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NHSI 2008 SENIORS

[OIL DA] 1
**SUBSIDIES DA**..........................................................................................................3
SUBSIDIES 1NC SHELL (1/3)..........................................................................................4
SUBSIDIES 1NC SHELL (2/3)..........................................................................................5
SUBSIDIES 1NC SHELL (3/3)..........................................................................................7
UNIQUENESS: SUBSIDIES NOW-IRAN........................................................................8
UNIQUENESS: SUBSIDIES NOW-IRAN........................................................................9
UNIQUENESS: SUBSIDIES NOW-VENEZUELA........................................................10
UNIQUENESS: OIL PRICES HIGH................................................................................12
UNIQUENESS: OIL PRICES HIGH................................................................................14
UNIQUENESS: OIL PRICES HIGH................................................................................15
HIGH OIL PRICES KEEP SUBSIDIES LOW.................................................................16
...........................................................................................................................................16
HIGH OIL PRICES KEEP SUBSIDIES LOW.................................................................17
LINK: HIGH OIL PRICES K2 SUBSIDIES-IRAN.........................................................18
LINK: HIGH OIL PRICES K2 SUBSIDIES-VENEZUELA...........................................20
INTERNAL LINK: DECREASED SUBSIDIESBACKLASH-GENERIC..................21
INTERNAL LINK: DECREASED SUBSIDIESBACKLASH-IRAN.........................23
INTERNAL LINK: DECREASED SUBSIDIESBACKLASH-IRAN.........................25
INTERNAL LINK: DECREASED SUBSIDIESBACKLASH-IRAN.........................27
INTERNAL LINK: DECREASED SUBSIDIESBACKLASH-VENEZUELA...........29
...........................................................................................................................................29
INTERNAL LINK: DECREASED SUBSIDIESBACKLASH-VENEZUELA...........30
...........................................................................................................................................30
INTERNAL LINK: DECREASED SUBSIDIESBACKLASH-VENEZUELA ..........31
INTERNAL LINK: DECREASED SUBSIDIESECON COLLAPSE-IRAN...............32
INTERNAL LINK: DECREASED SUBSIDIESECON COLLAPSE-VENEZUELA.35
INTERNAL LINK: DECREASED SUBSIDIESECON COLLAPSE-VENEZUELA.36
IMPACT: INSTABILITYNUKE WAR-IRAN.............................................................39
IMPACT: BIODIVERSITY-VENEZUELA.....................................................................46
**AFFIRMATIVE ANSWERS-SUBSIDIES DA**........................................................47
SUBSIDIES TURNS.........................................................................................................51
NO INTERNAL LINK......................................................................................................52
**CHINA/INDIA SCENARIO (TRANSITION)**..........................................................55
TRANSITION 1NC SHELL (1/3).....................................................................................56
TRANSITION 1NC SHELL (2/3).....................................................................................57
TRANSITION 1NC SHELL (3/3).....................................................................................58
UNIQUENESS: SHIFT TOWARD ALT ENERGIES-GENERIC...................................60
UNIQUENESS: SHIFT TOWARD ALT ENERGIES-CHINA.......................................61
UNIQUENESS: SHIFT TOWARD ALT ENERGIES-CHINA.......................................63
UNIQUENESS: SHIFT TOWARD ALT ENERGIES-CHINA.......................................65
UNIQUENESS: SHIFT TOWARD ALT ENERGIES-CHINA.......................................67
UNIQUENESS: SHIFT TOWARD ALT ENERGIES-INDIA.........................................69
LINK: DECREASED US DEPENDENCEOIL PRICE DROPS..................................71
LINK: DECREASED US DEPENDENCEOIL PRICE DROPS..................................72
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INTERNAL LINK: PRICE DROPOIL SHIFT.............................................................73
INTERNAL LINK: PRICE DROP  OIL SHIFT...........................................................75
IMPACT: CHINESE MIL BUILDUP...............................................................................76
IMPACT: CHINESE RELATIONS..................................................................................77
IMPACT: CHINESE GROWTH.......................................................................................78
IMPACT: CHINESE ECONOMY....................................................................................79
IMPACT: CHINESE ECONOMY....................................................................................82
IMPACT: US ECON COLLAPSE....................................................................................83
**AFFIRMATIVE ANSWERS-ENERGY TRANSITION DA**...................................84
NON UNIQUE: NO SHIFT TO ALT ENERGIES...........................................................85
UNIQUENESS O/W LINK...............................................................................................86
UNIQUENESS O/W LINK...............................................................................................87
NO LINK: CONSUMPTION WONT DROP....................................................................88
NO INTERNAL LINK......................................................................................................89
US ALTERNATIVE INNOVATION KEY......................................................................90
US ALTERNATIVE INNOVATION KEY......................................................................91
US ALTERNATIVE INNOVATION KEY......................................................................92
NO IMPACT-OIL WAR...................................................................................................93

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**SUBSIDIES DA**

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SUBSIDIES 1NC SHELL (1/3)


A. Uniqueness-Oil Subsidies are legislated in Iran, profit from exports facilitate its
continuance

Tahmassebi, 08

[Cyrus H. (Independent Consultant), March 10, Oil and Gas Journal, “Iran's gasoline woes persist despite rationing, price
hikes,” Lexis Nexis]

Although there are no consistent and reliable figures for the amount of subsidy provided to
consumers of gasoline and other fuels in Iran, it is obvious that it is huge by any standard. Iran now
consumes some 1.5-1.7 million b/d of petroleum products. Thus the annual subsidy, even at the
artificially inflated exchange rate, could easily top $40 billion. The weight of these subsidies is not
only on the shoulders of the government but also on NIOC's downstream operations. Iran has had
the luxury of continuing to operate these money-losing refineries only because of huge cash flows
generated from crude oil exports. The multifold increase in crude oil prices over the last few years
has provided the government with the financial wherewithal not only to continue operating these
refineries at great losses but also to add to capacity and upgrade some of them.
Obviously, this subsidy trend is not sustainable. Most observers believe the government will be
forced to follow a free market model in pricing its gasoline and other petroleum products and
gradually phase out its subsidy program. Procrastination--as has happened in the past--would only
make the task of tackling this problem progressively more difficult.

B. Link-Decrease in oil market would lead to increase in Iranian domestic oil


subsidies

Brumberg and Ahram, 07


(Daniel and Ariel, Daniel is an associate professor in the Department of Government and Georgetown University and also serves as a
special adviser for the USIP’s Muslim World Initiative in the Center for Conflict Analysis and Prevention. Ariel is a doctoral
candidate in the Department of Government and a graduate fellow at the Center for Democracy and Civil Society at Georgetown
University. His writing has appeared in Middle East Quarterly, Middle East Review of International Affairs, Orbis, and Georgetown
Journal of International Affairs., “THE NATIONAL IRANIAN OIL COMPANY IN IRANIAN POLITICS”, THE JAMES A.
BAKER III INSTITUTE FOR PUBLIC POLICY, March 2007,
http://www.rice.edu/energy/publications/docs/NOCs/Papers/NIOC_Brumberg-Ahram.pdf)

On the issue of domestic subsidies, too, ahmedinejad’s agenda also faced significant resistance. Iran
has some of the richest oil subsidies in the world, with the price of gasoline reduced to around US
$.10 per liter. Due to its artificially depressed price, Iran’s domestic consumption of gasoline, diesel
and kerosene is astronomical. Furthermore, this subsidized fuel pricing creates an incentive for arbitragebased
smuggling of Iranian gasoline to neighboring states. By some estimates, nearly 5 percent of subsidized gasoline is smuggled
abroad. NIOC administers this subsidy, allocating petroleum reserves for the domestic market. But, due to its limited refining
capacity, NIOC has to sell hard currency in order to import refined gasoline back into the country. From NIOC perspective, a
more efficient economic route would simply be to sell petroleum on the open market and avoid paying the margins for
refining outside the country. As Iran’s domestic consumption increases, NIOC economists also recognize that there will be
less available for export. 114 In 1998, during the Asian financial crisis and ensuing drop in oil prices, Iran
may actually have spent more in fuel consumption than it earned in fuel export. At that time,
officials at the Planning and Budget Organization and Zanganeh called for the introduction of fuel
rationing, if not a total phaseout of subsidies. 115 In a record high oil market, the strain on NIOC comes from the
other direction: even as Iran exports oil at a high price, it must still import gasoline at a premium. To maintain the 10 cent per
liter price, Iran had to import $2.5 billion per year of finished product. In 2004, a managing director of NIOC’s subsidiary for
distribution predicted that in five years, gasoline subsidies would account reach $15 to $20 billion annually. The solution, he
said, was to “expedite the privatization of all economic affairs.” 116 In 2005, NIOC and other officials in the oil industry
repeatedly pushed for a reduction of the subsidy. Hossein Kazempour Ardabili, Iran’s OPEC delegate, said in 2005 that the
fuel subsidy was “ridiculous… destroying other aspects in the development of the economy.” 117 Conservatives fired back

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by accusing NIOC of inflating the profit margin on imported gasoline, thereby needlessly expanding the shortfall. 118 By the
SUBSIDIES 1NC SHELL (2/3)
[…CONTINUED WITHOUT ALTERING TEXT] summer of 2006, though, even Kamal Daneshyar, the head of the Majles
energy committee, warned that only an additional allocation of $5 billion (on top of the previously budgeted $2.5 billion)
could allow the continued subsidy on imported gasoline, which comprised nearly 40 percent of the gasoline consumed
domestically. 119 This consensus has allowed the introduction of rationing in provincial cities as a prelude to bringing it to
the capital. In a country that considers itself oilrich, however, many citizens consider the provision of
cheap fuel a governmental obligation. Due to the low gasoline prices, many hundreds of residents in
Iran’s cities are able to supplement their incomes by driving private taxi services. Cutting into their
livelihood would likely provoke enormous public protest by, in effect, punishing both the providers
and consumers of this vital, middle class service. Here, again, some compromises arose between
Ahmedinejad’s populism and market liberalization. Plans to develop a rationing system, whereby a
percentage of the gasoline sales would sold be at market (unsubsidized) rates, appears to be in
development. This decreases NIOC’s financial burden to maintain the subsidy, but retains the
incentives for blackmarketeering of ration cards and smuggling. 120 After introducing his budget in
January 2007, Ahmedinejad himself conceded that some reduction in the fuel subsidy cost needed to
be found, but preferred developing alternative energy vehicles (NIOC itself has a division devoted
to developing energy saving technologies like LNG cars) and expanding public transportation.
Subsidies cannot immediately be eliminated because “all our economy is tied to this and it would
create traumas in people's lives if we were to change our views, lift control over gasoline prices,
allowing them to rise by up to 4050 percent and then have to face all the consequences.” 121 At the
same time, though, NIOC has steadily increased its investment in new refineries in a failing effort to
keep pace with growing demand. Acceptance of fuel rationing is part of a more general shift away
from Ahmedinejad’s populist electoral platform. A critical moment in this shift came in April 2006, when the
Supreme Leader formally announced his approval of a plan for implementation of the privatization of considerable state
assets (although still ruling out privatization of NIOC). Yet even here, the interests of entrenched groups are subtly
insinuated; the law requires that 50 percent of the privatized assets be reserved for poorer Iranians, but actually reserved for
purchase by provincial development corporations, yet another form of parastatal organization. 122 Since that time,
Ahmedinejad, Speaker of the Majles Gholamali HaddadAdel, and Minister of Economics Davud DaneshJa’fari have all made
statements agreeing with the Supreme Leader on the extent to which the government should strengthen the private sector and
shrink back to become only a coordinator of the economic sphere. Just as NIOC was forced to accede when Khamenei made
definitive declarations, the populists too can only maneuver within the boundaries demarcated by the Supreme Leader.

C. Internal Link-Decreased subsidies inspires civil unrest and instability in Iran-


Citizens see it as a fundamental right

Mouawad 07
(JAD, STAFF WRITER FOR THE NEW YORK TIMES, “Costly Fuel Is Never Far From a Match”, 9/30/07, Lexis)

In oil-rich Iran, civil unrest spread through Tehran this summer after the government rationed gasoline
in an effort to curb the country's addiction to cheap fuel; gasoline in Iran, imported because the country
lacks refining capacity, is heavily subsidized and cost about 40 cents a gallon at the time. After two
days of upheaval, the Islamic theocracy restored order and kept the policy. In Nigeria, the outcome was
different. Striking oil workers in June threatened to shut down the country's oil production if fuel
subsidies were dropped. Faced with the threat of losing its biggest source of revenue, the government
quickly backed down. Fuel prices go to the heart of people's ability to move, stay warm or feed
themselves. So it is no surprise that governments around the world have tried to blunt the effects of oil
prices that have tripled in the past four years. But interfering with energy markets can be a risky and
costly game. Prices kept high by market forces and taxes dampen expectations of cheap fuel. Fuel
subsidies do the opposite, and countries that rely on them play with fire. ''Some countries are hiding
the reality of high fuel prices to keep political peace,'' said David L. Goldwyn, an assistant secretary of
energy during the Clinton administration. ''Nigeria caved, but it's not a sustainable strategy. The more
they do it, the more they pump up demand with cheap energy.''
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SUBSIDIES 1NC SHELL (3/3)

D. Impact- Iranian instability results in nuclear war—lash out

Eisenstadt, 04
[Michael (Senior Fellow at The Washington Institute), September 16, “THE IAEA AND IRAN: THE PERILS OF INACTION
WASHINGTON INSTITUTE FOR NEAR EAST POLICY POLICY WATCH
#899,Google,http://www.iranwatch.org/privateviews/WINEP/perspex-winep-eisenstadt-nucleariran-091604.htm]

Implications of Instability in Iran? Instability and unrest in a nuclear Iran could have dire
consequences. Were antiregime violence to escalate to the point that it threatened the survival of the
Islamic Republic (unlikely in the near term, but a possibility in the future should popular demands
for political change continue to be ignored by conservative hardliners), diehard supporters of the old
order might lash out at perceived external enemies of the doomed regime with all means at their
disposal, including nuclear weapons. The apocalyptic possibility of nuclear terrorism by an Islamic
Republic in its death throes, though unlikely in the near term, cannot be dismissed as a source of
concern.

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UNIQUENESS: SUBSIDIES NOW-IRAN

Massive amounts of gasoline subsidies are granted by the government

Eqbali, 2k6
[Aresu, October 3, Platts Oilgram Price Report, “Iran seeks extra gasoline import funding,” Lexis Nexis,
http://www.lexisnexis.com.ezproxy.baylor.edu/us/lnacademic/results/docview/docview.do?
docLinkInd=true&risb=21_T4159405419&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsUrlKey=29_T415940
5425&cisb=22_T4159405424&treeMax=true&treeWidth=0&csi=8050&docNo=13]

Excessive gasoline consumption in Iran is basically due to generous state subsidies that offer the
fuel at one-sixth its imported price at the pumps and smuggling of the cheap fuel to bordering
countries, where retail prices are higher. Iranians also use old cars that consume a lot of gasoline and
are not economical to run.
In the first six months of the Iranian year, more than $5.6 billion of gasoline has been consumed, a
report by the energy news agency Shana said. In the current year, the country will need to spend $6
billion to import gasoline, while spending $8.5 billion on subsidies.

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UNIQUENESS: SUBSIDIES NOW-IRAN


Massive subsidies are being distributed

Reuters, 2k8
[June 25, “Ahmadinejad to focus subsidies on Iran’s poor,” http://uk.reuters.com/article/topNews/idUKBLA54169320080625?
pageNumber=1&virtualBrandChannel=0]

TEHRAN (Reuters) - Iran's president plans to adjust an unwieldy subsidy system so that it helps the
poor more directly despite initial inflation risks, in a reform opponents said was an overdue response
to criticism of his policies. President Mahmoud Ahmadinejad has in the past opposed reforms
requiring liberalising prices of goods like gasoline and some foodstuffs for fear of driving rampant
price rises still higher, the analysts say. Change may also risk social unrest. But reforms announced
in a TV interview and carried by newspapers on Wednesday indicate the president, facing growing
grumbles from opponents and the public, may want to rebuff at least some of his critics before the
2009 presidential election. "Mr Ahmadinejad is not able to continue the current situation. He has to
do something because the fourth year of Mr Ahmadinejad's presidential term is starting and actually
he did nothing for the economy," said Saeed Laylaz, a business consultant and frequent critic of the
president's policies. He said he welcomed the reforms Ahmadinejad announced. Ahmadinejad has
not said if he will run again but is widely expected to. Analysts say much will depend on keeping
the support of Supreme Leader Ayatollah Ali Khamenei, Iran's top authority who has gently urged
the government to deal with economic problems while still voicing backing for the president.
Ahmadinejad came to power in 2005 pledging to share out Iran's oil wealth more fairly. Despite
presiding over record crude earnings, economists say the wealth gap has widened due to profligate
spending that has stoked inflation, mostly harming the poor, and via subsidies that often mainly
benefit the rich. The president, whose government has in the past sought to tackle inflation by
telling businesses to lower prices, accepted subsidies needed changing.

Gas subsidies now

Murphy, 2k7
[Kim, January 7, The Los Angeles Times, “U.S. puts squeeze on Iran's oil fields,” Google,
http://www.irannewswatch.com/2007/01/us-puts-squeeze-on-irans-oil-fields.html]

Likewise, increased output from refinery construction is being outpaced by the swelling number of young
Iranians with a fondness for gas-guzzling cars. Heavily subsidized gasoline is just 35 cents a gallon, a price
that invites smuggling, and talk about raising the price has, until recently, gone nowhere. Moreover, the
country has one of the most extensive residential heating infrastructures in the world, with homes in the
most remote villages warmed toastily with cheap natural gas. Total domestic energy subsidies total $20
billion to $30 billion a year, Takin said. "These subsidies are now costing the government roughly 15% of
Iran's GDP. That should knock you over. That's a mind-boggling number," said Hossein Askari, professor
of international business at George Washington University. "And the nub of the problem is that if you were
to cut the subsidies, I think there would be riots in the streets."

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UNIQUENESS: SUBSIDIES NOW-VENEZUELA


VENEZUELA OFFERS OIL SUBSIDIES NOW

Wilson, 2008
(Special correspondent based in Caracas, http://www.businessweek.com/bwdaily/dnflash/content/may2008/db20080523_344156.htm)

Venezuela is not the only country that spares its citizens from high oil prices through fuel
subsidies. For oil-producing nations, subsidies are a way of sharing the natural-resources
largesse with the population. Iran and Saudi Arabia rank as the second- and third-
cheapest places to buy gas, at the equivalent of 40¢ and 44¢ a gallon, according to a
survey by Associates for International Research. Both nations offer their citizens gasoline
subsidies, though they are not quite as generous as Venezuela's.

VENEZUELA OFFERS SUBSIDIES NOW

THE NEW YORK TMES, 2007


(http://www.nytimes.com/2007/10/30/world/americas/30venezuela.html?_r=1&oref=slogin)

Motorists in the United States smarting from rising gasoline prices, take note: Mr. Taurisano pays the
equivalent of $1.50 to fill his Hummer’s tank. Thanks to a decades-old subsidy that has proven devilishly
complex to undo, gasoline in Venezuela costs about 7 cents a gallon compared with an average $2.86 a
gallon in the United States.

“It is one clear benefit to living in an otherwise challenging country,” said Mr. Taurisano, 34, who also
owns a BMW, a Mercedes-Benz, a Ferrari and a Porsche.

Many Venezuelans consider the subsidy a birthright even though it bypasses the poor, who rely on
relatively expensive and often dangerous public transportation. Economists estimate that it costs the
government of President Hugo Chávez more than $9 billion a year.

