the emerging markets, in particular China, India and Russia. But growth was also strong in all of the major oil exporters and commodity exporters of metals and minerals. There are few signs from these economies in recent months that the pace of growth is yet slackening. Oil prices remain high and demand for commodities from the emerging market giants (in terms of population) of China and India is still strong. However, we project that higher interest rates in many of the emerging market economies and currency appreciation over the past year - and likely to persist into this year - will slow down growth in 2008 compared with 2007. ...led by emerging markets... But with oil prices still high and commodity prices in general still strong, emerging market growth will remain broad based and not

confined to the largest developing economies. Continued growth in the emerging economies will also help growth in the developed economies to stabilise at or near trend rates this year. This means growth for the UK of 2.3% and for the eurozone 2%. For the US, growth is likely to remain below trend, at some 2%, as a result of the fallout from an extremely overvalued housing market slowing down and the bursting of the credit market bubble. This should be seen as good news in the medium term as the US has been consuming too much and saving too little in recent years, which meant that it was running an ever larger external deficit that threatened the stability of the global economy. A weaker currency will help to rebalance the global economy and make growth more sustainable in the years' ahead. With continued weakness in the US dollar likely this year, we look for faster export growth and sharply lower interest rates to spur economic recovery in the second half of 2008. However, once growth starts to recover, and it is clear that interest rates have peaked, the US$ could well reverse some of its decline. Weak dollar doesn’t give them an internal link to the global economy—high prices still help other countries.

Bloomberg, 9/21/2007. www.bloomberb.com/apps/news?pid=20601039&refer=columnist _sesit&sid=a.e.eUfVs1TM.

``Oil exporters' propensity to import from the U.S. has declined in recent years, while their tendency to import from Europe and Asia has risen steadily,'' says Stephen Jen, global head of currency research for Morgan Stanley in London. OPEC nations currently buy more than three times as much from the European Union as from the U.S., he says. To the extent that oil exporters keep buying European, Europe's economy may be less affected by higher oil prices than the U.S. economy, prompting investors to favor European investments. And since oil imports account for about a third of the U.S. trade deficit, ``high and rising oil prices may be particularly bad for the dollar,'' Jen says.

Weak dollar is self-correcting. N. Gregory Mankiw, 12/23/2007. Professor of economics at Harvard, and he wrote my econ textbook last semester. “How to Avoid Recession? Let the Fed Work,” New York Times, http://www.nytimes.com/2007/12/23/business/23view.html? ref=business. By making United States bonds less attractive to world investors, lower interest rates from a monetary expansion also weaken the dollar in currency markets. A depreciation of the currency is not in itself to be feared. Treasury secretaries often repeat the mantra of favoring

a strong dollar, but these pronouncements are based more on public relations than hard-headed analysis. A weak currency is a problem if it results from investors losing confidence in an economy. The most damaging cases are the episodes of sudden capital flight, as occurred in Mexico in 1994 and several Asian countries in 1997. This outcome is unlikely for the fundamentally sound American economy, but fear of it is one reason that Treasury secretaries maintain public fealty to a strong dollar. But if a weakened currency comes about because the central bank is trying to stimulate a lackluster economy, the story is very different. In that case, depreciation is not a malady but just what the doctor ordered. A weaker currency makes domestic goods more competitive in world markets, promoting

exports and bolstering the economy. The dollar’s falling value is one reason exports of goods and services have grown more than 10 percent in the past year.

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2NC—AT: HIGH PRICES CAUSE TERRORISM This internal link is stupid—terrorists can steal loose nukes or get money from drug trafficking in Afghanistan—oil revenues aren’t key.

No brink—terrorists states will keep sponsoring terrorism even if prices are lower and current revenues have already been given to terrorist groups.

Afghanistan funds terrorism.

AFP, 2/4/2008. “More action needed on Afghan opium: UN representative,” Agence France Presse, http://afp.google.com/article/ALeqM5jOh63wu14n9mDKK01WcRlx4Cty_g.

