Yesterday (January 3. 2011) oil jumped 4% and over the last year as global economic prospects dimmed and equity markets remained level or dropped, petroleum and refined products rose by around 15% since January 1, 2011. During the same time, petroleum demand presumably has continued to rise in some developing economies; however such has not been the case in most developed economies particularly Europe but also the US. A Contradictory and Inconsistent Rationale? Yesterday’s was spike was attributed across the Board as due to “rising optimism regarding global economic prospects and fears of conflict with Iran” and shut-off of petroleum flows from the Gulf through the Strait of Hormuz. (Read: - “How Iran Affects Oil Prices” diplomaticallyincorrect.org/films/blog_post/how-iran-affects-oil-prices-by-ambassador-mo/43204). However, the two rationales are contradictory with each other. If there is conflict with Iran, then the global economy will plummet, in part due to spiking oil prices. If there is no conflict, the global economy will grow, but not as well as anticipated a year earlier especially with persistent austerity and Eurozone malaise/crisis. It is impossible to have both factors acting simultaneously that have been trotted out to justify speculative spikes. Further, other indicators are that global petroleum use has reached its peak. Closing Refineries in US for Lack of Gasoline Demand? The US has seen at least two petroleum refineries shutdown and a large East Coast facility is either to be sold or also closed. Only a few years earlier, before the 2008 crash, the rationale for spiking gasoline prices was purportedly the lack of refining capacity. No new refineries are being built. One does not shut down refineries especially as regulatory/environmental permits are practically impossible to secure for building new ones – there must be a more permanent trend away from gasoline. Further, while petroleum has continued to rise, natural gas prices have fallen by around 25% from already low levels. New discoveries and exploitation have increased supply by 50% per day. Industrial and even large vehicle fleet use is increasingly trending toward alternatives to petroleum as well as conservation. Europe has been declining petroleum use for some time. New significant oil discoveries have been made in Brazil among others while Libya has resumed more quickly than expected in its production after the revolution. There is no current shortage nor one projected, at least one that is foreseeable. Not Following Same Unsustainable Road of Consumption: Consequently the only potential justification for price spikes is developing world increased demand. However, subsidies have kept gasoline cheap in most such countries from China to India to Iran. Those subsidies are being gradually removed – in Nigeria may be more drastically. Further, such developing economies will also be able to avoid following some of the pothole filled roads that saw the more mature economies become overly dependent on unsustainable petroleum. Whether conservation, efficiencies, alternatives, end of subsidies or just different lifestyle choices, it is unforeseeable how gasoline usage and demand will rise unabated in the developing world. In final analysis, the presented rationale for spiking petroleum is flawed, fable, unless perceived from perspective of financial market rather than petroleum market driven speculation/manipulation. The impact though is very real on consumers in the richest to poorest countries, from gas pump to food costs. Read: - “Commodity Price Record Volatility Spikes/Speculation (for Last Decade)” - diplomaticallyincorrect.org/films/blog_post/commodity-price-record-volatility-spikes-speculation-by-ambassador-mo/43092 By Ambassador Muhamed Sacirbey














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 “International Financial Crisis Channel” - diplomaticallyincorrect.org/c/international-financial-crisis