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UNIQUENESS—HIGH OIL PRICES


Prices are soaring

Snow, 7/22/, 2k8 [Nick, Oil and Gas Journal, “Supply, demand drove oil prices, says
CFTC-led task force,” Google News,
http://www.ogj.com/display_article/335084/7/ONART/none/GenIn/1/Supply,-demand-
drove-oil-prices,-says-CFTC-led-task-force/]

Fundamental supply and demand forces provide the best explanation for recent crude oil price increases,
concluded a staff report for the Interagency Task Force on Commodity Markets. "If a group of market
participants has systematically driven prices, detailed daily position data should show that [the] group's
position changes preceded price changes. The task force's preliminary analysis, based on the evidence
available to date, suggests that changes in futures market participation by speculators have not
systematically preceded price changes," the report said in its executive summary."On the contrary, most
speculative traders typically alter their positions following price changes, just as one would expect in an
efficiently operating market," it added. The US Commodity Futures Trading Commission formed the task
force in June with representatives from the Departments of Agriculture, Energy, and the Treasury, the
Federal Reserve's Board of Governors, the Federal Trade Commission, and the Securities and Exchange
Commission. It issued a 45-page interim report limited to the crude oil market on July 22 because the issue
of high oil prices is so important and timely, the CFTC said. "The recent upward surge in the price of crude
oil has significantly affected American consumers and businesses. This staff report reflects the collective
knowledge of some of our governments' best economists," said the task force's chairman, CFTC Chief
Economist Jeffrey Harris. "Each of the participating agencies brings unique expertise to the task force, and
this interim report, for the first time, attempts to compile the government's best available information and
analysis into one report. We hope that it will serve as a useful resource concerning the crude oil market and
will contribute to the public discussion of important energy issues," he said. The task force will continue to
evaluate commodity market conditions and will report on its additional work later this year, Harris said.

More evidence

Reuters, 7/22, 2k8 [ TEXT-S&P report on U.S. oil, gas


industry.http://uk.reuters.com/article/oilRpt/idUKWLA666920080722]

July 22 - The spoils of near record-high oil prices are still rolling into the U.S. oil and gas industry, but not
all sectors are benefiting equally, according to a report published today by Standard & Poor's Ratings
Services. In "High Commodity Prices Pump Up The U.S. Oil And Gas Sector, But Refiners Feel The
Squeeze," Standard & Poor's details how favorable rating trends that persisted in the U.S. oil and gas sector
in 2007 continued during the first half of 2008. Upgrades outpaced downgrades by 14 to 4 as robust
hydrocarbon prices continue to boost credit quality. Globally, the trend was similar with 29 upgrades and
nine downgrades.

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UNIQUENESS: OIL PRICES HIGH

GLOBAL OIL PRICES HIGH-SUBSIDIZED COST KEEP IRANIAN AND


VENEZUELEN DOMESTIC PRICES LOW

PARKER, 07
(RANDALL, Blogger @ Future Pundit, “Declining Exports From Big Oil Exporters Expected
Economist Jeffrey Rubin sees higher oil prices in part due to rising demand in oil exporting countries.“,
9/28/07, http://www.futurepundit.com/archives/004629.html)

CORK, IRELAND, Sept. 17 /CNW/ - CIBC (CM: TSX; NYSE) - Oil prices are likely to hit US$100 a
barrel by the end of next year as soaring rates of domestic oil consumption in the world's leading oil
producing nations cuts into their export capacity, forecasts the chief economist at CIBC World Markets.
Speaking at the 6th Annual Association for the Study of Peak Oil & Gas conference in Cork, Ireland, CIBC
World Markets chief economist, Jeff Rubin told delegates that the export capacity of OPEC, Russia and
Mexico will drop by 2.5 million barrels per day by the end of the decade. "Domestic demand growth of as
much as five per cent per year in key oil producing countries is already beginning to cannibalize exports
and will increasingly do so in the future as production plateaus or declines in many of these countries," says
Mr. Rubin. "OPEC members together with independent producers Russia and Mexico consume over 12
million barrels per day, surpassing Western Europe to become the second largest oil market in the world.
"At current rates of domestic consumption the future export capacity of OPEC, Russia and Mexico
must be increasingly called into question. These trends are likely to result in a sharp escalation in
world oil prices over the next few years." He noted that while he expects today's US$80 barrel of oil
will reach as high as US$100 a barrel by the end of 2008, consumers in many major oil producing
countries pay nothing near the global price for crude. He finds that highly subsidized gasoline prices
are often a significant factor in surging rates of domestic oil consumption. In many countries prices are
as little as US$10 a barrel. With exports from OPEC, Russia and Mexico expected to decline by seven per
cent over the next three years, markets will seek greater reliance on higher cost unconventional deposits.
He expects that Canadian oil sands will surpass deep water wells as the single largest source of new oil
exports by decade end. Governments of many big oil exporters sell petroleum products for a loss in
domestic markets. They use lower prices to buy domestic support for their governments. So gasoline
is cheaper in Venezuela, Iran, Saudi Arabia, and Russia than in the oil importing countries. As a result
domestic demand for oil products is growing more rapidly in the oil exporting countries than in most of the
rest of the world. This has hugely important implications. Oil exporters will reduce their oil exports years
before their domestic production peaks. Also, once their domestic production peaks their oil exports will
decline much more rapidly than their production.

OIL PRICES HIGH

FLETCHER, JULY 14TH


(Sam, professional journalist in oil and gas industry since 1977. Oil Editor at the Houston Post for 20 years. Master's degree in mass
communications from Texas Tech University, Oil and Gas Journal, “MARKET WATCH: Energy prices register new intraday highs”,
7/14/08, http://findarticles.com/p/articles/mi_m0EIN/is_2000_Nov_21/ai_67177810)

HOUSTON, July 14 -- Crude prices surged again July 11, hitting a new high in intraday trading as the
August contract regained in the last two trading sessions most of its losses from the first two sessions of
that week. The front-month crude contract lost a total $9.29/ bbl July 7-8 as the US dollar strengthened,
then inched up just 1¢/bbl on July 9 before climbing a total of $9.03/bbl over the July 10-11 sessions in the
New York market amid worries of possible supply disruptions. Trading was volatile within a wide range of
more than $12/bbl during the week. "Having reached an all-time intraday high on Friday, oil faces
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downward pressure in pre-market trading [July 14] as the dollar appreciated vs. the euro following
an announcement by the US Treasury of plans to provide direct loans to Freddie Mac [The Federal Home
Loan Mortgage Corp.] and Fannie Mae [Federal National Mortgage Assoc.]," said analysts in the Houston
office of Raymond James & Associates Inc. They said, "The stronger dollar has offset the added
geopolitical risk premium related to the 5-day strike of Petrobras employees in Brazil (OGJ Online, July
11, 2008). We expect that this prospective supply disruption, as well as ongoing instability in Nigeria
and Iran, will continue to add volatility to short-term oil prices." On July 14, oil workers halted work at
33 of 42 offshore platforms in Brazil's Campos basin. Campos accounts for more than 80% of Brazil's
crude output of 1.8 million b/d, or about 2% of world supply. Petrobras said it would implement a
contingency plan to maintain production on the platforms, but union leaders said such an attempt would be
resisted. Raymond James said, "On the natural gas side, over the past week, prices have fallen nearly 15%,
driven in part by a technical correction, as well as bearish management commentary from the CEO of a
major E&P company. He points to domestic supply increases (the crux of our bearish call) that could
overwhelm the market over the next couple of years, driving a return to parity with coal, instead of
oil (as it relates to fuel switching)." Analysts at Pritchard Capital Partners LLC, New Orleans, reported
July 14, "A stronger dollar spurred losses for crude and products in overnight trading." They also noted:
"Natural gas futures finished the week on a weak note Friday despite another record run higher in
neighboring crude futures." Bullish weather factors may be hard to find in the near term, with Hurricane
Bertha well out to sea in the Atlantic "and real summer heat has not arrived," they said. In other news,
President Hugo Chavez of Venezuela said in a broadcast July 13 that oil prices could hit $300/bbl,
especially if ExxonMobil Corp. were to freeze Venezuelan assets again in the dispute over a nationalized
oil project in that country. ExxonMobil earlier won a temporary court injunction freezing $12 billion in
assets held by state-owned Petroleos de Venezuela SA. A London court later overturned that injunction, but
Chavez said the US company could seek further action against Venezuela.

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UNIQUENESS: OIL PRICES HIGH


PRICES HIGH
KUMAR, JULY 13TH
(V. Pradeep, Author and Senior Management Professional, “The politics of petrol”,
7/13/08, http://www.deccanherald.com/Content/Jul142008/eb2008071378615.asp)

The fact is all trends related to oil prices have been on the rise. The consumption has been on the rise
and the dollar, in which is the oil is priced has been weak for long. With rising consumption and a weak
dollar, the price trends were clear. IMF predicts that oil prices are set to remain high and will be a
drag on the global economy. The head of a fund management company in the US has gone to the extent of
saying that this is the worst financial crisis since the Great Depression. The Goldman Sachs predicts the
crude prices to touch $200 a barrel in the next six to 24 months. We are already close to $150. It's no use
getting into the blame game and accuse OPEC for not doing enough to keep the prices at a reasonable level.
With failure to control consumption as well as not adequately tapping alternate sources of energy, we are
caught napping. Indians are now going to pay dearly for successive governments not having a clear long
term strategy on oil. Our nation is one of the worst examples for extremely poor infrastructure related to
urban mass transport. The fact is in every city, citizens have to have own private transport, if they have to
work or even go to school. This is one of the main reasons for consumption rising steadily, which jumped
up 11 per cent last year.
Shortage of power also contributes to consumption of diesel for power generation. In other words,
failure of our government to provide adequate mass urban transport and power, has led to increases
in consumption of petrol and diesel. Apart from this, we also haven't done enough to tap alternate sources
of energy. There are other problems plagued with Indian governance. Too expensive Look at the petrol
prices across the world, for instance ,to see how our pricing is right at the top. Petrol in India is at $1.32 or
Rs 57 per litre which is one of the highest in the world. In China, the price is about $1.01 or Rs 42.7 per
litre, after last weeks increase in prices. In Pakistan, petrol is considerably cheaper at $1.06 or Rs 44 per
litre. In Dubai, where I live, petrol is $0.37 or Rs 15.50, same as bottled mineral water and Pepsi! However,
the cheapest petrol is in Venezuela at $0.05 per litre or Rs 2.10 per litre. One of the major reasons for
higher prices in India is tax: customs & excise duties, and other taxes, including state taxes, accounting
for half of the selling price. In other words, the ex-refinery price of petrol is actually about Rs 25 per litre
and the rest is swallowed by our Government. Depreciation in the value of Rupee against Dollar is also
pushing up our oil prices. Clearly, we need to correct past blunders by taking urgent short term as well as
long term measures. We need to control consumption by providing citizens with reliable and comfortable
modes of public transport. Private sector should be encouraged to provide transport to employees.

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UNIQUENESS: OIL PRICES HIGH


PRICES ON THE RISE

REUTERS, 08
(AVA KASHIMA, “'Indefinite' fuel price hikes seen”, 6/30/08, Lexis)

Gasoline prices have now topped P60 per liter and, if the current pace of adjustment continues, will
likely be near P70 by August. Diesel, by the same reckoning, could go up to P60/liter, according to an
industry official who said that oil firms can be expected to keep hiking prices every weekend based on
crude movements for the month of June alone. Crude oil hit a fresh record of near $143 per barrel on
Friday, traced to investors moving to commodities following a drop in global equities markets. A
senior official in oil producer Iran on Saturday said crude could hit $150/barrel in the near future. A
Reuters poll on Friday also found the respondents indicating that the extended rally still had years to run.
The Philippines uses lower-priced Dubai crude as a benchmark but according to latest Energy department
monitoring, the average as of Friday was $126.99/barrel, $7.49 higher than last month and some $30 over
the March figure. "If [by] July, oil prices will be higher, then fuel pump prices will still be increased after
August 2 to an indefinite date," the source, who requested anonymity, said. Domestic oil firms again hiked
pump prices during the weekend, the 17th such adjustment this year, by P1.50 for gasoline, diesel and
kerosene. Pilipinas Shell Petroleum Corp. led the increase, followed by Petron Corp., Chevron (Caltex)
Philippines Corp., Total Philippines Inc. and Unioil Petroleum Philippines Inc. The adjustment put the
pump price for diesel at P52.50/liter and unleaded gasoline at P60.96/liter. The industry source claimed the
price of diesel sold by the oil majors could rise to P60.48/liter by August, and that gasoline would cost
P68.48/liter. Other officials were not immediately available for comment. The industry has been tight-
lipped after the Energy department said it was banning oil firms from making pronouncements regarding
future adjustments. In Iran, meanwhile, senior oil official Hojjatollah Ghanimifard said "It seems the
prices' upward trend will continue and it is anticipated that the price of each barrel of oil will reach
$150 in the near future." "As we get near the final days of the current month and the arrival of the
high-consumption summer season the possibility of a hike in the price of oil increases." Mr.
Ghanimifard repeated Iran's previous stance that the crude price rise was not due to shortage of supply in
the market. Iran, the world's fourth-largest oil exporter, has repeatedly said the market is well-supplied and
blames rising prices on speculation, a weak dollar and geopolitical tension. Reuters' poll, meanwhile,
marked the first time average forecasts have envisaged the extended rally has years to run. Analysts
previously expected US crude oil, viewed as the global price marker, to stop rising this year and fall in
2009-2010. The June poll showed US crude in 2008 would average $113.24 a barrel, up by about $6 from
the last poll in late May. The average price would be $113.25 in 2009 and $115.59 in 2010. The average
price for oil last year was $72.30. North Sea Brent, another major price marker, is expected to average
$112.02 this year, compared with $106.12 in the last poll. Oil prices have surged beyond many analysts'
expectations this year, forcing them to revise price assumptions repeatedly. Although high prices
have made some consumers use less fuel, the oil market has carried on rising because of robust
demand from emerging markets such as China and India and concerns over future supply. A
complex mix of inflation, interest rates and a weak dollar has also attracted a large inflow of investors'
money to oil. But while consumers complain and oil firms ponder reduced sales, other industry players see
huge opportunities with the crude problem. Philodrill Corp. has projected a huge profit this year as it awaits
the start of commercial operations in the Galoc field off Palawan. The firm expects to gain some $70-86
million over the next 24 months once commercial operations start next month.

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HIGH OIL PRICES KEEP SUBSIDIES LOW


Oil incomes are essential in funding generous oil subsidies
The New Zealand Herald, 2k6 [December 27, “Iran’s oil problems deep-seated,” Lexis Nexis,
http://www.lexisnexis.com.ezproxy.baylor.edu/us/lnacademic/results/docview/docview.do?
docLinkInd=true&risb=21_T4159405419&format=GNBFI&sort=RELEVANCE&startDocNo=1&re
sultsUrlKey=29_T4159405425&cisb=22_T4159405424&treeMax=true&treeWidth=0&csi=257912&d
ocNo=7]
Iran's image is of a muscular oil producer with plentiful reserves, but in fact it could soon face its
own energy crunch owing to failing infrastructure and lack of investments, Professor Roger Stern at
Johns Hopkins University said Writing in the Proceedings of the National Academy of Sciences of
the United States, the professor of geography and environmental engineering said Iran's oil
problems have the potential to topple the clerical regime. "The regime's dependence on export
revenue suggests that it could need nuclear power as badly as it claims." Generous domestic
subsidies for petrol mean that Iran's national oil company cannot make money at home and so needs
to export as much as it can. But rapid population growth means that domestic demand is rising,
while authorities have let their refineries and pipelines fray.

Most oil revenues are funneled into gasoline subsidies

Eqbali, 2k8
[Aresu, June 8, The Middle East Times, “A century of oil in Iran: a bounty and a curse,” Google,
http://www.metimes.com/Politics/2008/06/08/a_century_of_oil_in_iran_a_bounty_and_a_curse/afp/]

Oil exports, worth 65 billion dollars last year, count for 80 percent of Iran's foreign currency
earnings, essentially propping up the entire economy. But the country is still far from realising the
potential of either its oil riches or its gas reserves, again the second-largest in the world. Billions of
dollars in revenues that could be ploughed back into the industry each year are being thrown away
on massive subsidies to keep petrol and energy cheap for ordinary Iranians. The lack of investment
in exploiting new fields and obtaining the best recovery from existing ones is compounded by the
unwillingness of foreign countries to deal with Iran at a time of tension over its nuclear programme.
The luxury of hydrocarbon riches has encouraged successive governments in Iran to heavily
subsidize energy products, something no politician would dare change.
"We are paying 85 billion dollars a year on energy subsidies. If this is meant for low-income people,
then it's is not working out," the deputy oil minister for planning, Akbar Torkan, told AFP in an
exclusive interview.
"Thirty percent of the rich are in fact using 70 percent of the subsidies," he explained. Iran's
astonishingly profligate drivers, many of whom would not dream of travelling by bus or train,
consumed 64.5 million litres of petrol and 89.5 million litres of diesel a day in the Iranian year that
ended on March 19. Torkan said "we should pay the subsidies based on a more focused mechanism.
The current situation is not what the government is looking for and it is just a waste of money."

Profits are widely utilized for petroleum subsidies


Borger, 2k8 [Julian, March 11, The Guardian, “High Octane Poliics,” Google,
http://www.guardian.co.uk/world/2008/mar/11/iran?gusrc=rss&feed=worldnews]
The whole system is daft, and not just from the point of view of global warming. Iran is
blowing its oil profits on petrol subsidies, so that people end up spending hours a day in
traffic jams. There are a few nods in the direction of public transport. On some of the
wider boulevards, there is a fast lane in the centre for special high-speed buses, but there
are clearly not enough buses. Each one is crammed to bursting.

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HIGH OIL PRICES KEEP SUBSIDIES LOW

Oil export revenues are invested in subsidies, which cripple the economy and
skyrocket domestic oil consumption
EIA, 2k7 [Energy Information Association,http://www.eia.doe.gov/cabs/Iran/Oil.html]
Iran’s oil consumption totaled 1.6 million bbl/d in 2006. The Iranian government heavily subsidizes
the price of refined oil products which has contributed to increased domestic demand. Iran has
limited refinery capacity to produce light fuels, and imports much of its gasoline supply. Iranian
domestic oil demand is mainly for gasoline and automotive gasoils, but domestic demand for other
oil products are declining due to the substitution of natural gas. However, it is an overall net
petroleum products exporter due to large exports of residual fuel oil. Oil export revenues represent
the majority of Iran’s total exports earnings, but the country suffers from budget deficits due to a
growing population and large government subsidies on gasoline and food products. In 2005, the
International Monetary Fund (IMF) estimated that energy subsidies accounted for 12 percent of
Iran’s GDP, the highest rate in the world according to an International Energy Agency (IEA) study.

Iran is only able to afford to fund it’s subsidies program because of oil exports
Tait, 2k8 [Carrie, April 15, The Financial Post, “Only recession will cut oil prices; oil industry experts,”
Lexis Nexis, http://www.lexisnexis.com.ezproxy.baylor.edu/us/lnacademic/results/docview/docview.do?
docLinkInd=true&risb=21_T4178479086&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsU
rlKey=29_T4178479089&cisb=22_T4178479088&treeMax=true&treeWidth=0&csi=257989&docNo=2]
"I don't believe that [OPEC's production] is driven by high prices," he said. "I believe that is driven
by low prices, particularly if that low price starts to effect an increase in demand again." For
example, he estimates that Iran spends $30-billion a year on oil subsidies, a luxury the country can
afford thanks to oil revenue. But should global demand wane, the country would have to come up
with the cash; increasing supply at a lower price would do the trick. High oil prices prompt some
West-ern states to temper oil consumption. But another expert noted oil use rises in the Middle East
as prices climb. Kang Wu, a senior director at FACTS Global Energy USA, said higher oil prices
mean governments have more money to support and invest in their countries, which leads to higher
energy consumption in the region.