Afghanistan has done little to stop the corruption propping up its drugs trade and its war-shattered institutions are too weak to handle the problem, the UN representative on drugs here said. It will take decades to end the industry in the country, which produces more than 90 percent of the world's illegal opium, UN Office on Drugs and Crime representative Christina Oguz KABUL (AFP) —

told AFP in an interview. Drugs production, which last year reached new highs and feeds into deteriorating security, will be a main focus of ministers, donors and aid agencies meeting in Tokyo this week to assess progress in Afghanistan. A paper prepared for the talks Tuesday and Wednesday said the "expansion of the narcotics industry represents the single greatest threat to Afghanistan's stability, and is increasingly linked to insecurity and terrorist activities." "The drugs trade funds terrorism, fuels corruption and undermines the very rule of law that should bring security to our people," said the document on the website of the Joint Coordination and Monitoring Board (JCMB), a committee working to implement the country's five-year reconstruction plan.

Financing not key for terrorism—operations are inexpensive and they can always get enough money. Audrey Kurth Cronin, Summer 2006. Director of Studies of the Changing Character of War Program at Oxford University. “How al-Qaida Ends The Decline and Demise of Terrorist Groups,” International Security 31.1, Project Muse. Financial support of al-Qaida has ranged from money channeled through charitable organizations to grants given to local terrorist groups that present promising plans for attacks that serve al-Qaida's general goals.102 The majority of its operations have relied at most on a small amount of seed money provided by the organization, supplemented by operatives engaged in petty crime and fraud.103 Indeed, beginning in 2003, many terrorism experts agreed that al-Qaida could best be described as a franchise organization with a [End Page 36] marketable "brand."104 Relatively little money is required for most al-Qaida-associated attacks. As the International Institute for Strategic Studies points out, the 2002 Bali bombing cost less than $35,000, the 2000 USS Cole operation about $50,000, and the September 11 attacks less than $500,000.105 Another element of support has been the many autonomous businesses owned or controlled by al-Qaida; at one point, bin Laden was reputed to own or control approximately eighty companies around the world. Many of these legitimately continue to earn a profit, providing a self-sustaining source for the movement. International counterterrorism efforts to control al-Qaida financing have reaped at least $147 million in frozen assets.106

Still, cutting the financial lifeline of an agile and low-cost movement that has reportedly amassed billions of dollars and needs few resources to carry out attacks remains a formidable undertaking. Choking off funds destined for al-Qaida through regulatory oversight confronts numerous challenges. Formal banking channels are not necessary for many transfers, which instead can occur through informal channels known as "alternative remittance systems," "informal value transfer systems," "parallel banking," or "underground banking." Examples include the much-discussed hawala or hundi transfer networks and the Black Market Peso Exchange that operate through family ties or unofficial reciprocal arrangements.107 Value can be stored in commodities such as diamonds and gold that are moved through areas with partial or

problematical state sovereignty. Al-Qaida has also used charities to raise and move funds, with a relatively small proportion of gifts being siphoned off for illegitimate purposes, often without the knowledge of donors.108 Yet efforts to cut off charitable flows to impoverished areas may [End Page 37] harm many genuinely needy recipients and could result in heightened resentment, which in turn may generate additional political support for the movement.109 Al-Qaida's fiscal autonomy makes the network more autonomous than its late-twentieth-century state-sponsored predecessors.

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2AC—OIL DA—UNIQUENESS Developing countries are lifting price controls—this will trigger a demand slide that tanks prices.

The Telegraph (UK), 5/29/2008. “Asian countries begin to burst the oil bubble,” http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/05/29/ccoil229.xml.

One by one, countries across Asia and the Middle East are being forced to abandon price controls on fuel and energy, bringing hundreds of millions of consumers face to face with the true market cost of oil. The effect has already begun to chip away at world demand and may ultimately trigger a slide in crude prices. Egypt - the most populous Arab state - has raised petrol prices by 40pc, despite protests in Cairo. Sri Lanka lifted diesel and petrol prices by 25pc over the weekend. India may have to follow soon to prevent its trade and budget deficits climbing to dangerous levels. "The situation is alarming. We need to stem the rot," said India's energy secretary, MS Srinivasan. Indonesia has raised petrol prices by 33pc in order to restore fiscal discipline (subsidies are 3pc of GDP). Taiwan has mooted a 20pc rise, and Malaysia is to peel

While China has so far resisted calls for price freedom, the policy is becoming unsustainable. Analysts predict a change in tack after the finish of the Beijing Olympics at back controls.

the end of August.

High prices cause a demand decline that makes a price collapse inevitable. David Victor, 1/31/2008. Law professor and director at Stanford’s Program on Energy and Sustainable Development, as well as an adjunct senior fellow at the Council on Foreign Relations. “The Oil Paradox,” Newsweek, http://www.newsweek.com/id/106658/page/1.

