the visible hand

it is the theory which decides what can be observed – einstein

Oil price rise causes global shift in wealth…

Posted by ecoshift on November 10, 2007

I was just reading the Washington post article (below) and finally realized that… well, it turns out that Russia, Iran and Venezuela have quite a bit of our oil. Now, with oil prices rising, they are “enjoying the benefits.” And, just to make matters worse China is buying our oil with our money and, apparently, it’s still not enough. How can this be fair? I blame Hillary.

At least Iraq isn’t enjoying the benefits. And the Saudis don’t count.

Oil Price Rise Causes Global Shift in Wealth –
Iran, Russia and Venezuela Feel the Benefits

By Steven Mufson
Washington Post Staff Writer
Saturday, November 10, 2007; Page A01

High oil prices are fueling one of the biggest transfers of wealth in history. Oil consumers are paying $4 billion to $5 billion more for crude oil every day than they did just five years ago, pumping more than $2 trillion into the coffers of oil companies and oil-producing nations this year alone.

A few selected quotes from the article:

The benefits, to the tune of $700 billion a year, are flowing to the world’s oil-exporting countries.

  • Two of those nations — Iran and Venezuela — may be better able to defy the Bush administration because of swelling oil revenue. Venezuela has used its oil wealth to dispense patronage around South America, vying for influence even with longtime U.S. allies. And Iran could be less vulnerable to sanctions designed to pressure it into giving up its nuclear program or opening it to inspection.
  • Russia, the world’s No. 2 oil exporter, shows oil’s transformational impact in the political as well as the economic realm. When Vladimir Putin came to power in 2000, less than two years after the collapse of the ruble and Russia’s default on its international debt, the country’s policymakers worried that 2003 could bring another financial crisis. The country’s foreign-debt repayments were scheduled to peak at $17 billion that year.
  • Russia’s gold and foreign-currency reserves have risen by more than that amount just since July. The soaring price of oil has helped Russia increase the federal budget tenfold since 1999 while paying off its foreign debt and building the third-largest gold and hard-currency reserves in the world, about $425 billion.

Oil-importing countries face their own challenges….

  • In the United States, the rising bill for imported petroleum lowers already anemic consumer savings rates, adds to inflation, worsens the trade deficit, undermines the dollar and makes it more difficult for the Federal Reserve to balance its competing goals of fighting inflation and sustaining growth.
  • A scarcity of diesel fuel even hit China’s richest cities — Beijing, Shanghai and trading ports on the east coast — which in the past have been kept well supplied. In Ningbo, a city south of Shanghai, the wait at some gas stations this week was more than three hours, and lines stretched more than 200 yards.
  • Rumors circulated that gas stations or the government was hoarding fuel in anticipation of further price increases, prompting the official New China News Agency to warn that anyone caught spreading rumors about fuel-price increases will be “severely punished.”
  • Since shedding orthodox Maoist economic policies, China’s leaders have unleashed decades of pent-up demand. China consumes 9 percent of world oil output, up from 6.4 percent five years ago, according to the International Energy Agency. Yet it still subsidizes fuel. As a result, consumption this decade has skyrocketed at an 8.7 percent annual rate despite soaring prices and concerns about the environmental impact of profligate fuel use.

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