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LINK: HIGH OIL PRICES K2 SUBSIDIES-IRAN


High oil prices are key to sustain domestic subsidies in Iran—decreasing U.S.
dependence will impede Iran from granting economic benefits resulting in internal
wars and instability striking Iran—empirically proven with the Soviet Union
Friedman, 2k7
[Thomas L., February 2., The New York Times, “The Oil-Addicted Ayatollahs,”
LexisNexishttp://www.lexisnexis.com.ezproxy.baylor.edu/us/lnacademic/results/docview/docview.do?
docLinkInd=true&risb=21_T4159405419&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsU
rlKey=29_T4159405425&cisb=22_T4159405424&treeMax=true&treeWidth=0&csi=6742&docNo=9]

There may be only one thing dumber than getting addicted to consuming oil as a country -- and that
is getting addicted to selling it. Because getting addicted to selling oil can make your country really
stupid, and if the price of oil suddenly drops, it can make your people really revolutionary. That's
the real story of the rise and fall of the Soviet Union -- it overdosed on oil -- and it could end up
being the real story of Iran, if we're smart. It is hard to come to Moscow and not notice what the last five years of
high oil prices have done for middle-class consumption here. Five years ago, it took me 35 minutes to drive from the Kremlin
to Moscow's airport. On Monday, it took me two and half hours. There was one long traffic jam from central Moscow to the
airport, because a city built for 30,000 cars, which 10 years ago had 300,000 cars, today has three million cars and a ring of
new suburbs. How Russia deals with its oil and gas windfall is going to be a huge issue. But today I'd like to focus on how
the Soviet Union was killed, in part, by its addiction to oil, and on how we might get leverage with Iran, based on its own
addiction. Economists have long studied this phenomenon, but I got focused on it here in Moscow after chatting with
Vladimir Mau, the president of Russia's Academy of National Economy. I mentioned to him that surely the Soviet Union
died because oil fell to $10 a barrel shortly after Mikhail Gorbachev took office, not because of anything Ronald Reagan did.
Actually, Professor Mau said, it was ''high oil prices'' that killed the Soviet Union. The sharp rise in oil prices in the 1970s
deluded the Kremlin into overextending subsidies at home and invading Afghanistan abroad -- and then the collapse in prices
in the '80s helped bring down the overextended empire. Here's the story: The inefficient Soviet economy survived in its early
decades, Professor Mau explained, thanks to cheap agriculture, from peasants forced into collective farms, and cheap prison
labor, used to erect state industries. Beginning in the 1960s, however, even these cheap inputs weren't enough, and the
Kremlin had to start importing, rather than exporting, grain. Things could have come unstuck then. But the 1973 Arab oil
embargo and the sharp upsurge in oil prices -- Russia was the world's second-largest producer after Saudi Arabia -- gave the
Soviet Union a 15-year lease on life from a third source of cheap resources: ''oil and gas,'' Professor Mau said. The oil
windfall gave the Brezhnev government ''money to buy the support of different interest groups, like the agrarians, import
some goods and buy off the military-industrial complex,'' Professor Mau said. ''The share of oil in total exports went from 10-
to-15 percent to 40 percent.'' This made the Soviet Union only more sclerotic. ''The more oil you have, the less policy you
need,'' he noted. In the 1970s, Russia exported oil and gas and ''used this money to import food,
consumer goods and machines for extracting oil and gas,'' Professor Mau said. By the early 1980s,
though, oil prices had started to sink -- thanks in part to conservation efforts by the U.S. ''One
alternative for the Soviets was to decrease consumption, but the Kremlin couldn't do that -- it had
been buying off all these constituencies,'' Professor Mau explained. So ''it started borrowing from
abroad, using the money mostly for consumption and subsidies, to maintain popularity and
stability.'' Oil prices and production kept falling as Mr. Gorbachev tried reforming communism, but
by then it was too late. The parallel with Iran, Professor Mau said, is that the shah used Iran's oil
windfall after 1973 to push major modernization onto a still traditional Iranian society. The social
backlash produced the ayatollahs of 1979. The ayatollahs used Iran's oil windfall to lock themselves
into power. In 2005, Bloomberg.com reported, Iran's government earned $44.6 billion from oil and
spent $25 billion on subsidies -- for housing, jobs, food and 34-cents-a-gallon gasoline -- to buy off
interest groups. Iran's current populist president has further increased the goods and services being
subsidized. So if oil prices fall sharply again, Iran's regime will have to take away many benefits
from many Iranians, as the Soviets had to do. For a regime already unpopular with many of its
people, that could cause all kinds of problems and give rise to an Ayatollah Gorbachev. We know
how that ends. ''Just look at the history of the Soviet Union,'' Professor Mau said. In short, the best
tool we have for curbing Iran's influence is not containment or engagement, but getting the price of
oil down in the long term with conservation and an alternative-energy strategy. Let's exploit Iran's
oil addiction by ending ours.

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LINK: HIGH OIL PRICES K2 SUBSIDIES-VENEZUELA

GLOBAL DROP IN OIL PRICE HURTS VENEZUELAN SUBSIDIES


HALL, 06

(Kevin, Staff Writer for St. Petersburg Times, “


Oil-price drops could hurt Iran and Venezuela”, 10/29/06, Lexis
Still, with oil prices seemingly on the decline, critics of the two countries' leaders are beginning to
contemplate what kind of trouble the countries might face should oil prices drop below $50 a barrel
and stay there, or, in the extreme, reach the levels of three years ago, when prices were less than $30 a
barrel. Oil prices have been hovering just under $60 on the New York Mercantile Exchange. Both
Venezuela's Hugo Chavez and Iran's Mahmoud Ahmadinejad have used their countries' burgeoning oil
revenues to expand populist public spending programs and government salaries. An extended drop in oil
prices would have an impact, analysts say. "The worsening of the economic situation may not change
the government's behavior, but it certainly is going to change the structure and prosperity of the
Iranian economy," said Jahangir Amuzegar, who was Iran's finance minister during the regime of the shah
and is now a consultant. Amuzegar said oil accounted for 30 percent to 32 percent of Iranian gross
domestic product, the broadest measure of a nation's economy, up from 15 percent before the 1979
revolution, which brought in Iran's current theocratic leadership. Ahmadinejad has used oil revenue to
expand popular programs such as low-cost mortgages. The expansion is at least in part responsible
for his popularity at home. "Almost everything that is consumed by the masses is subsidized, and all
subsidies, absolutely every subsidy, comes out of the [oil] money," Amuzegar said. A continued drop
in prices is "going to affect the purchasing power and the standard of living of the masses," he said.
The story is similar in Venezuela, where oil accounts for about a third of the economy. But the
decline of oil prices may already be having an effect. Data from Venezuela's central bank show the
government has run a deficit of nearly $2.3 billion through August, reflecting high government
spending and falling oil revenue.

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INTERNAL LINK: DECREASED SUBSIDIESBACKLASH-


GENERIC
An increase in oil prices or elimination of subsidies will cause backlash—empirically
proven

Mouawad, 2k7
[Jad, September 30, The New York Times, “Costly fuel is never far from a match,” Lexis Nexis,
http://www.lexisnexis.com.ezproxy.baylor.edu/us/lnacademic/results/docview/docview.do?
docLinkInd=true&risb=21_T4178800026&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsU
rlKey=29_T4178800029&cisb=22_T4178800028&treeMax=true&treeWidth=0&csi=6742&docNo=4]

THERE are deep roots to Myanmar's current unrest, pitting its repressive regime against Buddhist
monks, but the immediate spark was the junta's unexpected decision in August to double fuel prices.
Overnight, diesel prices skyrocketed, and compressed natural gas rose fivefold. In this respect,
Myanmar is not an isolated case. Rising oil prices in recent years have created all kinds of
headaches as they have rippled across the world. Many governments, especially in the developing
world, have had to choose between raising domestic subsidies to offset the increases or letting the
people bear the brunt. Neither choice -- higher government spending or the risk of popular
discontent -- has great appeal. In oil-rich Iran, civil unrest spread through Tehran this summer after
the government rationed gasoline in an effort to curb the country's addiction to cheap fuel; gasoline
in Iran, imported because the country lacks refining capacity, is heavily subsidized and cost about
40 cents a gallon at the time. After two days of upheaval, the Islamic theocracy restored order and
kept the policy. In Nigeria, the outcome was different. Striking oil workers in June threatened to
shut down the country's oil production if fuel subsidies were dropped. Faced with the threat of
losing its biggest source of revenue, the government quickly backed down. Fuel prices go to the
heart of people's ability to move, stay warm or feed themselves. So it is no surprise that
governments around the world have tried to blunt the effects of oil prices that have tripled in the
past four years.

IRANIAN/VENEZUELEN PRICE RISE  REVOLT


CARROL 08

(Staff Writer for The Guardian, “International: Fuel costs: Cheap and cheerful:
Venezuelans cling to right for petrol at 42p a tank: Cost borne by environment and the
poor as government remains wedded to subsidy”, 1/18/08, Lexis)
There is a world where oil costs $100 a barrel, where motorists wince as they fill up the tank and
where energy efficiency is a mantra. And then there is Venezuela. At a Caracas petrol station last
week, Gloria Padron, a paediatrician, ticked off items that would cost about the same as the 60 litres
of fuel gurgling into her Land Cruiser. "Let me think. A Magnum ice cream. A cup of coffee. A
cheese and ham arepa (sandwich). Small stuff like that. Can't say I've ever really thought about the
price. Why would you?" When a litre costs 0.7p, and filling the tank of a 4x4 costs 42p, it is a fair
question. Petrol is so cheap here - reputedly the cheapest in the world - as to be almost free. Even
under the artificially overvalued official exchange rate, petrol is 45 times cheaper than in Britain. So
while oil-importing nations appeal for relief (George Bush called in vain this week on Saudi Arabia
to increase its output so as to bear down on prices), major exporters such as Venezuela bask in their
immunity from the petroinflationary pain. Venezuela has the seventh-largest oil reserves in the
world, and petrol is lavishly subsidised. "If it gives us nothing else, at least the government lets us
have our own petrol this cheap," said Padron, 44, revving her engine. "It may be crazy and have no
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logic, but I'm not complaining. Nobody is." That is the problem. The subsidy warps the economy,
drains government coffers, rips off the poor, pollutes the air and paralyses cities with traffic jams.
Yet it is hugely popular and the government dares not end the insanity. The phenomenon is
common to oil producers such as Burma, Indonesia, Iran and Nigeria: their people feel cheap
petrol is a birthright and tend to revolt if the price rises. The era of $100 barrels has magnified
the distortion, because governments are obliged to forfeit windfall revenues to divert ever-
greater quantities of oil to domestic markets. "It is difficult to go from this system to
something more rational," said Mark Weisbrot, an economist with the Washington-based Centre
for Economic and Policy Research. "People think they know how cheap the oil is, and that it is
theirs. It is very deep in the culture."

REVOLT INTERNAL

WORLD ENERGY OUTLOOK, 99


(INTERNAITONAL ENERGY AGENCY, “Looking at Energy Subsidies: Getting the Prices Right 1999
INSIGHTS”, 1999, < http://www.iea.org/textbase/nppdf/free/1990/weo1999.pdf>)

If removing energy subsidies were politically easy, it would already have happened. Formidable forces
oppose subsidy removal. Hikes in energy enduse prices are felt immediately by everybody, sometimes
painfully so by the poorer segments of the population. In extreme cases, energy price increases can
lead to violent reactions — especially without proper information and education about the benefits of
subsidy removal and when an inadequate social-policy framework cannot guarantee the universal provision
of life’s necessities, including energy.

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INTERNAL LINK: DECREASED SUBSIDIESBACKLASH-IRAN


Monetary gains earned from oil exports enable Iran to provide a litany of national
subsidies for fuel, food, and medicine—removal of subsidies will cause backlash

Lyon, 2k8
[Alistair, March 26, The International Herald Tribune, “Iranians feel pinch of soaring prices;
Populist spending policies feed runaway inflation rates,” Lexis Nexis,
http://www.lexisnexis.com.ezproxy.baylor.edu/us/lnacademic/results/docview/docview.do?
docLinkInd=true&risb=21_T4159405419&format=GNBFI&sort=RELEVANCE&startDocNo=1&re
sultsUrlKey=29_T4159405425&cisb=22_T4159405424&treeMax=true&treeWidth=0&csi=8357&doc
No=2]

Iran, one of the world's biggest producers of crude oil, has raked in $70 billion in oil revenue in the
past year, the government says. But much of that cash flows out in lavish subsidies on everything
from fuel and transport to food and medicine. ''The system is buying loyalty to pursue its nuclear
program,'' said Saeed Laylaz, an economist. Many of the subsidies are not specifically targeted at
low-income individuals, which often means that the rich, who can consume more, benefit more from
them than the poor. Adeli put the direct and indirect cost of fuel subsidies alone at $45 billion a
year. Lacking the refining capacity to meet domestic demand, Iran had been importing at least $5
billion worth of gasoline a year, which was sold at low cost to the public, a policy that encourages
waste and smuggling. To reduce the import bill, the government began rationing gasoline last year.
Last week, in an apparent bid to streamline the subsidy, rationing was temporarily relaxed to let
drivers buy extra gasoline for five times more than the subsidized price.
The new system could be extended, although a liberalized price could also have a short-term
inflationary effect. ''Taking away subsidies is no easy matter,'' said Mohammad Ali Farzin, an
Iranian economist who heads a poverty reduction effort by the United Nations Development
Program. ''The scale of the problem is just so overwhelming that it will take time.'' Farzin added that
dependence on subsidies was growing.
''Where you have chronic inflation, disproportionate rises in property prices relative to income,
serious unemployment and underemployment, it's only natural that low-income households cannot
keep up,'' he said. ''So they rely on subsidies.''

If Iran increased oil prices, the outcome would be revolt and national instability

Hobart Mercury, 2k7


[June 28, “Iranian revolt on fuel rations,” Lexis Nexis,
http://www.lexisnexis.com.ezproxy.baylor.edu/us/lnacademic/results/docview/docview.do?
docLinkInd=true&risb=21_T4178800026&format=GNBFI&sort=RELEVANCE&startDocNo=1&resultsU
rlKey=29_T4178800029&cisb=22_T4178800028&treeMax=true&treeWidth=0&csi=244810&docNo=1]

ANGRY Iranians set fire to service stations yesterday in protest after the government suddenly
began fuel rationing. Shouting ''[President Mahmoud] Ahmadinejad must be killed,'' stone-throwing
demonstrators set cars and petrol pumps ablaze in Tehran. The Oil Ministry announced the start of
rationing only three hours before it was due to begin, sparking a rush on service stations. Several
stations were attacked ''by vandals'', state media reported, refusing to confirm reports that stations in
other cities were burned. The government had been planning for weeks to implement rationing,
which was supposed to begin on May 21 but was repeatedly put off. Last month, it reduced
subsidies for petrol, causing a 25 per cent jump in the price.
The issue is hugely sensitive in oil-rich Iran, where people are used to having cheap and plentiful
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petrol.
Ahmadinejad came to power in the 2005 election based largely on his vows to improve the faltering
economy. The protests are the first open outpouring of anger since he took office, although criticism
has mounted in some economic circles that his policies are fuelling inflation and hurting the poor.
''This man, Ahmadinejad, has damaged all things,'' said teacher Reza Khorrami, who was in a 1km-
long queue at a Tehran service station. Iran is the second biggest exporter in the Organisation of
Petroleum Exporting Countries. But because it has low refining capability, it has to import more
than 50 per cent of its needs. To keep prices low, it subsidised petrol, saddling it with enormous
costs. Under the rationing, owners of private cars can buy only 100 litres of fuel a month at the
subsidised price of 45c a litre. Conservatives in Iran's parliament have long pushed for higher prices
with the hope of curtailing demand and freeing up government spending to invest in more oil and
petrol production.

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INTERNAL LINK: DECREASED SUBSIDIESBACKLASH-IRAN

IRAN INSTABILITY/REVOLT INTERNAL

KEMP, 05
(Geoffery, director of regional strategic programs at the Nixon Center in Washington, D.C. Former senior director for Near East and
South Asian affairs on the National Security Council staff during the first Reagan administration, “Iran and Iraq: The Shia Connection,
Soft Power, and the Nuclear Factor”,United States Institute for Peace, November 2005, <
http://www.usip.org/pubs/specialreports/sr156.html>)

Ahmadinejad's presidency will eventually be judged on how he handles the Iranian economy. On this
matter, he faces a fundamental dilemma: Oil is Iran's key export earner and its primary source of hard
currency, and over the past year, Iran has benefited greatly from the rising price of oil on the global
market; Iran's current account is in good standing because of profits from oil sales. However, the
overall Iranian economy is riddled with structural weakness, and its need for major capital investment is
overwhelming, including investment in the energy infrastructure. Since Ahmadinejad's election, confidence
in the economy has dramatically weakened: the Tehran stock exchange has sunk into the doldrums, and
there has been much capital flight from and very little investment in the domestic economy. In the short
run, the oil bonanza has provided Iran's government with a cushion to ensure the availability of staple
goods for the working class, such as bread and fuel, and has given it confidence that it can withstand further
sanctions imposed by the United States or possibly the Europeans. The Iranian leadership does not believe
the UN Security Council would agree to oil sanctions against Iran, given its critical importance to the
overall world oil market at a time of high prices. Perhaps the only situation in which oil sanctions against
Iran could be contemplated is a worldwide economic recession, dramatically curtailing the demand for oil.
Oil revenue is a critical component in Iran's capacity to ride out its disputes with the United States,
Europe, and, indeed, its neighbors. It can also use its principal export earnings to provide support for
groups that it believes serve its broader interests in the Islamic world, such as Hezbollah. But most of all,
Iran's oil is a critical component of the regime's domestic strategy. By and large, the Iranian population
has been quiescent over the past two years. There have been occasional riots and demonstrations, but
nothing to fundamentally threaten the regime. What would concern Iran's conservative leaders
would be massive unrest on the part of the Iranian working class and the underemployed, akin to the
shipyard strikes that began the downfall of the communist regime in Poland, as well as other peaceful
disruptions in Eastern Europe that helped topple communism. As long as earnings from oil exports
remain high because of increased global demand, Iran has a cushion of wealth that enables the
regime to continue to provide subsidies for basic staples such as fuel and food. If oil prices were to fall
precipitously, as happened during the mid- and late 1990s following the Asian financial crisis, the Iranian
regime could face its most serious test.

EMPERICAL PROOF-CHAOS WITH PRICE INCREASE IN IRAN

BUSINESS INTELLIGENCE, 07
(Business Intelligence: Middle East, International News Agency, “Riots in Iran following petrol rationing”, 6/27/07, < http://www.bi-
me.com/main.php?id=11130&t=1&c=34&cg=>)

IRAN. Riots broke out in Iran in the early hours of Wednesday and some petrol stations were set on fire in the capital Tehran
following the government's decision to ration petrol. According to local press reports, at least five petrol stations in Tehran were set
on fire in protest against the rationing. Some banks and supermarkets were also reportedly robbed. Witnesses said the people also
shouted slogans against President Mahmoud Ahmadinejad who is considered as the initiator of the petrol rationing. The Iranian
parliament swiftly reacted to the riots and summoned the oil and interior ministers to investigate the incidents in a secret session. The
Oil Ministry announced via state-television that necessary grounds would be prepared to prevent any petrol problems for the people.
The Ministry's promises were, however, based on establishing new oil refineries in the coming years. As of Wednesday, Iran, one of
the world's largest oil producers, started rationing petrol nationwide. The announcement caused huge chaos on Tehran's streets in
the late night hours of Tuesday with cars rushing to petrol stations to fill their tanks before the start of the rationing. The Oil

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Ministry said in a statement that each of the country's around 7 million private cars will get 100 litres per month at a price
equivalent to US$0.108 per litre for normal and US$0.151 for super petrol.

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INTERNAL LINK: DECREASED SUBSIDIESBACKLASH-IRAN


REGIME CHANGE

ERDBRINK 08
(Thomas, Political Analyist for The Washington Post, “Oil Cash May Prove A Shaky Crutch for Iran's Ahmadinejad”, 6/30/08,
Lexis)

Faced with rapid inflation and growing international concern about his country's nuclear ambitions, Iranian
President Mahmoud Ahmadinejad is relying on huge increases in oil and gas revenue to insulate his
government from internal and external pressures. Some of the same Western countries taking steps to
compel Iran to stop uranium enrichment are also the biggest consumers of its oil and gas. The European
Union voted last week to freeze the assets of Bank Melli, Iran's largest, in keeping with U.N. sanctions. The
E.U. is also the leading global consumer of Iranian oil and gas. Oil wealth, which funds 60 percent of the
national budget, has allowed Iran's government to exercise its power to cut interest rates and ignore
warnings from the country's Central Bank that overspending will worsen inflation. Iran earned $80
billion from oil and gas sales in the fiscal year that ended March 20, up from $35 billion three years ago.
But the increasing oil revenue is causing a widening gap between rich and poor, as some businesspeople
prosper while inflation eats away at consumers' purchasing power. These developments jeopardize
Ahmadinejad's populist appeal and could hurt his campaign for reelection in 2009. Since 2005, when
Ahmadinejad came to power, the annual rate of inflation has risen from 12.1 percent to 19.2 percent,
according to Central Bank figures. The rate reached 25.2 percent in May, the bank said. Ahmadinejad has
long tussled with economic officials, who say the government lacks expertise. Indeed, Central Bank
governor Tahmasb Mazaheri has straightforward advice for Iran's leaders: "They should decrease the
budget deficit, limit spending money and refrain from using oil revenues." Ahmadinejad announced last
week that he would implement unspecified changes in Iran's banking, taxation and import systems and
blamed leaders in these sectors for being "ineffective." He also conceded that inflation was a "big
problem." Ahmad Zeidabadi, an Iranian political analyst who writes for several anti-government media
outlets, said that increased oil revenue had "given the government lots of self-confidence in many
fields." "When you have plenty of money you can solve many problems," Zeidabadi said. But he also
noted the danger of intertwining the country's economic fate with the fluctuating price of oil. "If the price
suddenly would drop, they will not be able to provide the country with necessary imports. The oil
money is this government's lifeline."