The rising spiral in oil prices will eventually abate. Some of the relief will eventually come from new supplies, but the big surprise may be in demand. When prices stay high, consumers eventually start investing in more efficient oil systems. And entrepreneurs also look for substitutes such as advanced biofuels that are just being tested on a commercial scale this year. If America's economic troubles spread gloom across the globe, then demand will dampen further. And the trip down from today's dizzying oil prices could be faster than most people think. Once investors in oil commodities are no longer confident that oil will always be more valuable tomorrow than it is today, they will switch their money to some other investment. Oil hoarding makes a price collapse inevitable. Andrew Leonard, 8/21/2006. Senior editor at Salon.com. “The oil bubble,” http://www.salon.com/tech/htww/2006/08/21/oil_bubble/index.html. In the last week, while How the World Works was pretending that the spot market price for crude had no relevance to life in the woods of southern New Hampshire, much has been made in the press of a report by Sanford Bernstein oil expert

an oil price shift downwards is imminent, in part because the global storage capacity for oil is getting tight. So many traders (and governments) are hoarding oil that we are rapidly approaching a point where there is no more room to put it -- one estimate predicts that date could arrive within four to six months. In that scenario, the cost of storage will naturally begin its own rise, encouraging traders to unload their holdings, and thus depressing the price of oil as the market gets glutted with supply. Ben Dell that

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1AR—OIL DA—UNIQUENESS—SPECULATORS Speculators are pulling out of oil.

The Telegraph (UK), 5/29/2008. “Asian countries begin to burst the oil bubble,” http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/05/29/ccoil229.xml.

The fast-changing politics of the emerging world has started to chill enthusiasm in New York and London for oil futures contracts. West Texas Intermediate has so far slipped $5 a barrel from its alltime high of $135 last week as hedge funds lock in profits, although analysts warn that it is too early to tell whether the

Gold, industrial metals and corn (a biofuel substitute have all fallen hard in recent days as investor sentiment turns cautious towards the whole nexus of commodities. The drip-drip effect of grim data from the United States, Britain and parts of Europe has sapped confidence, causing many investors to question the whole assumption of a rapid "V" recovery powered by low interest rates in the US. The number of miles driven by Americans fell in March at the steepest rate ever recorded. Oil use in the OECD 30pc spike in oil prices since March has burned itself out. for oil)

club of rich states has been falling for more than two years.

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1AR—OIL DA—UNIQUENESS—DEMAND CRASH High prices will cause demand crash in the US and Asia.

Bloomberg, 5/29/2008. “Crude Oil Falls as High Prices May Curb U.S., Asian Fuel Demand,” http://www.bloomberg.com/apps/news?pid=20601116&sid=aLcaZ1SHf9aM&refer=africa.

Crude oil fell in New York as prices near $130 a barrel may prompt consumers in the U.S. and Asia to limit fuel purchases. U.S. gasoline demand dropped 5.5 percent last week as prices at the pump reached records, according to a report yesterday by MasterCard, the second-biggest credit-card company. In Asia, the governments of Indonesia, Taiwan and Sri Lanka have reduced subsidies for buyers, while India and Malaysia are considering similar steps. ``No question, there has been a demand slowdown in the U.S.,'' said Victor Shum, senior principal at consultants Purvin & Gertz Inc. in Singapore. ``The demand situation there plus the reduction in fuel subsidies in Indonesia and the talk of reducing subsidies in other countries provides some food for thought for traders on the impact of high prices on demand.'' May 29 (Bloomberg) --

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1AR—OIL DA—UNIQUENESS—AT: CHINA KEEPS DEMAND UP China can’t keep demand up.