GLOBAL OIL DECREASE  SUBSIDY INCREASE = BAD

FRIEDMAN, 07
(Thomas, Political Analyist for The New York Times, “
The Oil-Addicted Ayatollahs”, 2/2/07, Lexis)

There may be only one thing dumber than getting addicted to consuming oil as a country -- and that is
getting addicted to selling it. Because getting addicted to selling oil can make your country really stupid,
and if the price of oil suddenly drops, it can make your people really revolutionary. That's the real
story of the rise and fall of the Soviet Union -- it overdosed on oil -- and it could end up being the real
story of Iran, if we're smart. It is hard to come to Moscow and not notice what the last five years of high oil
prices have done for middle-class consumption here. Five years ago, it took me 35 minutes to drive from
the Kremlin to Moscow's airport. On Monday, it took me two and half hours. There was one long traffic
jam from central Moscow to the airport, because a city built for 30,000 cars, which 10 years ago had
300,000 cars, today has three million cars and a ring of new suburbs. How Russia deals with its oil and gas
windfall is going to be a huge issue. But today I'd like to focus on how the Soviet Union was killed, in part,
by its addiction to oil, and on how we might get leverage with Iran, based on its own addiction. Economists
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have long studied this phenomenon, but I got focused on it here in Moscow after chatting with Vladimir
Mau, the president of Russia's Academy of National Economy. I mentioned to him that surely the Soviet
Union died because oil fell to $10 a barrel shortly after Mikhail Gorbachev took office, not because of
anything Ronald Reagan did. Actually, Professor Mau said, it was ''high oil prices'' that killed the Soviet
Union. The sharp rise in oil prices in the 1970s deluded the Kremlin into overextending subsidies at home
and invading Afghanistan abroad -- and then the collapse in prices in the '80s helped bring down the
overextended empire. Here's the story: The inefficient Soviet economy survived in its early decades,
Professor Mau explained, thanks to cheap agriculture, from peasants forced into collective farms, and cheap
prison labor, used to erect state industries. Beginning in the 1960s, however, even these cheap inputs
weren't enough, and the Kremlin had to start importing, rather than exporting, grain. Things could have
come unstuck then. But the 1973 Arab oil embargo and the sharp upsurge in oil prices -- Russia was the
world's second-largest producer after Saudi Arabia -- gave the Soviet Union a 15-year lease on life from a
third source of cheap resources: ''oil and gas,'' Professor Mau said. The oil windfall gave the Brezhnev
government ''money to buy the support of different interest groups, like the agrarians, import some goods
and buy off the military-industrial complex,'' Professor Mau said. ''The share of oil in total exports went
from 10-to-15 percent to 40 percent.'' This made the Soviet Union only more sclerotic. ''The more oil you
have, the less policy you need,'' he noted. In the 1970s, Russia exported oil and gas and ''used this money
to import food, consumer goods and machines for extracting oil and gas,'' Professor Mau said. By the early
1980s, though, oil prices had started to sink -- thanks in part to conservation efforts by the U.S. ''One
alternative for the Soviets was to decrease consumption, but the Kremlin couldn't do that -- it had been
buying off all these constituencies,'' Professor Mau explained. So ''it started borrowing from abroad, using
the money mostly for consumption and subsidies, to maintain popularity and stability.'' Oil prices and
production kept falling as Mr. Gorbachev tried reforming communism, but by then it was too late. The
parallel with Iran, Professor Mau said, is that the shah used Iran's oil windfall after 1973 to push
major modernization onto a still traditional Iranian society. The social backlash produced the
ayatollahs of 1979. The ayatollahs used Iran's oil windfall to lock themselves into power. In 2005,
Bloomberg.com reported, Iran's government earned $44.6 billion from oil and spent $25 billion on
subsidies -- for housing, jobs, food and 34-cents-a-gallon gasoline -- to buy off interest groups. Iran's
current populist president has further increased the goods and services being subsidized. So if oil
prices fall sharply again, Iran's regime will have to take away many benefits from many Iranians, as
the Soviets had to do. For a regime already unpopular with many of its people, that could cause all
kinds of problems and give rise to an Ayatollah Gorbachev. We know how that ends. ''Just look at the
history of the Soviet Union,'' Professor Mau said. In short, the best tool we have for curbing Iran's
influence is not containment or engagement, but getting the price of oil down in the long term with
conservation and an alternative-energy strategy. Let's exploit Iran's oil addiction by ending ours.

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INTERNAL LINK: DECREASED SUBSIDIESBACKLASH-


VENEZUELA

SUSTAINED PROVISION OF SUBSIDES ARE KEY TO CONTINUED


VENEZUELAN STABILITY

The Guardian, 2008

(International: Fuel costs: Cheap and cheerful: Venezuelans cling to right for petrol at
42p a tank: Cost borne by environment and the poor as government remains wedded to
subsidy, Lexis)

Venezuela, a major oil producer which introduced the subsidy as a populist measure in
the 1940s, is probably the most extreme case of a gas-guzzling dream becoming a policy
nightmare. A lack of rigs and other problems has reduced the output of the state oil
company, Petroleos de Venezuela, just as domestic consumption has soared to 780,000
barrels a day. The subsidy costs the government around £4.5bn annually. It also
encourages a brisk trade in contraband petrol across the Colombian border, where prices
are higher. A consumer boom has doubled the number of cars on Venezuela's roads, with
500,000 sold last year alone. "None of the advertisements talk about fuel efficiency," said
Daniel Guerra, the manager of a Ferrari dealership in Caracas. "People have been spoiled
for so long with the subsidy that when it comes time for a reality check they don't
understand." As a result, streets are filled with new SUVs, including Humvees, as well as
wheezing 70s-era sedans, aggravating smog and gridlock.
Some economists call the subsidy "Hood Robin", because it steals from the poor and
gives to the rich by favouring relatively wealthy car owners above the poor who rely on
public transport. President Hugo Chavez railed against it last year, going so far as to label
the inequity "disgusting". He also chided western countries for consuming so much oil
and depleting a non-renewable resource. The self-styled revolutionary socialist, however,
has not followed through on his promise to raise prices at home. "That might make
economic sense, but could risk his already dwindling support," said Michael Shifter, an
analyst with the Inter-American Dialogue thinktank. "In a context of growing fissures
within his own coalition, it is doubtful Chavez would be too eager to reduce gas
subsidies," he said. When a previous government raised prices in 1989, the resulting riots
left hundreds, possibly thousands, dead and destabilised the political system. A price rise
now could worsen the galloping 22% rate of inflation by having a knock-on effect on the
cost of haulage and public transport. The opposition would also pounce on the move and
try to use it against the president in forthcoming regional elections. Chavez's extensive oil
diplomacy, which subsidises exports to friendly countries, notably Cuba, has further
sensitised Venezuelans to prices at the pump. "You can't give a stranger a present of
something from your own home and then deny it to your children," said Alfredo Lozano,
55, a decorator, as he filled his 4x4. "The government has to keep the price low."

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INTERNAL LINK: DECREASED SUBSIDIESBACKLASH-


VENEZUELA

CHEAP GAS IN VENEZUELA IS KEY TO STABILIZING THEIR ECONOMY


AND MANTAINING PEACE IN THE REGION

The Washington Post, 2006

(Divided Venezuelans United on Costly Policy of Cheap Gas, Lexis)

But he's not worried. Operating his four-door Malibu across Caracas, day and night, costs
less than $4, thanks to gasoline that, at 17 cents a gallon, is considered the cheapest in the
world. "Gasoline prices here in Venezuela are very good," said Vivas, 25, in the kind of
characteristically understated comments Venezuelans make about fuel costs. "We cabbies
circulate all over. Here in Caracas it's cheap, and you can go the whole day."

The credit, as every Venezuelan knows, goes to government subsidies and price controls
-- part of a policy that dates back decades and has infused people here with a sense of
entitlement to Venezuela's vast oil deposits. In this famously polarized country, where
President Hugo Chávez's government and a strident opposition never have anything good
to say about each other, there is agreement about at least one thing: gas. The country's
policy is unalterable, a hip-hip-hurrah for cheap fuel that is seconded by truckers,
industrialists and suburban soccer moms in their SUVs.

"As an oil country, the state has the responsibility to guarantee energy and preserve the
price of gasoline as it is," said Gabriela Ramírez, a pro-Chávez lawmaker in the National
Assembly. "You raise the price one bolivar and you affect the economy because the price
of bus tickets goes up, everything becomes more expensive."

Everyone in Venezuela also remembers what happened when prices were dramatically
increased in 1989 -- an uprising that left hundreds dead. As the government and its foes
prepare for the Dec. 3 presidential election, which most opinion polls show Chávez will
win handily, the themes of the day range from Venezuela's expensive aid programs
overseas to skyrocketing crime to the government's popular social programs. No one --
no one -- is talking about cheap gasoline.

"Of course, cheap gas is good," said Jesús Espinoza, a truck driver, perplexed that anyone
could consider low gasoline prices debilitating. "In a country with so much petroleum
riches, you cannot have expensive gasoline. It would be a contradiction."

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INTERNAL LINK: DECREASED SUBSIDIESBACKLASH-


VENEZUELA
INCREASING OIL PRICES IN VENEZUELA LEADS TO SOCIAL UNREST

Joe Duarte, 2006

(M.D., PEAK OILVenezuela: Is Time Running Out?,


http://www.financialsense.com/editorials/duarte/2006/0513.html).

Venezuela's oil production continues to decrease, for multiple reasons, mostly political,
while the country is swimming in heavy oil that few are interested in counting, or in
taking huge risks to go harvest, due again, mostly to political risks.The Chavez
government continues to subsidize the energy needs of countries like Cuba, and Bolivia,
among others, for political reasons.Somewhere along the way, something will have to
give.The laws of the business Universe are clear. Entities can't continue to antagonize
customers, run questionable accounting, and continually subsidize inefficient operations
indefinitely.Many businesses fail when they do one of those three things continuously.
PDVSA seems to be doing them routinely, and has been doing them for a long time. The
results have been decreased production, significantly damaged infrastructure, and a great
deal of mistrust from the global oil industry, and likely international lending operations.If
Venezuela needs $20 billion to fix, its mostly self inflicted oil infrastructure, no one that
we know of, has stepped up to the plate as a potential lender, yet.Meanwhile, Mr. Chavez
has been floating the idea that he will conduct a referendum to see if voters want to keep
in office until 2031.With gasoline at 12 cents a gallon, the big question for Venezuela
drivers might just be, when do we start?For the world's oil supply, though, the real
question is how long can this kind of policy go on?For the record, Venezuela's gasoline
price has historically been subsidized. Attempts to raise prices toward market rates have
met with significant amounts of social unrest.If and when Chavez and PDVSA are
squeezed enough to have to raise prices, life in Caracas could get oh so interesting.

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INTERNAL LINK: DECREASED SUBSIDIESECON COLLAPSE-


IRAN

DECREASE BAD

MURPHY, 06
(KIM, Has worked as a foreign and national correspondent for the past 15 years covering assignments in the Middle East, Balkans,
Afghanistan and the Pacific Northwest, “Oil Revenues Fuel Resistance to US”, 11/12/06)

Venezuela is expected to collect about $37 billion this year in oil earnings and has used the money to
expand the international influence of Chavez, including an unsuccessful effort to win a seat on the United
Nations Security Council. Chavez's assertiveness has a parallel in a previous era of high oil prices, said
Francisco Monaldi, academic coordinator at the International Center for Energy and Environmental Studies
in Caracas, the Venezuelan capital. During the late 1970s, when prices were high, then-Venezuelan
President Carlos Andres Perez nationalized the oil industry, denounced the International Monetary Fund
and said OPEC should use its power over oil prices to change the international status quo. A decade later,
when Perez held office again during a period of low oil prices, he accepted a $4.5-billion loan from the
IMF and took "a more moderate view of the role he would play on the international stage," Monaldi said. "I
think this is sort of an amazingly simple experiment" in how oil prices can change a country's global
posture, he said. But Venezuela's experience also shows that price declines can upend producing countries
accustomed to high spending. This time around, Iran could be particularly exposed if prices were to
drop. From the time of his election in June 2005, Iran's president, Mahmoud Ahmadinejad, has pledged to
"take oil revenues to people's dinner tables." The results have included major new spending programs that
provide loans to newlyweds to rent apartments, business start-up loans and discounts to low-income
Iranians seeking to buy a share in the nation's privatizing enterprises. Last month, Ahmadinejad handed out
the first shares in Iran's state industries to an estimated 4.6 million citizens. The shares will provide about
$2,200 worth of stock to the poorest segments of the population at a 50% discount. The program ultimately
could total $140 billion. A separate fund for loans to small businesses has a balance of $27 billion. Price
subsidies for consumers, mainly on energy, now take up more than one-fifth of Iran's gross domestic
product, said Saeed Leylaz, an economic analyst in Tehran. Iranians pay only about 9 cents a liter for
gasoline (roughly 34 cents a gallon), a subsidy that will cost the government more than $5 billion this year.
Iran would face economic catastrophe if the price of oil dropped below $50 a barrel, Leylaz said in a
telephone interview. "Immediately after any decrease in the oil price, my prediction is that inflation
will go up very fast, and the social structure of the country, which is very fragile and sensitive now,
will be in a dangerous position," he said. Indeed, some analysts argue that a sharp drop in prices could
cause more problems than the current high cost of oil. "Yes, these regimes are annoying," said A.F.
Alhajji, an associate professor of economics at Ohio Northern University. But "all three regimes are
democratically elected," he said. "They have to answer to the people who elected them, and if they don't,
then we're going to see political problems within each of these countries, and political problems mean a
threat to oil supplies. "These citizens, when they have a house to live in, food to eat, jobs to work at - as
long as they're working, they're not going to go to the streets or bomb pipelines."

IRAN ECON CARD

REUTERS 08

(International Herald Tribune, “Iranians feel pinch of soaring prices;


Populist spending policies feed runaway inflation rates”, 3/26/08, Lexis)

Ali Daryani is embarrassed about the inflationary pain he is passing on to his customers. ''Sometimes we

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have to change the price stickers three times a day because of inflation,'' said Daryani, a grocer in the
Iranian capital. The Iranian president, Mahmoud Ahmadinejad, survived the parliamentary election this
month without a big blow to his prestige, even if his core support base among a broad group of
conservatives shrank. But the president's opponents, both from the reformist minority and the
victorious conservatives, could pressure him to rein in populist spending policies seen as partly to
blame for inflation, which is hovering around 19 percent. Since Ahmadinejad swept to power in 2005 with
a promise to spread Iran's oil wealth among its citizens, soaring world oil prices have swelled national
revenue, but economists say colossal subsidies and presidential handouts have fueled inflation.
Ahmadinejad is basking in support from the Iranian supreme leader, Ayatollah Ali Khamenei, for his tough
nuclear stance, but his economic record may dent his chances of re-election next year. Iranians are
cushioned by a wide range of government subsidies, but runaway prices are still hitting the pockets
of consumers. ''The prices of rice, meat, fruit and everything else have gone up,'' said Baqer Gabai, a 54-
year-old retired teacher, in Mohseni Square in Tehran. ''The price of chicken has doubled in six months, but
my income has not changed a bit.'' Seyed Mohammad Hossein Adeli, a former central bank governor who
now heads a policy research group, said Ahmadinejad was aware of the danger and was already reverting to
more orthodox policies. ''He has helped the poor in some way with micro-attention,'' Adeli said of the
president's habit of touring the provinces, receiving petitions and trying to address problems directly. ''But
if you go and spend money and have a huge expansionary fiscal policy without limits, it pushes inflationary
pressures.'' Adeli said the central bank of Iran was now pursuing ''very contractionary policies'' to correct
this. The previous central bank governor, Ebrahim Sheibani, quit last year because of differences with
Ahmadinejad over interest rate policy. The current governor, Tahmasb Mazaheri, has proposed bank loan
repayment rates, or ''profit-sharing'' rates, based on inflation plus a fee - a move analysts consider a reversal
of a policy backed by Ahmadinejad that had sent rates below inflation. Iran, one of the world's biggest
producers of crude oil, has raked in $70 billion in oil revenue in the past year, the government says. But
much of that cash flows out in lavish subsidies on everything from fuel and transport to food and medicine.
''The system is buying loyalty to pursue its nuclear program,'' said Saeed Laylaz, an economist. Many of the
subsidies are not specifically targeted at low-income individuals, which often means that the rich, who can
consume more, benefit more from them than the poor. Adeli put the direct and indirect cost of fuel
subsidies alone at $45 billion a year. Lacking the refining capacity to meet domestic demand, Iran had been
importing at least $5 billion worth of gasoline a year, which was sold at low cost to the public, a policy that
encourages waste and smuggling. To reduce the import bill, the government began rationing gasoline last
year. Last week, in an apparent bid to streamline the subsidy, rationing was temporarily relaxed to let
drivers buy extra gasoline for five times more than the subsidized price. The new system could be
extended, although a liberalized price could also have a short-term inflationary effect. ''Taking away
subsidies is no easy matter,'' said Mohammad Ali Farzin, an Iranian economist who heads a poverty
reduction effort by the United Nations Development Program. ''The scale of the problem is just so
overwhelming that it will take time.'' Farzin added that dependence on subsidies was growing. ''Where you
have chronic inflation, disproportionate rises in property prices relative to income, serious
unemployment and underemployment, it's only natural that low-income households cannot keep up,''
he said. ''So they rely on subsidies.'' Ali Reza Cheloyan, a farmer in Ahmadinejad's home town of Aradan,
east of Tehran, acknowledged his dependence on state aid for fertilizer, tractors, gasoline and bread, as well
as the price he got for his wheat and cotton. ''Inflation has gone up but it's a global problem. We support the
government,'' he said. Iran has reduced absolute poverty over the years, but officials say that 7 percent to 10
percent of the population of 70 million still live with less than a minimum daily intake of 2,100 calories.
But Farzin, the economist, said wealth inequalities were widening. ''Iran's economy doesn't produce in such
a way as to generate sufficient employment, distribute the income well and alleviate relative poverty,''
Farzin said. ''This is the core problem.'' Iran is grappling with economic challenges that are exacerbated by
UN and U.S. sanctions that have raised the cost of doing business and deterred badly needed Western
investment in its oil and natural gas industry. But analysts said it would be rash to assume that more
economic pressure would force Iran's leaders to compromise in their dispute with the United States and its
allies over the country's nuclear program, which the West suspects has a military purpose. Tehran denies
this. Adeli, the former central bank governor who is also a former ambassador, said he thought that
sanctions were futile. ''Historically, they haven't been able to serve their purpose, especially when it comes
to Iranians, with their pride, their resilience, their resistance towards foreigners,'' he said.
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INTERNAL LINK: DECREASED SUBSIDIESECON COLLAPSE-


VENEZUELA

DECREASE IN OIL PRICES DESTABILIZES VENEZUELAN ECONOMY

The Washington Post, 2006

(Divided Venezuelans United on Costly Policy of Cheap Gas, Lexis)

One downside to the cheap gas, though, is that it eats up about $1 billion in subsidies and
another $5 billion that Venezuela fails to earn by not selling the oil on the world market,
where a barrel reached a high of $78 this year. It generates the horrendous traffic jams
that mark this city, where 2 million cars snake along at an average speed of 9 mph. It also
has made the sale of contraband gasoline to neighboring Colombia a major criminal
enterprise.

The policy, critics say, is a vicious circle that feeds on itself as Venezuelans seeking
investments, ever mindful that filling up a tank costs less than a ham sandwich, buy cars
at a record clip. More than 320,000 cars have been sold this year alone.

HIGH OIL PRICES IN THE UNITED STATES KEY TO VENEZUELAN


ECONOMY

Cesar J. Alvarez, 2008

(Venezuela’s Oil-Based Economy, Council On Foreign Relations,


http://www.cfr.org/publication/12089/venezuelas_oilbased_economy.html)

Venezuela's proven oil reserves are among the top ten in the world. Oil generates about
80 percent of the country’s total export revenue, contributes about half of the central
government’s income, and is responsible for about one-third of the country’s gross
domestic product (GDP). Increases in world oil prices in recent years have allowed
Venezuelan President Hugo Chavez to expand social program spending, bolster
commercial ties with other countries, and boost his own international profile. Though
Chavez has threatened to stop exporting Venezuelan oil and refined petroleum products
to the United States, its biggest oil-trading partner, experts say a significant short-term
shift in oil relations between Venezuela and the United States is unlikely. The medium-
term outlook for state oil company PDVSA is questionable, however, and analysts draw
links between PDVSA's profitability and the political stability of the country.

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INTERNAL LINK: DECREASED SUBSIDIESECON COLLAPSE-


VENEZUELA

ABANDONING SUBSIDIES THREATENS VENEZUELAN STABILITY AND


ECONOMY- EMPIRICS PROVE

The New York Times, 2007

(Venezuela's Gas Prices Remain Low, but the Political Costs May Be Rising, Lexis)

Motorists in the United States smarting from rising gasoline prices, take note: Mr.
Taurisano pays the equivalent of $1.50 to fill his Hummer's tank. Thanks to a decades-old
subsidy that has proven devilishly complex to undo, gasoline in Venezuela costs about 7
cents a gallon compared with an average $2.86 a gallon in the United States.

''It is one clear benefit to living in an otherwise challenging country,'' said Mr. Taurisano,
34, who also owns a BMW, a Mercedes-Benz, a Ferrari and a Porsche.

Many Venezuelans consider the subsidy a birthright even though it bypasses the poor,
who rely on relatively expensive and often dangerous public transportation. Economists
estimate that it costs the government of President Hugo Chavez more than $9 billion a
year.

Critics of Mr. Chavez, and the president himself, agree that the subsidy is a threat to his
project to transform Venezuela into a socialist society, draining huge amounts of money
from the national oil company's sales each year that could be used for his social welfare
programs.

Gasoline prices have often been a taboo subject for Venezuelan governments. There are
memories of the riots in 1989, in which hundreds, perhaps thousands, of people died after
protests set off by an increase in gasoline prices that resulted in higher transportation
costs. That instability helped set in motion a failed coup attempt by Mr. Chavez in 1992,
which first thrust him into the public eye.

After his re-election to a six-year term last December, when his political capital was
abundant, Mr. Chavez called the gasoline prices ''disgusting'' and said his government
was planning to raise them with a measure ''financed by those who own a BMW or a
tremendous four-wheel drive.'' But he turned his attention to other matters, avoiding the
touchy subject.

The link between social peace and gasoline so cheap it is almost given away is evident to
many motorists. ''If you raise gasoline, the people revolt,'' said Janeth Lara, 40, an
administrator at the Caracas Stock Exchange, as she waited for an attendant to fill the
tank of her Jeep Grand Cherokee at a gas station here on a recent day. ''It is the only

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cheap thing.''

During an oil boom that is lifting the incomes of both rich and poor, Venezuela is
grappling with Latin America's highest inflation rate, about 16 percent. The local
currency, the bolivar, has plunged almost 50 percent in unregulated trading this year,
reaching a record low of about 6,000 to the dollar in October (the official rate is fixed at
2,150 to the dollar.) Gasoline is one of the few products subject to price controls here that
is in relatively ample supply. Newspapers have been filled recently with tales of
consumers struggling to find milk. Last month, eggs were scarce.

Economic uncertainty makes it harder to tinker with fuel prices because a small increase
could cascade. There could be an impact on the poor, with higher costs for food and other
goods for which transportation costs are important, said Francisco Rodriguez, a former
chief economist at the National Assembly.

A DROP IN OIL PRICES UPSET VENEZUELAN REVENUES THAT ARE


CRITICAL TO CONTINUED SUBSIDIES NECESSARY FOR SUSTAINING
THE ECONOMY

The Globe and Mail, 2006

(Chavez's fate may rest in OPEC's hands; Venezuelan president desperately seeks
production cut to drive up crude oil prices, Lexis)
More than most members of the Organization of Petroleum Exporting Countries, Mr.
Chavez is desperate to the stop the erosion of oil profits, which he has spread widely to
support his popularity at home and abroad.
He has used the country's petrodollars to fund social programs that have garnered him
tremendous support among the poor in Venezuela, where he faces an increasingly
competitive election in seven weeks. He also financed international aid commitments that
bolstered his image abroad, including his as-yet unsuccessful attempt this week to win a
seat on the United Nations Security Council.
But Chavez-watchers say Latin America's champion of the underdog will have to rein in
his ambitions and make some tough choices if crude prices fall much further.
"They're totally stretched," said Riordan Roett, professor of Latin American studies at
Johns Hopkins University.
"I think Chavez is about to hit a wall in that his commitments in Venezuela, but also his
commitments throughout the region, are based on very high and continuing high oil
prices," he said.
"Unless he is able to convince other members of OPEC to have a sharp drop in
production - which I think is what he needs to achieve his goal - Venezuela is in trouble."
OPEC ministers agreed to meet in Qatar tomorrow in an attempt to halt the slide in crude
prices, which have dropped from a record $78 (U.S.) a barrel this summer to below $58
last week. Yesterday, the benchmark West Texas intermediate fell $1.01 to close at
$58.93 on the New York Mercantile Exchange.

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But analysts question whether the OPEC ministers will be able to agree on the mechanics
of the production cuts, given that countries such as Saudi Arabia, Algeria and Libya have
invested heavily in additional capacity, while such members as Indonesia, Iran and
Venezuela are producing well below their quotas.
For Mr. Chavez, record crude prices over the past year have masked a growing problem.
His cash cow, the state-owned oil company Petroleos de Venezuela SA (PDVSA), has
seen its production decline as a result of the government's sacking of 18,000 workers
after a failed coup four years ago, and the lack of reinvestment.
Venezuela as a whole is now producing far less oil than allowed under its OPEC quota of
3.2 million barrels a day. Latest estimates from the International Energy Agency suggest
the country produces about 2.5 million barrels - a cut in output would hurt, but a fall in
prices would bite much harder.
Petroleos de Venezuela, which was the country's sole operator 15 years ago, once
pumped more than three million barrels of oil a day. Now it accounts for only about half
of the country's production, though Mr. Chavez has forced international oil companies to
accept PDVSA as a joint venture partner, meaning the state-owned company's nominal
output will rise.
Roger Tissot, director of the Latin America group for Washington-based PFC Energy
consultants, said Mr. Chavez likely needs a $60 price to stave off serious financial [Card
continues, no text omitted]…
problems. He said the Venezuelan government is already operating in a slight deficit
position, despite record prices.
Mr. Tissot said Mr. Chavez has boosted spending dramatically to further his domestic
and international agenda, including the bid for UN Security Council seat. That effort has
resulted in a humiliating setback for the Venezuelan leader as his country trails
Guatemala in voting after several rounds; neither has won the two-thirds support in the
General Assembly needed to take the two-year position.
Mr. Chavez is also facing a challenge as he runs for re-election Dec. 3 against opposition
candidate Manuel Rosales, who is attempting to outdo the President in his populist, big-
spending appeal.
Though few observers expect Mr. Rosales to defeat the incumbent, Mr. Chavez is
stepping up his spending campaign to keep the support of the people. Oil profits currently
subsidize energy costs, as well as basic food products and health care for the poor.

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IMPACT: INSTABILITYNUKE WAR-IRAN


Iran poses a extremely deleterious threat to Middle Eastern stability
Steinberg, 2k5 [Gerald M, April, Jerusalem Center for Security Affairs, Deterrence
Instability: Hizballah's Fuse to Iran's Bomb, http://www.jcpa.org/jl/vp529.htm]
At the same time, the zero-sum frameworks that have dominated may evolve into more cooperative
situations, in which confidence- and security-building measures may evolve, not due to pressures and
inducements from the outside, but from the internal recognition of the elements necessary for national
survival. Yet for all of the reasons explained in this analysis, this process, if it happens, could take many
years or decades, and during this period, avoidance of nuclear destruction will be tenuous, at best. For
the current political and strategic horizon, the prevention of Middle East nuclear proliferation by
focusing on halting the illicit Iranian acquisition of fissile material remains the best policy option. Other
regional steps such as mutual recognition and reliable communications will be necessary in order to
manage the relationship and prevent nuclear destruction. At the same time, proposals that lack
credibility and are based on amorphous and unreliable "international guarantees," such as those which
have failed to prevent Iranian, Iraqi, Libyan, and other violations of their NPT commitments, and that
will endanger Israel's survival, are counterproductive and unrealistic.

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NEG—TERRORISM IMPACT
Iranian instability magnifies the threat of nuclear terrorist attacks on U.S. soil
Eisenstadt, 2k4 [Michael (Senior Fellow at The Washington Institute), September 16,
“THE IAEA AND IRAN: THE PERILS OF INACTION WASHINGTON INSTITUTE FOR
NEAR EAST POLICY POLICY WATCH
#899,Google,http://www.iranwatch.org/privateviews/WINEP/perspex-winep-
eisenstadt-nucleariran-091604.htm]
The fact that Iran or its agents have not yet used chemical or biological agents in terrorist attacks may
indicate the existence of a normative threshold, or it may indicate that, having achieved important successes
by conventional terrorism (e.g., the 1983 Beirut Marine barracks bombing, which led to the withdrawal of
U.S. troops from Lebanon), Tehran perceives no need to incur the risk that the use of weapons of mass
destruction would entail. Nevertheless, Iran is likely to seek, when acting against more powerful
adversaries, the ability to covertly deliver such weapons by nontraditional means (i.e., terrorists, boats, or
remotely piloted aircraft). Because such methods offer the possibility of deniability, they are likely to
become important adjuncts to more traditional delivery means such as missiles. In situations in which
deniability is a critical consideration, they are likely to be the delivery means of choice. The possibility of
deniable, covert delivery of nuclear weapons by Iran could pose a major challenge for deterrence
particularly if the country's leadership believed that the nation's vital interests or the regime's survival was
at stake. Any assessment of the implications of Iran acquiring nuclear weapons is necessarily speculative,
and it is unlikely that all of the aforementioned possible outcomes will come to pass. But there can be no
doubt that the acquisition of nuclear weapons by an Iran that supports terrorism, seeks hegemony in the
Gulf, works to undermine American efforts to achieve Arab-Israeli peace and other critical U.S. interests in
the region, and continues to call for the destruction of another UN member-state (Israel), will be a source of
instability in a region of strategic importance to the international community.

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NEG—YES WEAPONS
Iran has nukes that could be galvanized against the U.S.
Steinberg, 2k5 [Gerald M, April, Jerusalem Center for Security Affairs, Deterrence
Instability: Hizballah's Fuse to Iran's Bomb, http://www.jcpa.org/jl/vp529.htm]
Iran is continuing to violate its commitments under the Nuclear Non-Proliferation Treaty (NPT), hide
facilities and activities from the International Atomic Energy Agency, and move steadily to a nuclear
weapons capability, European diplomatic efforts notwithstanding. Indeed, the extent of these activities
and the repeated discovery of Iranian efforts to hide the evidence is the most telling confirmation of the
weakness of the European approach. But instead of moving to a more visible and credible effort,
including sanctions and the threat of military action, European diplomats such as Javier Solana, the
EU's foreign policy czar, dismiss and undermine the Bush administration's reminders that military
options have not been ruled out. As a result, Iranian decisions-makers can confidently conclude that
they can achieve a nuclear weapons capability without a significant penalty. In private conversations,
many Europeans are increasingly ready to admit the obvious - that without credible threats, Iran will not
end its pursuit of nuclear weapons. They then argue that this is not disastrous, and that Iran will, of
necessity, act as a responsible nuclear power in order to avoid catastrophic destruction. They point to
the history of the U.S. and the Soviet Union as an example of successful deterrence, and draw a highly
simplistic and dangerous analogy to compare it to the threat that would be posed by a nuclear-armed
Iran with respect to its neighbors in the Middle East, including the Gulf oil producers, as well as Israel,
the U.S., and even Europe. More serious analysis reveals that the potential for the development and
maintenance of a stable deterrence relationship with a radical and isolated Islamic Iranian leadership
armed with nuclear weapons is highly problematic. Instead, as demonstrated by Pakistan in the 1999
Kargil crisis with India, this regime could trigger confrontations and crises that could quickly escalate
out of control. The Iranian religious leaders who make the key decisions via the Expediency Council
have very limited knowledge of and contact with the outside world, and have close links with terror
groups such as Hizballah, Hamas, and Islamic Jihad. Given this assessment, and the prospect of
continued failure in the diplomatic arena, military approaches are likely to be examined carefully,
despite the inherent difficulties and risks.

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NEG—ISRAEL IMPACT
Iran poses a grave threat to Israel
Steinberg, 2k5 [Gerald M, April, Jerusalem Center for Security Affairs, Deterrence
Instability: Hizballah's Fuse to Iran's Bomb, http://www.jcpa.org/jl/vp529.htm]
Iran, with its allies and subsidiary groups, poses the greatest danger to Israel's survival. Its frequent,
emotion-filled declarations of intent to "wipe Israel off the map" are often matched by actions in
support of terrorist proxies. Similarly, in Saudi Arabia, Kuwait, Turkey, and other countries that are
within range of Teheran's growing "sphere of influence," as well as in the U.S., the prospect of a
nuclear-armed Iran - a core member of the "axis of evil" - is very unsettling. This nightmare scenario is
not new and did not suddenly become apparent following the revelations regarding the extent of the
links between Iran and A.Q. Khan, the head of the Pakistani "nuclear Walmart" - to use IAEA director
Dr. Mohammed El-Baradei's terminology. The evidence that Iran has been secretly acquiring facilities
and materials for an illicit nuclear weapons capability, in violation of its NPT commitments, has been
increasingly evident. Continued development of large-scale uranium enrichment facilities, a heavy
water production plant, and a plutonium production reactor in Arak,1 as well as other key components
of the atomic fuel cycle, clearly show Iran's goal of obtaining nuclear weapons. (IAEA inspectors were
prevented from entering two large rooms and taking samples at the Kalaye Electric Co., a "watch-
making factory" located in a Teheran suburb.)2

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MISC.—AIR ATTACK WILL FAIL

An air attack will be ineffective in deterring Iranian aggression


Steinberg, 2k5 [Gerald M, April, Jerusalem Center for Security Affairs, Deterrence
Instability: Hizballah's Fuse to Iran's Bomb, http://www.jcpa.org/jl/vp529.htm]
Iran, with its allies and subsidiary groups, poses the greatest danger to Israel's survival. Its frequent,
emotion-filled declarations of intent to "wipe Israel off the map" are often matched by actions in
support of terrorist proxies. Similarly, in Saudi Arabia, Kuwait, Turkey, and other countries that are
within range of Teheran's growing "sphere of influence," as well as in the U.S., the prospect of a
nuclear-armed Iran - a core member of the "axis of evil" - is very unsettling. This nightmare scenario is
not new and did not suddenly become apparent following the revelations regarding the extent of the
links between Iran and A.Q. Khan, the head of the Pakistani "nuclear Walmart" - to use IAEA director
Dr. Mohammed El-Baradei's terminology. The evidence that Iran has been secretly acquiring facilities
and materials for an illicit nuclear weapons capability, in violation of its NPT commitments, has been
increasingly evident. Continued development of large-scale uranium enrichment facilities, a heavy
water production plant, and a plutonium production reactor in Arak,1 as well as other key components
of the atomic fuel cycle, clearly show Iran's goal of obtaining nuclear weapons. (IAEA inspectors were
prevented from entering two large rooms and taking samples at the Kalaye Electric Co., a "watch-
making factory" located in a Teheran suburb.)2 Over the past decade, high-level international
committees were formed to consider the diplomatic and military options and their implications in detail.
Attempts were made to persuade Russia and China to stop the flow of unsafeguarded technologies and
expertise into Iran. This supply-side approach to non-proliferation was clearly an example of "too little,
too late." Similarly, discussions of international fuel-cycle facilities that would prevent individual
countries, such as Iran, from acquiring the technology and materials to make nuclear weapons may be
well-intentioned but are unrealistic in the time-frame in which action must be taken before Teheran
reaches the finish line. Taking another approach, the European "troika," consisting of Britain, France,
and Germany, tried the opposite route, offering Iran advanced technology, including civil nuclear
facilities but without the fuel cycle, in exchange for abandoning its illicit weapons program. In
November 2003, with great fanfare, an agreement between Iran and the Europeans was announced in
which Iran agreed, or so it seemed, to freeze its uranium enrichment activities and also open up the
facilities to IAEA inspection. But a few months later, when IAEA inspectors began to arrive at these
sites to check for signs of enrichment and other fuel cycle activities, their access was limited, and what
they found confirmed that the Iranian activities were continuing.3 So the Europeans tried again, and a
year later another agreement was announced, but at the same time, Iran continued to move closer to an
indigenous weapons capability.4 If the current regime that controls the Islamic Republic of Iran cannot
be persuaded to drop its nuclear ambitions, perhaps a different and more liberal regime would be less
obsessed with this project and also recognize the inherent dangers. Indeed, a few years ago, many
diplomats and analysts thought that the reformist movement under President Khatami would be that
moderating force in Iran that would slow, if not stop, the pursuit of nuclear weapons and would pursue
a more stable foreign policy. However, in the past few years, Iran's "hardliners" have reasserted control,
making regime change in the next few years seem unlikely. As a result of the failure of these initiatives,
the "window" within which Iran might be stopped short of the finish line is closing quickly. Hopes that
the political leadership of the IAEA would suddenly acknowledge the overwhelming evidence of
cheating, which the agency's own reports (available at the IAEA Internet site) show began almost two
decades ago, are disappearing (if such hopes were ever realistic), and the time remaining for the
imposition of sanctions to prevent the production of enriched uranium is fading. The European efforts
may have slowed the pace of uranium enrichment during the past year, and may be able to further
extend the time-frame for a diplomatic solution, but the odds of success are small. If, as is feared,
diplomatic efforts led largely by Europe fail, this will leave two main options for responding to Iranian
nuclear capabilities - military action in the form of a preventive attack, or acceptance of the situation
and reliance on deterrence. As will be discussed below, military action would be complex and risky.
But at the same time, an unstable and uncertain deterrence relationship may be even riskier, particularly
for Israel, but also for the U.S. and Europe. The prospects for stable deterrence involving the current
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Iranian regime are quite slim, and the dangers posed by the potential involvement of Iran's terrorist
proxies and clients, including Hizballah, are alarming.