The Telegraph (UK), 5/29/2008. “Asian countries begin to burst the oil bubble,” http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/05/29/ccoil229.xml. Stephen Jen, currency chief at Morgan Stanley, says

half the world's population now enjoys fuel

subsidies of one sort or another. Petrol costs 5 cents a litre in Venezuela, 12c in Saudi Arabia, 64c in China, $1 in the US, and $2.16 (£1.10) in Britain. It is heavily subsidised in Mexico, Iran, central Asia and the Gulf states. The result has been to encourage promiscuous use of fuel. It has masked the underlying rate of inflation in emerging markets, and flattered the economic growth rate. Mr Jen says the game is largely over. "The subsidies will need to be rolled back, especially for governments with fragile fiscal positions. They face a stagflationary shock," he said. Michael Waldron, an oil analyst at Lehman Brothers, said the bullish case for oil over the next year or so rests on an ever narrower group of countries - essentially China and the Gulf states." Are they really enough to support oil prices at this level? Inventories are building up at 600,000 barrels per day [bpd] across the world," he said Lehman Brothers estimates that supply will average 86.2m bpd in the second quarter, while demand slips to 85.6m. The surplus will widen to 1m bpd later in the year as new oil comes on stream from Brazil, Azerbaijan, Kazakhstan and the Sudan. The US Energy Information Agency expects US output to rise by 400,000 bpd by the winter.

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2AC—OIL DA—LINK DEFENSE Weak dollar guarantees high prices. Brad Bourland, 5/9/2008. Chief Economist & Head of Research Jadwa Investment. “Oil's surge: what's behind it and what it means for Saudi Arabia,” http://www.saudi-us-relations.org/articles/2008/ioi/080509-bourland-oil.html.

Oil prices have hit a series of all-time highs and touched $120 per barrel in late April despite clear signs that the global economy is slowing. Demand and supply fundamentals have supported much of the run-up in prices in recent years, but the recent upward movement has been the result of investors using oil (and other commodities denominated in US dollars) as a hedge against the falling value of the dollar. Higher prices have not had too great an impact on economic growth so far because most

consumers have been sheltered from the rise. Retail prices of fuel in emerging markets are generally fixed at low prices, those in Western Europe are heavily taxed, while in the US refiners have been absorbing some of the higher fuel costs with reduced profit margins.

High global demand limits the ability to lower prices Meyer and Swartz, 08 (Gregory Meyer, Adjunct Professor, University of Phoenix, Spencer Swartz, staff writer for the Wall Street Journal, May 5, “ENERGY MATTERS: Saudi Fears Of High Oil Prices Fade With Demand” http://www.cattlenetwork.com/Content.asp?contentid=218898) OPEC officials "don't care what will happen in 10 or 20 years or more. They are politicians. They care only about what will happen today." "Even Saudi Arabia with these huge reserves is now more concerned about maximizing oil revenues than it is about maximizing long-term recovery of its oil," said Chalabi. Crude oil futures prices surged Monday to top $120 a barrel for the first time amid fresh anxieties about oil supplies at a time of rising seasonal demand. June light, sweet crude was trading at $120.07, up $3.75 in early afternoon trade on the New York Mercantile Exchange. OPEC supplies one in four of every barrel of oil consumed globally, which reached about 87 million barrels of a day in the first quarter. After slicing oil production in late 2006 and early 2007, the cartel has kept its daily output unchanged even in the face of oil prices that first breached triple-digit territory on Jan. 2. The group says speculators and a weak dollar are behind the latest move higher in prices. Saudi Arabia is the world's only true custodian of spare capacity. The kingdom is currently pumping a little over 9 million barrels a day, according to Dow Jones Newswires estimates. No More 'Good Sweatings'? If the fear of high prices is one of the defining axioms of the oil market psyche of the recent past, then the nature of Saudi influence is also being redefined. While spare capacity still gives Saudi Arabia unique power to sway the market, the structural shift in global energy demand limits its ability to conceivably push oil prices down to historic lows. No spare capacity - neg evidence is unqualified exaggeration Webb, 07 (Tim, Nov 18, “Business & Media: Business: Energy: Can Saudi square the oil circle?: The world's largest oil producer could soon find itself over a barrel” The Observer, Lexis) One of the big concerns is whether Opec, and in particular Saudi Arabia, can - or will - increase production by the level needed. Ciszuk says: 'How much they have is kept very tightly under wraps.' Opec countries have traditionally been extremely secretive. In Iraq, for example, it used to be a hanging offence to reveal information about the country's reserves before the cartel introduced a production quota system in the early 1980s. Oil wealth is a matter of national security as it determines countries' economic and military power. It is also in members' interests to overstate their reserves. Opec introduced mandatory quotas to limit supply and prop up prices. These quotas were based on the size of reserves, so that gave an incentive to exaggerate them. Advocates of peak oil - who say that production is in terminal decline - severely dispute these reserve figures. The trouble is, no one knows for sure.