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MISC.—DETERRENCE DOESN’T SOLVE


Deterrence efforts will fail to impede Iran for spurring instability in the Middle
East
Steinberg, 2k5 [Gerald M, April, Jerusalem Center for Security Affairs, Deterrence
Instability: Hizballah's Fuse to Iran's Bomb, http://www.jcpa.org/jl/vp529.htm]
Historically, in response to other threats to national survival, Israel has placed primary emphasis on
maintaining a credible and robust deterrence capability. The deep structural asymmetries in the region
in terms of territory and population make Israel appear to be vulnerable to a crippling first strike. Thus,
Israel's capability to inflict overwhelming and disproportionate costs regardless of the extent of the
initial attack has been a central feature in deterring attack. This is the case with respect to conventional
warfare (based on overwhelming air superiority and highly mobile ground forces), as well as providing
the foundation for the development of its policy of "deliberate ambiguity" with respect to nuclear
capabilities. This policy has served Israel well, to date. Egyptian military planners have acknowledged
their decision to opt for a limited strategy in the 1973 war in order to avoid triggering an Israeli strategic
response. In 1991, the fact that Saddam Hussein did not use chemical or biological warheads in the
missile attacks on Israel is also attributed to fear of overwhelming Israeli retaliation. Furthermore,
Israel's nuclear capability and the realization that Israel could not be "wiped off the map" without
massive retaliation were important factors in initiating peace processes with Egypt, Jordan, and
beyond.12 However, the development of an Iranian nuclear capability and a multipolar nuclear
environment would end the stability resulting from the ambiguous Israeli nuclear posture, and would
fundamentally change the calculus of strategic deterrence in all major dimensions. In the context of a
multipolar nuclear Middle East and the need for a credible second-strike capability, maintenance of
Israel's policy of deliberate ambiguity ("don't ask, don't declare, and don't test") would become
increasingly difficult. Credibility and communications are central components of stable deterrence, and
a more overt and visible nuclear weapons capability may be seen as necessary to avoid Iranian (and
wider regional) misperceptions, particularly given the isolation of decision-makers in Iran. However,
the isolation of Iran's leaders, the fog that surrounds its decision-making structures, the absence of direct
channels of communication, and its radical, religious-based, revisionist objectives will make the
development of stable deterrence extremely difficult. While the Iranian leadership is not seen as suicidal
or particularly prone to high-stakes risk-taking (in contrast to Saddam Hussein and other Arab leaders),
there are likely to be many misperceptions regarding Israeli intentions and red lines. With many
potential triggers for crises and escalation between Teheran and Jerusalem, including Hizballah, Hamas,
and Islamic Jihad, and extremist elements within Iran, the difficulty in managing these crises in a
nuclear environment will pose a formidable challenge. In comparing a potential Israeli-Iranian
deterrence relationship to the U.S. and the Soviet Union during the Cold War, the key event is the 1962
Cuban missile crisis. The successful management of this crisis, which brought the two nuclear
superpowers "eyeball to eyeball" and to the brink of mutual destruction, depended on the existing
diplomatic ties and channels of direct communications. There were periodic summit meetings between
U.S. and Soviet leaders, and at the height of the confrontation, they could at least fall back on these
shaky links. This is also true with respect to India and Pakistan, which came close to mutual destruction
during the Kargil crisis following their respective decisions to test nuclear weapons. But no such links
exist in the case of Iran, which maintains a policy of boycotting the "Zionist entity" and supporting
terrorist groups, thus maintaining a proxy war against Israel. This policy is particularly irresponsible
and dangerous for a country armed with nuclear weapons and itself a target for massive retaliation. As a
result, while deterrence theory provides a basis for hope for survival in this dangerous environment, in
practice, in the Iranian case, this relationship will be highly dangerous and unstable.

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IMPACT: BIODIVERSITY-VENEZUELA

VENEZUELA KEY TO BIODIVERSITY

CNN.com, 2006

(http://www.youtube.com/results?
sarch_query=ben+folds+philosophy&search_type=&aq=-1&oq=ben+folds+philosoph)

CARACAS, Venezuela (Reuters) -- Scientists studying an unspoiled jungle river


wilderness in Venezuela announced this week the discovery of 10 new fish species,
including a red-tailed tiddler, a "punk" catfish with a spiky head and a piranha that eats
fruit as well as flesh.

They called on the Venezuelan government and international conservation bodies to


protect the Caura River Basin in Bolivar state, a vast area of pristine tropical forest and
waterways covering five percent of the surface of the oil-rich country.

Conservationists fear encroachment by human settlement, as well as fishing, farming,


mining and possible government hydroelectric projects, could destroy what they call one
of the world's richest biodiversity "hotspots."

"The Caura River Basin requires immediate and urgent protection as a wildlife reserve,"
said Antonio Machado, a zoologist from Venezuela's Central University who announced
the new fish discoveries in Caracas.

Biodiversity collapse threatens human extinction

Schlickeisen 2000

(Roger, President of Defenders of Wildlife and the Natural Resources Defense Council,
May 24, Federal News Service)

A 1998 survey by the American Museum of Natural History confirmed that a majority of
scientific experts believe that we are in the midst of a mass extinction of living things.
These scientists agree that: the loss of species will pose a major threat to human existence
in this century; during the next 30 years as many as one-fifth of all species alive today
could become extinct; this so-called "sixth extinction" is the fastest in the Earth's 4.5
billion-year history, but unlike prior mass extinctions, is primarily the result of human
activity and not natural causes; biodiversity loss is a greater threat than the depletion of
the ozone layer, global warming or pollution and contamination.

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**AFFIRMATIVE ANSWERS-SUBSIDIES DA**

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UNIQUENES—LOW OIL PRICES


Drop in prices—speculation

Thomas Financial News, 7/22, 2k8 [“SKorean shares outlook—higher on fall in oil
prices,” http://www.forbes.com/afxnewslimited/feeds/afx/2008/07/22/afx5242309.html]

SEOUL (Thomson Financial) - South Korean shares are expected to open higher on Wednesday as
investors cheer gains on Wall Street following another sharp drop in oil prices, helping ease worries about
the impact of high crude costs on the global economy. The Dow rose 1.2 percent on Tuesday as a barrel of
light, sweet crude tumbled $3.09 to settle at $127.95 on the New York Mercantile Exchange, down nearly
$20 from its record high of $147.27, reached just weeks ago. The price of oil began the session mildly
lower on expectations that Tropical Storm Dolly wouldn't disrupt oil operations in the Gulf of Mexico. The
advance increased after comments from a Federal Reserve official sent the dollar higher against major
currencies, a trend that in turn

More evidence

Mouawad and Henriques 7/23, 2k8 [“Jad and Diana, New York Times, “Speculators
aren’t driving up oil prices, report says”
http://www.nytimes.com/2008/07/23/business/23commodities.html?ref=business]

After settling at a record $145.29 a barrel on July 3, oil futures on the New York Mercantile Exchange have
been sliding in recent weeks. On Tuesday, oil fell $3.09 to $127.95 a barrel. Average gasoline prices have
also been declining recently, from a record of $4.11 a gallon on July 17 to $4.05 a gallon on Tuesday.

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VENEZULEAN ECONOMY STRUGGLING NOW

Chris Kraul, 2008


(Journalist for the Los Angeles Times, Awash in oil wealth, Venezuela suffers healthcare
crisis,http://www.boston.com/news/world/latinamerica/articles/2008/04/09/awash_in_oil_wealth_venezuela_suffers_healthcare_crisis/
?page=1)

Palacios, the nation's largest public maternity hospital and once the nation's beacon of neonatal care, has
fallen on hard times. Half of the anesthesiologists and pediatricians on staff two years ago have quit. Basic
equipment such as respirators, ultrasound monitors, and incubators are either broken or scarce. Six of 12
birth rooms have been shut. On one day in March, five newborns were crowded into one incubator, said Dr.
Jesús Méndez Quijada, a psychiatrist and Palacios staff member who is a past president of the Venezuelan
Medical Federation The deaths of the six infants "were not a case of bad luck, but the consequence of an
accumulation of circumstances that have created this alarming situation," Quijada said.
The problems at Concepción Palacios are symptoms of a variety of ills plaguing the public healthcare
system under leftist firebrand President Hugo Chávez, Quijada and others say. Cases of malaria nearly
doubled between 1998, the year before Chávez took office, and 2007. Incidents of dengue fever more than
doubled over the same period. Poorly paid doctors regularly demonstrate at hospitals from Puerto La Cruz
in the northeast to Maracay in the industrial heartland, demanding back pay and protesting the lack of
equipment and supplies. Others are leaving in droves for Spain, Australia, or the Middle East, where they
can make 10 times the $600 monthly average salary they earn in public hospitals.
Problems in Venezuela's healthcare system did not materialize when Chávez took office. The system has
been riven with corruption, mismanagement, and disorganization for decades. Tropical conditions have
made the country ripe for a host of epidemics difficult for any government to control. An encephalitis
outbreak in 1996 sickened 20,000 people. But the system's current crisis comes as the country is awash in
oil wealth, a windfall that critics say could be used to ease the problem. Instead, Chávez is building a
parallel health program called "Barrio Adentro," which features 11,000 neighborhood clinics staffed mainly
by Cuban doctors. Inaugurated nationwide in 2003, Barrio Adentro initially was so popular with poor
people that it helped Chávez win a crucial 2004 referendum and hold on to power. It has brought basic
healthcare to the barrios, with free exams and medicine as well as eye operations that have saved the sight
of thousands. But the system siphons resources and equipment from the public hospitals, which have four-
fifths of the nation's 45,000 hospital beds and where the public still goes for emergency and maternity care,
as well as for most major and elective surgeries. The finances and organization of Barrio Adentro are "a
black box and not transparent so it's impossible to analyze it for efficiency," said Dr. Marino Gonzalez,
professor of public policy at Simón Bolivar University here. A lack of openness has affected other facets of
public health too. After the medical establishment blamed him for an outbreak of dengue fever last
summer, Chávez halted weekly publication of an epidemiology report that for 50 years had tallied
occurrences of infectious diseases nationwide. Former Health Minister Rafael Orihuela contends the loss of
the weekly report has deprived the government of information needed for a quick response to outbreaks of
disease. "I am not talking about a failure of the government to adopt innovations in healthcare," said
Orihuela, a Chávez critic. "I am talking about a failure to maintain basic healthcare standards." Chávez has
also been accused of appointing cronies to manage public health. Efforts to arrange an interview with
Minister of Popular Power for Health Jesús Mantilla, who served with Chávez in the military, were
unsuccessful last week. Politics and polarization fuel the healthcare debate. Depending on who is speaking,
Venezuela is either suffering from the pangs of a new dawn in socialist healthcare - or from monumental
incompetence of top-level bureaucrats. But even government officials admit the public health system in
recent months has been on the verge of collapse, evidenced by problems in maternal and newborn care.
Since the mid-1990s, the maternal death rate of women giving birth has risen 18 percent, to 59 of every
100,000 deliveries, according to UNICEF. That's four times the rate in Chile. Venezuela's infant mortality
rate of 18 deaths for every 1,000 live births in 2007 was down from 20.5 in 1998, but still double the rate of
Chile and higher than other Latin American countries such as Colombia, Uruguay, and Costa Rica. "It's not
that before Chávez things were great," Gonzalez said. "It's that things have deteriorated."

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THE AFFIRMATIVE’S IMPACTS ARE INEVITABLE-VENEZUELAN ECONOMY


IS COLLAPSING NOW

Wilson, No Date Given

(Lieutenant Colonel, United States Army,


http://www.strategicstudiesinstitute.army.mil/pdffiles/ksil33.pdf)

With less than two years remaining in his current term in office, President Chavez leads a
country that is sharply divided. Although elected as a reformer with a broad mandate by
the people to close the substantial and long-standing gap between the haves and have-
nots in Venezuela, Chavez’s actions seem to have had the opposite effect. Chavez does
not enjoy the support of business leaders, the traditional power brokers of the country,
who stand to lose significantly if Chavez is successful in shifting wealth from them to the
poor who make up a majority of the population. The working class has grown impatient
with Chavez’s lack of progress and labor unions have joined business leaders in
opposition to Chavez.25 Chavez’s most loyal supporters are among the country’s urban
poor, the fastest growing segment of Venezuelan society.26 his recent political instability
has had serious effects on the Venezuelan economy, including sharp drops in gross
domestic product and investment. The economy has been in a depression for more than
two years. Inflation was 31% in 2002 27 and 41% in 2003.28 Unemployment is also
fairly high at 16%-18%.29 There is considerable income inequality in Venezuela, with
somewhere between 50 and 65% of the population living in poverty.30 The research
institute AEI estimates that 43% of Venezuelans live in extreme poverty in households
earning less than $173 each month.31 The middle class is fast disappearing due to
worsening economic conditions and emigration and the polarization between rich and
poor is increasing.32 Crime is rising in Venezuela, fueled by the deteriorating economy
and incompetence and corruption among the police forces. This is posing a significant
threat to human rights within the country and is chasing away foreign investment.33 This
political and economic instability in Venezuela has also had a negative impact in the U.S.
During and after the period of the national strike in Venezuela, oil prices rose by
approximately one-third, or about $10/barrel. Although there were other contributing
factors to this price increase, including preparation for Operation Iraqi Freedom, cold
winter weather in the U.S. and unrest in Nigeria, the strike and uncertainty of future
production in Venezuela was a significant factor.

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SUBSIDIES TURNS

SUBSIDY RATION/INCREASE SOLVES CONSUMPTION CRISIS

BBC 07
(BBC Monitoring Middle East, “Iranian president says petrol rationing resulted in drop in consumption”, BBC Monitoring Middle
East, 7/1/07, Lexis)

There are different ways to tackle this [high consumption rates]. One of those ways
is to ration petrol. The reality is that all these ways lead to the decrease in consumption. We have to decrease it;
otherwise we will not be able to cope with this ever-increasing consumption rate. I
think the people, the experts and our industrialists should help us turn this situation to a great opportunity for our economy and
industry. Now what do I mean by an opportunity? It can be an opportunity to develop gas-intensive industries. Those who can set up
factories and help switch car fuels to gas, can come and invest. Our
people will be under pressure for a little
while, but after three or four years, all our vehicles will be using gas as their fuels
and will no longer have to worry about petrol. We have enough gas to supply us for 100s of years, and its
price is far cheaper than petrol. Even if we want to give subsidies on gas, the amount will be far less. Through the savings in this
procedure we can help reconstruct Iran. Everyone should pay attention. According to the budget bill, the government's total
development budget this year is 18,400 billion tumans [approximately 18,400 million dollars]. But what we receive in practice is less
than 15,000 billion tumans. Now how much fuel [petrol] do we consume in the country? We consume 55 billion dollars worth of fuel,
If we
i.e. 50,000 billion tumans [a year]. And more than 40,000 billion tumans of this amount is being paid in the form of subsidies.
manage to save half of this amount, we will be able to increase our development
projects by twice as many as the current number and I have to say that the current
number of projects and the way they are being carried out are unprecedented in
history of the country. It is unprecedented to carry out development projects worth 15,000 billion tumans in just a year.
This amount is nearly 2.6 times more than the projects carried out in the year 1383 [2004]. It is a huge amount for a year's investment.
all the half-
However, if we are more careful and do not waste, we can increase this figure by 2 to 2.5 times. This means that
complete projects of the country, which take seven or eight years to complete, can be
finished in two or three years. We will be able to build refineries, factories,
universities and roads. We [CARD CONTINUES}…will be able to build highways
and railroads so that our people won't endanger their lives or waste their time in
roads. We can equip our research centres and laboratories. It is a huge figure; only if half of it. If
it was transferred to gas, and we conserved, two-thirds could be saved. We can use this to build the future of the country. There are
some pressures at the beginning, I admit. We should cooperate to cushion that pressure. The plan to replace gas is forging ahead fast.
By Mehr [starts on 22 September 2007], God willing, there will have been 550 gas [CNG] pumps in the country. By the end of the
year [20 March 2008] the figure will rise to 1,000. We are trying our best; connecting networks. On the other hand, we lent support to
measures to bring in factories, [and] equipment. People can come forward. If our cars run on gas, the environment will benefit a lot as
far as environmental standards are concerned. We will have a healthier environment. After all, the pollution gas causes is by far less
than petrol and diesel. Cars [changes thoughts] carmakers should focus on less consumption. I remember when some countries wanted
to turn around their industry, they introduced a shock onto global oil and petrol markets. Prices increased three-fold, four-fold. That
put pressure on local industries. As a result their experts developed cars which consumed less petrol.

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NO INTERNAL LINK

NO RISK OF CHAVEZ CHANGING HIS SUBSIDY POLICY- FEAR OF BACKLASH


BEFORE THE ELECTIONS

Benedict Mander, June 2008

(Journalist for the Financial Times, Venezuelans enjoy costly petrol subsidy,
http://www.ft.com/cms/s/0/d1ec8ed8-46c8-11dd-876a-0000779fd2ac.html)

Elsewhere in
the world, particularly in south-east Asia, petrol subsidies are being trimmed
because of increasing costs and the distortions that they bring as the price of oil rises.

But in Venezuela shorter-term imperatives mean that the subsidy is unlikely to be


eliminated soon. On Saturday Hugo Chávez, the president, said he had “no immediate plans” for a
petrol price rise.
Economists say the petrol subsidy is costing the government at least $10bn to $12bn (€7.6bn, £6bn) a year in lost export revenues.

Mr Chávez is already struggling to contain the highest inflation rate in the western
However,
hemisphere – it is over 30 per cent. Raising petrol prices would only push this higher.

Another formidable barrier is that such a move would be hugely unpopular – subsidised
petrol has existed in Venezuela for decades and is now practically considered a birthright.

Chávez is not willing to risk a backlash with regional elections approaching in


Analysts say Mr
Memories of the 1989 riots triggered by a rise in petrol prices, which ultimately
November.
precipitated the downfall of the government, remain fresh.

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AFF—IMPACT INEVITABLE

Iranian aggression is inevitable--driven by political and economic motives


Steinberg, 2k5 [Gerald M, April, Jerusalem Center for Security Affairs, Deterrence
Instability: Hizballah's Fuse to Iran's Bomb, http://www.jcpa.org/jl/vp529.htm]
Opponents of military action to prevent Iran from obtaining nuclear weapons often argue that while a
preventive attack could unleash a cycle of retribution and counter-attack, the Iranian leadership is
cautious and would not use nuclear weapons to attack other countries, including Israel. Indeed, a strong
(if incomplete) case can be made for this relatively benign analysis. Iran's drive for nuclear weapons has
numerous sources, including regional power ambitions, the sense of vulnerability in a hostile Arab and
Sunni-dominated region, and a history of warfare, including the Iraqi invasion and eight-year-long war
during the 1980s. In addition, the survival of the regime is under threat, both from internal pressure and
from the U.S. government, and WMD is seen as a form of insurance policy rather than an inherently
belligerent option.6But the evidence also shows that the Iranian regime and its clients have aggressive
objectives that contribute greatly to instability in the region. In the terminology of international relations
theory, Iran is a revisionist state, uninterested in preserving the status quo but, rather, seeking to expand
and use its capabilities to alter the international and regional political framework. The regime's extreme
Islamic ideology and declarations of unmitigated hostility are seen as posing an existential threat to
Israel. In 2001, then-President Rafsanjani called the establishment of Israel the "worst event in history,"
and declared, "In due time the Islamic world will have a military nuclear device, and then the strategy
of the West would reach a dead end, since one bomb is enough to destroy all Israel."7 Similarly, Iran's
supreme leader Ayatollah Khamenei declared "that the cancerous tumor called Israel must be
uprooted."8 This obsession is also reflected in highly anti-Semitic programs on Iranian television, as
well as the transfer of shiploads of missiles, explosives, and weapons to Palestinian terror groups.
Israeli security officials point to Iranian financing, planning, training, intelligence, and other
involvement in suicide bombing and other terror attacks by groups such as Hamas.

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AFF—NO NUKES

No nuclear weapons in Iran


UN News Center, 2k7 [March 24, “Security Council tightens sanctions against Iran over
uranium enrichment,” http://www.un.org/apps/news/story.asp?
NewsID=21997&Cr=Iran&Cr1]
United Nations Security Council acted unanimously today to tighten sanctions on Iran, imposing a ban
on arms sales and expanding the freeze on assets, in response to the country’s uranium-enrichment
activities, which Tehran says are for peaceful purposes but which other countries contend are driven by
military ambitions. Following the adoption of resolution 1747, Iran’s Foreign Minister, Manouchehr Mottaki, immediately rejected it as illegitimate,
maintaining Teheran’s longstanding claim that the country’s nuclear programme is entirely peaceful and therefore outside of the Council’s brief. He also
charged that the sanctions were not being imposed in response to the nuclear programme but were rather “schemes of the co-sponsors” carried out “for narrow
The resolution reaffirms that Iran must take
national considerations aimed at depriving the Iranian people of their inalienable rights.
the steps required by the International Atomic Energy Agency (IAEA) Board of Governors, which has
called for a full and sustained suspension of all enrichment-related and reprocessing activities; and
ratification and implementation of the Nuclear Non-Proliferation Treaty’s (NPT) Additional Protocol
granting the IAEA expanded rights of access to information and sites, as well as additional authority to
use the most advanced technologies during the verification process. States are called on “to exercise
vigilance and restraint regarding the entry into or transit through their territories of individuals who are
engaged in, directly associated with or providing support for Iran’s proliferation sensitive nuclear
activities or for the development of nuclear weapon delivery systems.” Any such persons should be
reported to the Council’s Iran sanctions committee. A designated list of individuals banned from travel
is annexed to the resolution, but its provisions apply to others not listed who are involved in Iran’s
nuclear weapons programme. The resolution imposes a strict import/export ban on Iranian weapons,
deciding that “Iran shall not supply, sell or transfer directly or indirectly from its territory or by its
nationals or using its flag vessels or aircraft any arms or related materiel, and that all States shall
prohibit the procurement of such items from Iran by their nationals, or using their flag vessels or
aircraft, and whether or not originating in the territory of Iran.” States must also “exercise vigilance and
restraint” with regard to any battle tanks, armoured combat vehicles, large calibre artillery systems,
combat aircraft, attack helicopters, warships, missiles or missile systems destined for Iran. Except for
humanitarian or development aid, States and international financial institutions should not provide
funds to Iran, according to the resolution. All countries have 60 days to report to the Iran sanctions committee on steps they have taken to
give effect to the resolution. The resolution also aims for a diplomatic breakthrough, expressing the Council’s conviction that if the IAEA can verify that Iran
has suspended its uranium enrichment and reprocessing, this would lead to a negotiated solution that guarantees Iran’s nuclear programme is for exclusively
peaceful purposes. nderlining a willingness to work positively for a diplomatic solution, the Council encourages Iran, “to re-engage with the international
community and with the IAEA.” nder other provisions of the resolution, the Director-General of the IAEA is to report back to the Council within 60 days on
Iran’s nuclear programme. he Council will review Iran’s actions in light of that report and will suspend the sanctions “if and for so long as Iran suspends all
enrichment-related and reprocessing activities, including research and development, as verified by the IAEA, to allow for negotiations in good faith in order to
However, if Iran
reach an early and mutually acceptable outcome.” he measures will be terminated once Iran has complied with all Council demands.
does not comply, the Council will “adopt further appropriate measures” aimed at persuading Teheran to
comply with its resolutions and the requirements of the IAEA, the resolution warns. Today’s text also recalls an
IAEA Board of Governors resolution adopted last year which states that “a solution to the Iranian nuclear issue would contribute to global non-proliferation
efforts and to realizing the objective of a Middle East free of weapons of mass destruction, including their means of delivery.” Annexed to the resolution is a
proposal put forward last June by six countries – China, France, Germany, the Russian Federation, the United Kingdom and the United States – aimed at
achieving an end to the standoff by providing elements of a long-term agreement. Three months ago, the Council imposed a more limited set of sanctions on
Iran over the nuclear issue. That resolution, also adopted unanimously following weeks of intensive diplomacy, contains a list of persons and entities involved
with Iran’s nuclear and ballistic missile programmes that are subject to a freeze on their financial assets. Today’s resolution expands that list with an Annex
containing additional persons and entities also subject to the measures. Iran’s nuclear programme has been a matter of international concern ever since the
discovery in 2003 that it had concealed its nuclear activities for 18 years in breach of its obligations under the NPT.

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**CHINA/INDIA SCENARIO (TRANSITION)**

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TRANSITION 1NC SHELL (1/3)

A. Uniqueness-Chinese investment is increasing-theres an established long term


plan for action

Climate Ark, 06

(“China to increase investments in alternative energy projects”, 10/8/06,


http://www.ccchina.gov.cn/en/NewsInfo.asp?NewsId=6038)

China will step up investments in projects involving development of bio-energy and


other alternative energies between 2006 and 2010 to ensure energy security and
maintain its high economic growth. By increasing investments, the government
hopes to ensure China's energy security as the country fears that the soaring world
oil prices would have a negative impact on its economic growth, officials with the
Ministry of Finance said. Data showed that China's dependence on foreign oil reached 43
per cent last year. Departments concerned forecast that China's oil consumption would hit
450 million tonnes in 2020, with 250 million tonnes to be imported from abroad. The
ministry, however, did not elaborate on the investment figures, saying only that it
would earmark more funds for bio-energy, solar and wind energy projects, as well
as for coal-to-liquid fuel projects over the next five years, Xinhua news agency
reported. The ministry has listed the development of renewable energy a top priority in
the coming five years. It would also encourage consumers to save energy and make
efforts to build energy reserves. China has set a target of raising the proportion of
wind and solar power in its total energy supply to 10 per cent by 2010 and to about
16 per cent by 2020. To achieve the goal, China will need a total investment of 101.1
billion US dollars by 2020, offering vast business opportunities for foreign investors.
China, the world's second largest energy consumer after the United States, promulgated
the Law on Renewable Energy early this year, and put forward in its 11th Five-Year
Plan (2006-2010) the speedy development of renewable energy. Northwest China's
Ningxia Hui Autonomous Region plans to build nine new wind power plants with an
investment of 2.2 billion US dollars by 2020, the local government said. The region is
expected to become the country's biggest wind power generator in 2020, when it will
have the installed capacity of 2.15 million kw. The region's installed capacity of wind
power stood at 112,200 kw in 2005, according to the China Electricity Council (CEC), an
association of Chinese electricity plants. By 2005, Ningxia ranked fourth in wind power
capacity after Inner Mongolia and Xinjiang Uygur Autonomous Regions, and Liaoning
Province, the council said.

B. Link- Decreasing U.S. oil dependence will drastically plummet high oil prices—
consumes 25% of the oil produced globally

Roberts, 04

[Paul (Harper’s Magazine, Finalist for the National Magazine Award), “The End of Oil:
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APerilous New World]

TRANSITION 1NC SHELL (2/3)

The geopolitics of oil are vast, complex, and ever-changing, but three elements are of
absolute importance. The first is the preponderant role of the United States. Since the
earliest days of the oil industry, the country has been the dominant figure, first as the
world’s largest producer of oil and other energy and now as its largest consumer. Today,
one out of every four barrels of oil produced in the world is burned in America, and this
enormous, apparently limitless appetite exerts a ceaseless pull on the rest of the world’s
oil players and on the shape of the world political order. American oil lust is a mixed
blessing: on the one hand, such heavy dependence on foreign oil makes the United States
vulnerable to disruptions in supply and to energy “blackmail” and has, in addition,
fostered a long tradition of doing whatever is necessary, covertly or overtly, to ensure that
the United States — and U.S. oil companies — have access to world oil supplies. 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 1990s, 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.

C. Internal link-Drop in oil price causes china to abandon the shift to alternative
energy-Chinese military buildup to contend with the United States military

Reich, 07
(ROBERT, Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley, “China's
Military Buildup and Its Economic Goals”, 3/7/07, http://www.robertreich.org/reich/20070307.asp)

China announced this week that it’s planning to increase military spending 18 percent this year – its
largest military boost in almost a decade – to $45 billion. This makes China one of the largest defense
spenders in the world. The sum isn't much when compared to America’s military budget of more than $600
billion this year, but it’s large enough – and following so closely on the heels of China’s successful test of
an anti-satellite missile – as to spook the Pentagon. What’s going on? One clue is that China’s
announcement of its military buildup comes the same week Treasury Secretary Hank Paulson is scheduled
to visit, presumably to continue pressing China to raise the value of its currency in light of the huge and
growing trade imbalance with America. For China, economic security and military security go hand in
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hand. Both are part of the same strategy to make China a superpower. Maintaining its current 10
percent yearly growth rate necessitates reliable supplies of oil, natural gas, and other raw materials
TRANSITION 1NC SHELL (3/3)
[…CONTINUED WITHOUT ALTERATIONS] from all over the world; as well as the latest technologies. And
China also needs growing export markets to absorb its increasing production, and provide jobs to the
tens of millions of its people migrating from the countryside. All this, in China’s view, necessitates being
able to play power politics with both Middle-East and Russian oil producers, when and if tensions
arise over energy supplies. And China needs to be able to flex its muscle with Japan, Europe, and
America in the competition for energy and other critical raw materials – as well as continue to have
access to technologies these nations possess. And it needs to keep its access to these hugely important
markets. Power politics in today’s world doesn’t require the direct exercise of military power so much as
the capacity to pressure other major powers indirectly – for example, credibly threatening to use force
against Taiwan, or selling advanced weapons systems to oil-rich or raw-materials-rich developing nations,
or, in the case of North Korea, becoming the source of food and weapons. Sound familiar? China is not
inventing this strategy of combining economic power with military power. It’s following in the footsteps of
the nation that wrote the play book on how it’s done – the United States. That’s why China’s military
announcement was timed to coincide with Hank Paulson’s visit. Some in the U.S. cling to the mistaken
view that China has been able to buck American pressure to revalue China's currency because China is
becoming our major creditor. But America's indebtedness to China gives the U.S. huge leverage over
China. If we allowed the dollar to fall, China would lose a bundle. The real reason China has been able
to hold the line against American pressure is China's growing influence around the world --
especially in the Middle East, Venezuela, Nigeria, Australia, North Korea, and Russia -- places with
critical natural resources, or that are hotspots of potential trouble for America. China's military
strategy is a part of this, and it's why Paulson’s economic mission will get nowhere.

D. Impact-Energy Wars ensue and go Nuclear

Ronald Bailey, 2006

(Science Correspondent, “Is the planet running out of gas? If it is, what should the Bush
administration do about it?, http://reason.com/news/show/36645.html)
The Princeton geologist Ken Deffeyes warns that the imminent peak of global oil production will result in
“war, famine, pestilence and death.” Deffeyes, author of 2001’s Hubbert’s Peak: The Impending World Oil
Shortage and 2005’s Beyond Oil: The View from Hubbert’s Peak, predicted that the peak of global oil
production would occur this past Thanksgiving. Deffeyes isn’t alone. The Houston investment banker
Matthew Simmons claims in his 2005 book Twilight in the Desert: The Coming Saudi Oil Shock and the
World Economy that the Saudis are lying about the size of their reserves and that they are really running on
empty; last September he announced that “we could be looking at $10-a-gallon gas this winter.” Colin
Campbell, a former petroleum geologist who is now a trustee of the U.K.-based Oil Depletion Analysis
Centre, warned way back in 2002 that we were headed for peak oil production, and that this would lead to
“war, starvation, economic recession, possibly even the extinction of homo sapiens.” In his 2004 book Out
of Gas: The End of the Age of Oil, the Caltech physicist David Goodstein wrote that the peak of world
production is imminent and that “we can, all too easily, envision a dying civilization, the landscape littered
with the rusting hulks of SUVs.” Jim Motavalli, editor of the environmentalist magazine E, writes in the
January/February 2006 issue, “It is impossible to escape the conclusion that we’re steaming full speed
ahead into a train wreck of monumental proportions.”And James Schlesinger, the country’s first secretary
of energy, declared in the Winter 2005–06 issue of the neoconservative foreign policy journal The National
Interest that “a growing consensus accepts that the peak is not that far off.” He added, “The inability readily
to expand the supply of oil, given rising demand, will in the future impose a severe economic shock.” Even
some traditionally calm voices are starting to sound panicky. In March 2005, the New York investment
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bank Goldman Sachs issued a report suggesting that oil prices would experience a “super spike” in 2006,
reaching up to $105 per barrel. ChevronTexaco’s willyoujoinus.com campaign, featuring a series of full-
page newspaper ads that urge Americans to conserve energy, flatly declares, “The era of easy oil is over.”

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UNIQUENESS: SHIFT TOWARD ALT ENERGIES-GENERIC


Many countries are diversifying energy sources

Africa News, 2k8

[July 17, “UNEP—clean energy investment reached 148bn in 2007,”


http://www.energynews.co.za/web_main/article.php?story=20080717232058628]

According to the report, most new alternative energy investment has flowed into Europe, followed
by the United States. However, China, India and Brazil are drawing growing investor interest with
their share of investment increasing from 12% in 2004 to 22% in 2007, an increase from $1.8 billion
and $26 billion. Sustainable energy accounted for 23% of new energy adding 31 gigawatts of new
power capacity, about 10 times that of nuclear. "Investment between now and 2030 is expected to
reach $450 billion a year by 2012, rising to more than $600 billion from 2020," the report said. "The
sector's overall performance during 2007 and into 2008 sets it on track to achieve these levels." The
EU remained the leading region for investment, particularly later-stage financing. Supportive
policies, as well as an investor base that is comfortable with financing renewable energy projects
and more intense competition for deals, drove European asset finance to a record level of $49.5
billion in 2007. This was 62% of asset finance worldwide. During 2007, investment in non-hydro
renewables capacity in China increased by more than four times, to $10.8 billion, and new wind
capacity doubled to 6 gigawatts. The report says the 2008 Beijing Olympic Games "sharpened the
country's political resolve and strengthened programmes to promote cleaner generation and cut
energy intensity." In India, asset financing grew significantly, to $2.5 billion, mostly for 1.7GW of
new wind projects. These installations place India fourth in the world, both in terms of new capacity
added in 2007 and total installed capacity.

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UNIQUENESS: SHIFT TOWARD ALT ENERGIES-CHINA


China is shifting towards alternative energy now

Trade Markets, 2k8

[June 22, “POWER PRICE HIKES IN CHINA PROMPT ALTERNATIVE ENERGY DRIVE”
http://www.tradingmarkets.com/.site/news/Stock%20News/1704451/]

China's alternative energy sector will develop rapidly due to increases in the price of product oil and
industrial power. China decided to raise the prices of gasoline, diesel oil and jet kerosene by 1,000
yuan/ton, 1,000 yuan (US$145.35)/ton and 1,500 yuan/ton each as of June 20, and increase
industrial power prices by 0.025 yuan/kwh since July 1, 2008. The unexpected increase of product
oil and industrial power prices will prompt the development of substitutive energy such as coal,
natural gas, solar energy, wind power and fuel ethanol.

China’s oil consumption rates are being mitigated by surging oil prices

Oster, 2k8

[Shail, July 18, Wall Street Journal, “China’s Electrcity Shortage Looks Unlikely to Spur Oil-Binge
Return,” http://online.wsj.com/article/SB121632682476763067.html?mod=googlenews_wsj]

There's one reason for "oil bears" to be optimistic: History in China isn't likely to repeat itself. In 2004,
China was swept by severe shortages of electricity, as supply from its coal-fired power plants couldn't meet
demand. Thousands of factories rushed to fill the tanks of diesel-powered backup generators in an effort to
secure power to keep their production lines open. The result: China's oil consumption in 2004 jumped 16%,
an unexpected surge that helped fuel a run in global oil prices. This year, China is facing an electricity
shortfall that officials predict will be at least as big as the one that rocked global oil markets four years ago.
But analysts say China won't go on another big oil-buying binge, thanks largely to already-rising prices and
a crimp in the spending power of Chinese manufacturers. "There will be a slight uptick in fuel-oil and
diesel demand during the summer, but nothing in comparison to the blackout-driven spike in 2004," says
Trevor Houser, an energy expert with Rhodium Group, an economic research firm in New York. What
happens with China's oil demand could have a big impact on the share prices of oil producers -- not to
mention on the global economy. China is the world's second-largest oil consumer after the U.S., and its oil
demand is among the fastest growing in the world; the country is likely to use an average of eight million
barrels a day this year, 25% more than it consumed in 2004. That rapid growth has been widely cited as a
main cause of the explosion in crude-oil prices over the past several years. In the past week, crude prices
have dropped significantly from the record closing high July 3 of $145.29 a barrel on the New York
Mercantile Exchange. At midday Thursday in New York, crude for August delivery was trading down
$1.01 at $133.59 a barrel. Shares of big oil companies like Exxon Mobil, Royal Dutch Shell and BP have
been falling since late May, however. On Wednesday, shares of Exxon Mobil closed on the New York
Stock Exchange at their lowest level in 11 months. Shares in China's major oil companies, including
PetroChina, have been falling for even longer than those of Western producers have. The power shortages
this year have been triggered in part by surging global prices for another energy source: coal. Already,
some provinces have started rationing electricity, and big energy users like zinc or aluminum smelters are
warning that their output will have to fall. China is rationing electricity in more than half its provinces, with
a projected national shortfall of 30 gigawatts, equivalent to about 4.2% of current national annual capacity.
In 2004, China lacked about the same amount of power, but the country has added hundreds more plants
since then. Unlike last time, however, many Chinese factory owners simply can't afford to buy the fuel for
generators. For many in the export-oriented manufacturing sector, the rising value of China's currency
against the dollar, the weakening global economy and rising prices for inputs have pushed them to the edge.
Export growth overall remains robust, but it has slowed considerably; exports rose 18.2% in June from a

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year earlier, compared with growth of nearly 28% for all of 2007. Far from planning big new outlays for
fuel, some low-cost factories are closing shop, analysts say. "Coastal processing and manufacturing
businesses, which used a lot of diesel generators in 2004, are slowing down," says K.F. Yan of Cambridge
Energy Research Associates.

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UNIQUENESS: SHIFT TOWARD ALT ENERGIES-CHINA

CHINA AND INDIA INVESTING IN ALTENERGY; RISING OIL PRICES

SMITH, 06
(Angela MacDonald, staff writer for the International herald Tribune, “China and India trying to harness the power of wind; Global
scramble to develop alternative sources of energy has industry executives focusing on emerging markets; BUSINESS ASIA by
Bloomberg”, 9/20/06, Lexis)

China and India are accelerating development of wind power, luring companies including the turbine
maker Vestas Wind Systems, as restrictions hamper wind farm construction in traditional markets like
Australia. ''The biggest markets in the next decade will probably be India and China in particular,''
said Achim Hoehne, a manager at the PB Power unit of the engineering services company Parsons
Brinckerhoff. ''Australia had a good market until about a year ago. Since then, companies are looking for
other opportunities.'' A venture partly owned by CLP Holdings of Hong Kong earlier this year scrapped
more than $400 million of projects in Australia, where quotas on renewable energy have almost been
met, in favor of China and India. Vestas Wind, the world's biggest wind turbine maker, and Suzlon
Energy of India, Asia's largest wind turbine maker, are expanding in China. Global oil prices have stayed
above $50 a barrel for 15 months, prompting a global scramble to develop alternative energy sources.
China, which gets two-thirds of its power from coal, is also trying to cut pollution. China added almost
500 megawatts of wind energy capacity in 2005, more than double the previous year, according to the
Global Wind Energy Council. That compares with growth of 11 percent in Germany, the world's largest
wind market, where capacity reached 18,428 megawatts, the council, which is based in Brussels, said.
China may add 2,000 megawatts of capacity this year, it estimated. That's making the market more
attractive than countries like Australia, where investments in wind projects have slowed as a government
target for renewable energy use is reached. ''I would say the Australian market has seen a collapse, while
there's a very significant outlook in China and other countries, but China in particular,'' said Mark
Kelleher, managing director of Roaring 40s Renewable Energy, CLP's sustainable energy venture with
Hydro Tasmania in Australia. PB Power's Hoehne is among wind power industry executives due to speak
at the Global Windpower 2006 conference that started Tuesday in Adelaide, Australia. Li Junfeng, vice
president of the China Renewable Energy Association, Vilas Muttemwar, India's minister for non-
conventional energy sources, Brett Thomas, managing director of Acciona's Oceania unit, and Mohammed
Boutaleb, Morocco's mines and energy minister are also scheduled to address the three-day event. China
has a target of 5,000 megawatts of wind capacity by 2010 and a goal of 30,000 megawatts by 2020,
said Andrew Richards, president of the Australian Wind Energy Association. China National Offshore, the
country's third-largest oil company, said Aug. 29 that it was studying building offshore wind farms.
''Everyone is positioning themselves to be there and be ready when things really open up,'' said Dan Kofoed
Hansen, managing director of the Australian unit of Ahmedabad-based Suzlon. ''China is still in its infancy
as a market as such.'' A plan to triple use of wind power in Japan, which imports almost all of its oil, is
being undermined because of concern that power surges from wind farms could be disruptive. Unlike
Germany, Japan lacks the national grid needed to iron out supply fluctuations from such projects. The
Japanese government drafted a plan in May 2005 to increase wind power generation to 3,000 megawatts in
the five years to March 2011. As of March, Japan had a little more than 1,000 megawatts. In China, the
renewable power market still favors local companies over foreign ones, Hansen said. This is among
deficiencies that probably need to be removed before the market fulfils projections of its potential, he said.
''Domestic wind power equipment is competitive compared with imported gear because the production base
is nearby and it costs less to repair and maintain the equipment,'' said He Lixin, deputy chief of the energy
department at the Xinjiang Development and Reform Commission, which overseas China's biggest wind
farm. Vestas, based in Randers, Denmark, opened a factory in northeast China in June, while Repower
Systems, a German rival, signed a contract earlier this month to take control of a Chinese wind turbine
manufacturing venture. Power generation from renewable sources, while more expensive than coal-fired
production, has the advantage of lower carbon dioxide emissions. China, the world's biggest sulfur

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dioxide polluter, plans to set up a carbon emissions exchange by the year end to encourage cleaner
power generation. Last year, about $14 billion of investments were made in the global wind energy
industry, and this is set to increase, Thorbjorn Rassmussen, vice-chairman of the Global Wind Energy
Council, said Tuesday at the opening session of the conference. The growth of the Indian wind energy
market is supported by legislation that encourages renewable energy projects, Hansen said. The
regulations still favor local companies over international power producers, he said. India is the world's
fourth-biggest wind energy market and is expanding, said Rassmussen, who is also president of Vestas's
Asia-Pacific unit. Foreign companies need an Indian partner for wind-generation projects, said J.R.
Mesram, director for wind energy at the Ministry of Non-Conventional Energy Sources. Australian
investment in wind energy projects slowed last year as the nation's renewable energy industry neared the
2010 legislated target. Roaring 40s started studying ventures in China at least 18 months ago, Kelleher said.
''We foresaw that within 18 months that Australia's existing, very small target would be subscribed, and
there wouldn't be many more projects going ahead,'' he said. ''Companies are unlikely to thrive here now
simply by operating in the Australian market.''