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2AC—OIL DA—LINK DEFENSE No perception link—US no longer key to OPEC The Guardian, 08 (Jan 4, “Leading article: Oil price: Crude lessons from the $100 barrel” Lexis) The alternative, of course, would be for oil producers in the Opec cartel to increase supplies. They probably will, but not by much: think drips rather than gushers. Opec countries worry that if they pump too much oil just as the world economy goes into sharp slowdown the price of crude will plummet and so will their revenues. Other countries have reserves of oil, of course, but the places where it is easiest to get it out at short notice are largely within the cartel. This simply underlines the second big thing that $100 oil tells us: that western influence on the world economy is on the wane. America is still the global hub, but it no longer has quite the sway over Opec that it did. Nor is the US as important a customer as it used to be. It remains far and away the biggest consumer of oil, but American demand for crude is falling (in 2006, it slipped 1.3% on the year before). In the developing world, on the other hand, it is rocketing; not just China (where crude consumption rose nearly 7% in 2006) but across Asia and Latin America. That matters because the US is staring down the barrel of a recession and could do with lower commodity prices - even while China continues to boom and pushes those prices up. This will be a first for the world economy. Well depletion and Asian demand prevent OPEC from dropping prices CSM, 05 (Christian Science Monitor, Aug 26, “Finding solace in $3-a-gallon gas”, Lexis) Then the world can start to make the inevitable shift to a new energy era independent of crude. That transition is coming anyway in this century. It's better to start paying the "replacement cost" now for the eventual depletion of oil reserves and move to a range of alternatives. Many of them are cleaner, renewable, or - get this - not imported from a few terroristinfested nations. Since 1973, of course, high oil prices have come and gone like bad romances. But that's the way OPEC prefers it. Not only has this cartel of petroleum giants helped to keep prices way above production costs, it has also occasionally moved to drop oil prices when they were too high. That trick has left a lingering threat of roller-coaster prices, scaring off multibillion-dollar investments in many alternative energy sources or in expensive conservation steps that require years, even decades, of use in order to justify costs. If potential investors can now have some assurance of making a profit in many oil alternatives within a few years, there could be a rush from crude. Indeed, OPEC's ability to make prices gyrate - which affects investors much as currency fluctuations do - could be over. Many of its wells are pumping at near capacity. Some experts say the giant Saudi oil fields are nearing a peak of production and could see a decline. On the demand side, China and India show little signs of reversing a rising demand for cars and petroleum.

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2AC—AT: RUSSIAN ECONOMY IMPACT Russia’s economy is structurally flawed—a collapse is inevitable. Dr. Xiaoxiong Yi, 1/15/2008. Professor at Marietta College and director of the China Institute. “Putin's grand strategy of 'Energy Superpower' doomed to fail,” http://www.coshoctontribune.com/apps/pbcs.dll/article? AID=/20080115/OPINION02/801150320. For one thing, as the London-based magazine, The Economist, noted, "Russia's

economy has many underlying structural weaknesses that are now becoming more apparent: entrenched inflation of more than 10 percent a year, public spending that needs to be reined in, a vulnerable banking system. Above all, Russian business is losing competitiveness as both costs and the ruble rise faster than productivity." Moreover, to focus on "energy superpower" strategy instead of fixing economic and social problems, no sustainable development and international competitiveness plans are on Kremlin's agenda. In fact, President Putin has practically abandoned all liberalizing and reform policies and has done nothing to address problems in banking, social welfare, political reform, and infrastructure. Finally, Russia faces another fundamental problem - it simply does not have enough resources. Only a few small petro-states may have enough resources per capita to create a significant life improvement for their citizens. "With

Russia's large population," as Milov points out, "the state cannot rely only on resource revenue to promote development. Even if the state were to expropriate all oil profits, it would have only $80 per person per month to redistribute. Moreover the Russian economy is extremely energy-intensive and the country's large territory imposes significant transportation costs, limiting export capability. So the Kremlin cannot build an economic and social policy on energy alone."

Oil stabilization fund solves the impact to price collapse.

The Telegraph (UK), 2/3/2008. “Russian economy succumbs to the oil curse,” http://www.freerepublic.com/focus/f-news/1965154/posts.

The Oil Stabilization Fund was supposed to inoculate Russia against the curse by siphoning revenues out the domestic economy. Certainly it helps. There will be no repeat of 1998 default. Russia has paid off its foreign debt. The oil fund ($157bn) and foreign reserves ($470bn) are enough to deflect anything short of financial cataclysm. Turn—low prices solve dutch disease.

Russia & CIS General Newswire, 9/5/2006. “Reduction in oil price will have no negative effect on Russian economy – Shuvalov,” Lexis.

A reduction in oil prices would be healthy for Russia, said Russian presidential aide Igor Shuvalov. "If the price falls to $25 per barrel, nothing but positive changes will happen to our economy. It will become healthier and healthier," Shuvalov told a briefing in Moscow on Tuesday. A reduction in oil prices will help Russia to get rid of the so- called 'Dutch disease,' he said. "The domestic economy will have to carry out structural changes, the population will have to adapt and will soon get over the habit of being pampered," he said. However, a reduction in oil prices to $25 a barrel is currently impossible, he said. "But if it were to happen, it would be a very healthful thing for us," he said.

That boosts the Russian Economy.

SKRIN Market & Corporate News, 9/15/2006. “Low oil prices may push up Russia'seEconomy,” Lexis. Experts note that a new drop is the start of a long-term trend of a decline in oil prices. Russian authorities have already given their predictions of how Russia’s economy will be affected by lower oil prices. The Central Bank’s head Sergey Ignatyev said that Russia would not suffer even if oil falls below $25-30 per barrel. Independent experts are of a different opinion, though. With a Urals barrel at $80 a

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a fall in natural resources prices may give a positive impulse to the Russian economy. "Certainly, if the natural resources industry slows down, other sectors may speed up as the Central Bank will no longer have to strengthen the ruble to trend down inflation," Evgeny Nadoshin at the Trast bank said. "This is what Russian business has long been asking for." A sharp drop in oil prices may force the Russian government to reinvigorate reforms and diversify economy, which will boost Russia’s economy. Even if Russian oil company has after-tax net profit of $36.3 billion annually. If Urals decline to $30, the net profit will plummet to $7.8 billion. Yet,

authorities prefer a passive stance and keep on increasing budget expenses ahead of presidential election, Russia’s gold reserves and stabilization fund will help the economy to slow down as smoothly as possible.

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EXTENSIONS—RUSSIA SURVIVES OIL COLLAPSE Russia could survive an oil price collapse.

Business Week, 6/7/2004. “Putin’s Game,” Lexis. Not many in the West know how much Putin has already achieved. The government has kept a lid on expenses, using the gains from high oil prices to pay off debt. Now the trade surplus is $ 60 billion, the budget is solidly in the black, and gross domestic product is up by 7% a year. Skeptics

assume that this impressive performance stems mainly from high oil prices. Yet Russia's growth is also being driven by a surge in productivity -- a predictable result of the market reforms launched in the 1990s and continuing under Putin. Overall, labor productivity is growing by 14% a year. With the nonoil sector gaining traction and reserves hitting $ 90 billion, Russia may even withstand an oil slump. Peter Westin, chief economist at Aton Capital brokerage in

Moscow, figures that every dollar off the price of a barrel of crude would trim Russia's GDP growth by less than three-tenths of a percentage point. Even a fall to $ 20 a barrel would leave the economy growing around 5% a year. Stabilization fund prevents economic collapse.

Global Finance Magazine, December 2007. “RUSSIA; The Wild East,” Lexis. Unlike in 1998, when declining world commodity prices tipped the economy over the edge, now Russia boasts substantial reserves, which are likely to reduce the impact of any immediate shock. And although the federal budget is reliant on oil and gas revenues, in the past few years Russia has diversified its tax base. It has also accumulated a fairly substantial stabilization fund -- approximately $ 128 billion by the end of July this year -- to help withstand any oil price shocks.

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1AR—AT: SAUDI ARABIA IMPACT High prices causing massive inflation in Saudi Arabia—dragging down growth.

Wall Street Journal, 5/30/2008. “Oil-Price Rise Takes Toll on Gulf,” http://online.wsj.com/article/SB121209976399230769.html?mod=googlenews_wsj.

Oil surpassing $130 a barrel last week is both a blessing and a curse for the Arab states of the Persian Gulf, where rising costs are hitting company profits and forcing foreign workers to tighten their belts. Rampant inflation threatens to undermine the benefits of an oil-price windfall. The cost of everything from construction steel to diesel fuel is rising as booming growth spurs demand across the region, which pumps a fifth DUBAI, United Arab Emirates --

of the world's oil. For Edward Najjar, the general manager for Abu Dhabi National Co. for Building Materials, or Bildco, record oil prices are squeezing profits at his building-materials business even as demand for his products rises. "Profit margins are under pressure," Mr. Najjar told Zawya Dow Jones in a telephone interview. He said the price of construction steel, one of Bildco's main products, has risen 73% since the beginning of the year to 5,200 dirhams ($1,416) a metric ton, as more of the region's bumper oil revenues are transformed into new real-estate projects. The rising prices for building materials are hurting contractors most, as their operating costs spiral. By hoarding building materials, contractors are hedging against future price rises, Mr. Najjar said. "Customers are stockpiling, and those who used to buy 2,000 tons of

Saudi Arabia, the world's largest oil is among the worst affected. Inflation in the kingdom, the Middle East's largest economy, surged to a 27-year high of 10.5% last month and is expected to continue rising throughout the year. Reda Toubar, brand manager for Ahmed Fitaihi Co., a luxury-goods distributor, is typical of many Saudi businesses feeling the pinch. "We could have gained a lot of profit from high oil prices, but inflation in Saudi Arabia is high and people have less to spend," he told Zawya Dow Jones. steel per month are now buying 8,000 tons for the next four months," he said. exporter and biggest beneficiary of high crude prices,

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1AR—AT: IRAQ IMPACT No link—Iraq budget planned with prices at $57—proves they can survive a decrease in prices.

Reuters, 1/30/2008. “Iraq could see windfall from high oil prices: report,” http://www.reuters.com/article/worldNews/idUSN2958614920080130.

Oil revenues represent more than 80 percent of Iraq's $48 billion 2008 budget, according to the U.S. Office of the Special Inspector General for Iraq Reconstruction. But the government of Prime Minister Nuri al-Maliki has based its revenue estimates on an average oil price of $57 a barrel, well below an average price of $85 per barrel forecast for 2008 by the U.S. Department of Energy. Reconstruction failing now—insurgent violence and corruption overcomes oil prices.

Newsday, 1/30/2008. “WAR UPDATE: DEVELOPMENTS,” http://www.newsday.com/news/nationworld/world/nywodeve305556757jan30,0,1125721.story.

Rising Iraqi oil production and higher world oil prices could mean a multibillion-dollar windfall to help Baghdad rebuild, a report out today says. But insurgent violence still hobbles the country's $114 billion reconstruction effort and the possible flood of new money makes it more important than ever that Iraqis fight corruption, the quarterly report by the special inspector general for reconstruction says. It notes civilian workers have died - seven in the past quarter - since the U.S. began the reconstruction effort.

High oil prices hurt Iraqi economy—undermines reform and infrastructure.

Voices of Iraq, 1/25/2008, “Economists warn of long-term effects of oil prices over Iraq ’s economy,” http://www.iraqupdates.com/p_articles.php/article/26604.

Economists on Friday warned the ongoing rise of oil prices will leave negative consequences on the Iraqi economy. Experts agreed that the rise of oil revenues could worsen inflation rates and affect the country's balance of trade based on the fact that the rise of imports would eat away all exports turnovers and plunge the market into sticking stagnation. "The positive effects of the hikes in the crude oil prices could increase the country’s account of foreign currency that might enable the government to meet essential requirements like building on the army, installing new oil refineries and enhancing public services," Dr. Abdul Jabar Abdul Sattar, professor at the

Economic department of Baghdad University told Aswat al-Iraq-Voices of Iraq (VOI).

Yet he considered these effects will be short-term if the "oil revenues were not wisely spent." "The dependence on imported commodities will eat away the oil turnovers and wear out the infrastructures and social security issues," Abdul Sattar highlighted the long-term impact of oil prices over economy. The expert added "these conditions would increase the imported items, decrease the average revenues and

weaken the competitive ability for exports as well as paralyzing the domestic manufactures. "Rises in oil prices will not continue for ever, as importers will seek cheaper alternatives," he pointed out.

Hilal al-Taan, economist, referred to the negative impact of dependence on importing 90% of commodities which could lead to a deficit in the total Iraqi balance of trade. He pointed out "the government can not benefit from the hikes in oil prices as the money

gained from the increase will not be wisely invested due to rampant financial and administrative corruption.