CHINA INVESTING IN ALT ENERGIES

IEICI, 06
(The Isralei Export and International Cooperation Institute, “China: Alternative Energy Investments”, 11/22/06,
http://www.export.gov.il/Eng/_Articles/Article.asp?CategoryID=640&ArticleID=4695)

The news that China is to build the world's largest solar power station in Dunhuang, is a striking
reminder of the continued growth potential of clean energy stocks in this country. The plant, which
will take five years to build, will yield 100 megawatts of peak capacity and will cost an estimated 6.03
billion yuan (about $766 million), according to the state-run Xinhua news agency. The plant is only one of
several projects claiming to become “the world’s largest,” rapidly growing the world’s solar energy
capacity. Concerns about energy security are driving the Chinese government to look at ways to
reduce the oil import bill. Biofuels are a key part of this strategy, and a 10% ethanol blend is already
mandatory in several provinces. On the back of this, licenses for ethanol production for road transport
fuel blends are expected to be issued by the government shortly. "Increasing awareness of climate
change, and the desire to improve energy security at a time of high fossil fuel prices, are driving
governments worldwide to strengthen their policies on clean energy" said Sophie Horsfall, fund
manager of the F&C Stewardship International Fund. "China Sun Bio-chem, which we hold in the F&C
Stewardship International Fund, has a lot of experience in the ethanol market already, and so is in with a
chance of winning licences to produce ethanol for fuels. This gives the stock real upside potential", Horsfall
believes.
And Chinese renewable energy companies such as Suntech Power Holdings, the country's biggest solar
power producer, benefit from low costs, and are highly competitive in international markets. Horsfall
commented: "Suntech is well placed both to take advantage of the growing domestic market, and also to
export to major overseas markets such as the US and Germany". Reaping the benefits of investment in
clean energy stocks is dependent on government policies coming through – and there are some concerns
that there is an unsustainable boom.

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UNIQUENESS: SHIFT TOWARD ALT ENERGIES-CHINA

LONGTERM INVESTMENT

HVISTENDHAL, 07

(Mara, Staff Writer for World Changing, “China Moves Towards Energy, Not Oil”,
10/22/07, http://www.worldchanging.com/archives/007449.html)

When China unveiled its' ambitious renewable energy law in 2005, pledging that by 2020 15 percent of the
country's power would be drawn from renewable sources, it attracted more than a few raised eyebrows.
Chinese leaders are fond of long-term plans and big targets. But how, exactly, did they plan to hit this
target in the face of China's fast-growing economy and energy consumption? Two years later, this is now
becoming clear. In September, top energy planner Chen Deming said that the government would
institute subsidies and tax breaks to encourage investment in renewables. The total price tag for the 15
percent target, he added, would be two trillion yuan -- about $265 billion, or one-tenth of China's 2006
GDP. Sure enough, last week China National Offshore Oil Corporation (CNOOC), China's third largest
petroleum company (best-known in the U.S. for its botched 2005 bid to buy American oil giant Unocal)
announced plans to establish a 1,500 KW off-shore wind farm in Bohai Bay. With Beijing pushing
renewables, CNOOC now aims to be "an energy company rather than just an oil company." As
company chairman Fu Chengyu told Xinhua, "[T]he national development mode decides the development
of our company." Strong government backing has Chinese companies convinced they can profit from
renewable energy. The Clean Development Mechanism (CDM) (a facet of the Kyoto Climate Protocol that
encourages developed world deals in and technology transfers to the developing world in order to cut
carbon emissions) provides another important avenue for green revenue. Despite entering the CDM market
relatively late in the game, China has quickly become the world leader in volume of carbon number of
individual CDM projects). Many early Chinese projects dealt with reductions credits (India still leads in
in industrial gases like HFC-23, a questionable methodology, but the emphasis is now on the
renewable sectors: this month, the government list of new registered projects was dominated by wind
and hydro. There is, of course, still room for improvement. For example, why is there so much hydro on
the CDM list? China would do well to discourage the construction of more dams and add solar to its
priorities. The country leads the world in the use of solar water heaters, and development
organizations and select cities are spearheading interesting initiatives at the local level. Clearly,
Chinese are keen to use the sun for power. But the government has not yet introduced the subsidies and
feed-in tariffs that are necessary for large-scale grid connection. Last month, Greenpeace, the Worldwide
Fund for Nature, and the Chinese Renewable Energy Industries Association issued a report detailing the
need for policy changes to get solar PV power onto urban grids. (Li Junfeng, one of the report's authors and
the secretary general of CREIA, is one of China's great renewable energy crusaders). China now has a
dozen PV power systems of up to 1 MW in capacity, the report says, but "no PV power system has as yet
been permitted by grid companies to connect to the grid" and "no project has as yet been built by
developers for commercial operation." (See summary here.) This is a very real concern. But the report,
coming as it did ahead of this month's National People's Congress, suggests that Li and others at least take
the government targets seriously. Even the skeptics now have to admit that China intends to meet its goals.
Worldwatch Institute's Yingling Liu recently told the Agency France Presse news service that China could
soon become a world leader in renewable energy. "Changes are happening in the right directions towards
cleaner and more sustainable energy sources," she said, "and the trends will likely be accelerated." And if
China can fulfill its pledge even as it develops, it would have implications for the rest of the world.

HIGH OIL PRICES CAUSE CHINA AND INDIA TO LOOK TO ALTERNATIVE


ENERGY SOURCES

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The International Herald Tribune, 2006

(Chasing the power of wind in Asia; China and India attract firms encouraged by high oil
prices, Lexis)

China and India are accelerating development of wind power, which is luring companies like the turbine
maker Vestas Wind Systems as
restrictions hamper wind farm construction in traditional markets like Australia.

''The biggest markets in the next decade will probably be India and China in particular,'' said Achim
Hoehne, a manager based in Sydney at the PB Power unit of the engineering services company Parsons
Brinckerhoff. ''Australia had a good market until about a year ago. Since then, companies are looking for
other opportunities.''

A venture partly owned by CLP Holdings of Hong Kong scrapped more than $400 million of projects in
Australia this year where government renewable-energy quotas have almost been met in favor of China and
India. Vestas Wind, the world's biggest wind turbine maker, and Suzlon Energy of India, the largest in
Asia, are expanding in China.

Global oil prices have stayed above $50 a barrel for 15 months, prompting a worldwide scramble to
develop alternative energy sources. China, which gets two-thirds of its power from coal, is also trying to
cut pollution.

China added almost 500 megawatts of wind energy capacity in 2005 a jump of 66 percent to 1,260
megawatts, according to the Global Wind Energy Council, which is based in Brussels. That compares with
growth of 11 percent in Germany, the world's largest wind market, where capacity reached 18,428
megawatts, the council said. China may add 2,000 megawatts of capacity this year.

That is making the market in China more attractive than countries like Australia, where investments in
wind projects have slowed as a government target for renewable energy use is reached.

China has a target of 5,000 megawatts of wind capacity by 2010 and a goal of 30,000 megawatts by 2020,
said Andrew Richards, president of the Australian Wind Energy Association. China National Offshore
Corp., or Cnooc, one of the largest oil companies in China, said last month that it was studying building
offshore wind farms.

''Everyone is positioning themselves to be there and be ready when things really open up,'' said Dan Kofoed
Hansen, managing director of the Australian unit of Suzlon. ''China is still in its infancy as a market as
such.''

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UNIQUENESS: SHIFT TOWARD ALT ENERGIES-CHINA


HIGH OIL PRICES CAUSE CHINA AND INDIA TO SEARCH FOR ALTERNATIVE
ENERGY SOLUTIONS

Inside Energy with Federal Lands, 2008

(G8 ministers note 'serious concerns' over oil price; urge more investment, Lexis)

The G8 powers and other major oil consumers ended ministerial talks in Japan June 8 by
voicing "serious concerns" about high oil prices and calling for increased investments in
supply. But at a meeting in Aomori City, they stopped short of a direct plea to producers
to put more oil on the market.

With China, India and South Korea joining the so-called "group of eight" countries for
energy talks for the first time, the meeting represented about 60% of global oil
consumption, and came just days after a dizzying spurt in oil prices to more than
$139/barrel.

But the ministers found little they could do to calm the oil market in the short term,
agreeing instead on longer-term policies, including more energy efficiency and
alternative energy production.

These initiatives, coupled with the expected wave of new nuclear power plants in several
countries and the expansion of renewable energy, could well help wean the world's
richest economies off oil in the decades to come. But they will do little to ease the pain
being caused to governments and consumers alike by the current record crude prices, the
ministers acknowledged.

"We share serious concerns over the current level of high oil prices. Current high oil
prices are unprecedented and against the interest of either consuming or producing
countries," the 11 countries said in a joint statement.

The meeting was a preliminary session leading to the G8 summit that will be held in July
in Toyako, Japan, on the island of Hokkaido.

Akira Amari, Japan's minister of economy, trade and industry, warned of the threat posed
by "outrageous" prices, saying: "If we do not take any action the world economy will
slow."

Oil demand in the US, the world's biggest user, is currently falling, and the country's
energy secretary, Samuel Bodman, warned that it was not in producers' interest to allow
high prices to dent growth.

"We're struggling economically. It is not good for producing nations to see the United
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States struggling economically because they depend on us to be a significant engine in
the world's economic activity," Bodman told reporters at the meeting.

As well as the economic impact, high oil prices are also causing political problems for
leaders in several of the G8 countries, with protests against high fuel prices in recent
weeks in France, Italy and the UK.

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UNIQUENESS: SHIFT TOWARD ALT ENERGIES-INDIA

INDIAN SHIFT AWAY FROM OIL DEPENDENCY TO ALT ENERGY

GUZMAN, 07

(Doris de, Staff Writer for ICIS Chemical Business; the world's largest information
provider for the chemical and oil industry, “Slow start forbiofuels”, 7/23/07, Lexis)
INDIA IS spicing up its biofuels program to counteract an increase in the costs of crude oil imports.
Expenditure on oil imports is said to have nearly doubled because of rising global prices. These
imports are required to meet about 72% of domestic demand, and this is expected to expand in the next few
years, says the US Department of Agriculture's Foreign Agricultural Service (FAS).To achieve a target
economic growth rate of 9%/year between 2007 and 2012, India's energy demand in the transportation
sector is expected to grow by 6-8%/year, reports the FAS. India's petroleum product consumption is
expected to rise from 113m short tons (102.51m tonnes) in the fiscal year 2006 to 135m short tons by fiscal
2012."The burgeoning expenditure on oil imports is of serious concern to the Indian government,"
says the FAS. "Promoting the use of biofuels will limit India's rising oil imports, support rural
farmers by developing an alternative usage for sugarcane and byproducts, as well as improve use of
unproductive land for cultivation of other biofuel feedstock."The Indian government, through the
Ministry of New and Renewable Energy, is in the process of implementing a national policy on
biofuels that will cover R&D, capacity building, purchase policy and registration for enabling biofuel
use. The new policy, which is still at the draft stage, aims for a 5% blending requirement of petroleum-
based fuel with biofuels by 2012, increasing to 10% by 2017. The policy will also recommend minimum
support prices for biofuel-specific crops, such as jatropha and other non-edible oilseeds."Biofuels are an
integral component of our National Energy Policy," says Shri Vilas Muttemvar, India's minister for new
and renewable energy. "The effective implementation of the biofuel program, which will be developed on
public-private partnerships, will go a long way in reducing India's dependence on oil, besides helping to
address climate change concerns."SWEET ETHANOLIndia is the fourth-largest ethanol producer, after
Brazil, the US and China, says Joseph Gonsalves, consultant for the UN Conference on Trade and
Development (UNCTAD).India's ethanol is produced by fermenting molasses - a byproduct of sugar
manufacture. India and Brazil are currently the world's largest sugar producers, each with average output of
around 21m short tons/year. India's ethanol production averages around 1.9bn liters/year, says Gonsalves.
The government made 5% ethanol blending in petrol mandatory in nine sugarcane growing states, effective
from January 2003."India is not as efficient an ethanol producer compared to Brazil and the US," says
Gonsalves. "For instance, the cost of ethanol production in Brazil is 20-30 cents/liter, substantially less than
the 40 cents/liter in India. When Indian sugar production dropped to 15m tons in 2003, only 196m liters of
the required 363m liters of ethanol could be produced, causing a temporary derailment of the 5% ethanol-
blended petrol (EBP) program."The EBP program has been renewed with the strong resurgence of sugar
production in the past few years. Last year, the Indian government implemented the second phase of the 5%
EBP program in 20 states and eight Union territories, effective from November 2006. "This would require
about 550m liters of ethanol for marketing year 2006-2007, all of which has to be sourced domestically,"
the FAS reports. "India's current ethanol production capacity, at around 1.3bn liters/year, is enough to meet
the estimated ethanol demand for the 5% EBP requirement. For a 10% EBP program, which would require
around 1.3bn-1.6bn liters, current capacities will need to be expanded."The government plans to raise the
5% blend to 10%, once the second stage of the program extends to all target states. The EBP program has
not yet been implemented in other states because of high state taxes, excise duties and levies, which makes
the ethanol supply for blending commercially unviable.There is also no direct financial assistance or tax
incentives for the production or marketing of ethanol or EBP. Sugar mills that are interested in establishing
ethanol production facilities, however, are being given subsidized loans of up to 40% of the project cost
from the government-controlled Sugar Development Fund, says the FAS."The government also provides
financial support for R&D on ethanol production from both public and private sectors," says the
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FAS. Several firms are looking at sweet sorghum and sugar beets as alternative feedstocks.Tata Chemicals
recently announced plans to set up a 30,000 liter/day sweet sorghum-based ethanol plant in eastern
Maharashtra. Projected to start by mid-2009, the plant will initially use conventional processing, but is
developing improved technologies. Others are said to be looking at sugar cane juice-based ethanol, which
would require additional investments for sugar mills for technological modifications. Two Indian sugar
mills are said to be producing the sugar cane-based ethanol on an experimental basis."A large proportion of
arable area in India is under sugarcane production," says Shushmul Maheshwari, CEO of New Delhi, India-
based industry research firm RNCOS. "The annual Indian sugarcane production last year was 267m tons.
The practice of producing sugar cane-based ethanol, however, hasn't picked up yet in the country. This
indicates a huge opportunity for the development of this kind of ethanol."Currently, petroleum companies
are said to be buying fuel-grade ethanol from the sugar companies at rates between 47-53 cents/liter. "With
expected bumper sugar and molasses production for 2007-2008, the cost of ethanol production is expected
to remain low, and the sugar industry will be encouraged to supply ethanol for the EBP program," says the
FAS.BURGEONING BIODIESEL While India's ethanol industry is mature, the biodiesel industry is still in
its infancy as high edible oil prices make it unfeasible for Indian biodiesel production.In 2003, India
launched its National Biodiesel Mission to meet 20% of the country's diesel requirements in 2012 by
cultivating a total of 11.2m ha (27.7m acres) of jatropha for biodiesel feedstock. The program also aims to
install transesterification plants to process the oilseed in each state."For the estimated consumption of 43m
tons of diesel in India for 2006-2007, 2.2m tons of biodiesel, or an equivalent of 2.1m-2.5m ha of jatropha
plantation, will be needed for a 5% blend," reports the FAS. "Current total jatropha plantation is around
400,000ha, of which 70-80% will come into maturation in the next three to four years. Not only are there
not enough seeds to crush, but there is also not enough capacity to produce biodiesel," adds the
FAS.Initiating large-scale cultivation of jatropha is difficult, notes Gonsalves, as farmers do not consider
the oilseed profitable. "The government needs to sponsor confidence-building measures such as
establishing a minimum support price for jatropha and assuring farmers of timely payments," he says.Some
18 biodiesel plants are reportedly now in operation, with capacities ranging from 1 to 10 tons/day using
waste edible oil, animal fat and inedible oil as feedstock. Automobile and transport companies mostly buy
the biodiesel for R&D trials on their vehicles. Indian biodiesel capacity is estimated at 200-500 tons/year,
according to FAS.Another program that took effect early last year is the biodiesel purchase policy, where
oil firms can purchase biodiesel at a set price of Indian rupees (Rs) 26.50/liter (65 US cents, 48 euro
cents/liter) and blend 5% into diesel. "Right now, biodiesel sales are nil as the production cost is 40-80%
higher than the purchase price," says Kali Krishna, chief corporate communications manager for New
Delhi-based Indian Oil Corp. (IOC). "Commercial production of biodiesel has not yet started, as production
costs are in the range of Rs33-36/liter."The government does not provide any direct financial assistance for
biodiesel production or plant investment. "Although the central government has exempted biodiesel of the
central excise tax, most state governments do not provide any exemptions for biodiesel or blended
biodiesel," says the FAS. Despite the current cost setback, the biodiesel program is expected to gather
momentum in the next four to five years."India has vast potential for production, as well as
consumption, of biofuels," says Krishna. "Availability will gradually improve as more players enter
the field."IOC itself plans to cultivate 30,000ha of jatropha in Madhya Pradesh for future biodiesel
production. UK-based producer D1 Oils and oil giant BP have formed a ?31.75m ($64.4m, ?46.8m) joint
venture, D1-BP Fuel Crops, which will undertake 1m ha of global jatropha planting. D1 Oils has an oil and
seed supply agreement and farming contracts covering 56,800ha of jatropha in India. BP has a 10-year
biodiesel demonstration project in India, which plans to cultivate 8,000ha of jatropha. "Local and
foreign collaborations for biodiesel production are coming in some states, which could boost the
country's capacity to 1m tons/year in the next two to three years," reports the FAS.

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LINK: DECREASED US DEPENDENCEOIL PRICE DROPS

The perception of the U.S. transforming its energy supplies will cause exporting
countries to mitigate supercharged oil prices—competition to secure U.S.
consumption

Roberts, 2k4

[Paul (Harper’s Magazine, Finalist for the National Magazine Award), “The End of Oil:
APerilous New World]
Within the oil world, no decision of any significance is made without reference to the U.S.
market, nor is anything left to chance. Indeed, the world’s oil players watch the American oil market as
attentively as palace physicians once attended the royal bowels: every hour of every day, every oil state and
company in the world keeps an unblinking watch on the United States and strains to find a sign of anything
— from a shift in energy policy to a trend toward smaller cars to an unusually mild winter —that might
affect the colossal U.S.consumption. For this reason, the most important day of the week for oil traders
anywhere in the world is Wednesday, when the U.S. Department of Energy releases its weekly figures on
American oil use, and when, as…???

Substantial reductions in U.S. oil consumption will devastate global oil markets and
create civil unrest in many oil exporting nations
Roberts, 2k4 [Paul (Harper’s Magazine, Finalist for the National Magazine Award),
“The End of Oil: A Perilous New World]
The last time the United States got really serious about energy efficiency — after the
1974 oil price shocks — U.S. oil use fell so low that OPEC was nearly wiped out. A
more permanent reduction — even if partly offset by rising demand in the fast-growing
Asian economies — would completely change the global oil order. As oil prices fell — to
as low as fifteen dollars a barrel, some analysts say — many big oil states would see their
geopolitical status tumble. Some, like Russia, Venezuela, Iran, and Qatar, which have
enormous gas reserves, could compensate by stepping up efforts to sell gas, especially to
gas-hungry markets like China, India, and the United States. Other petrostates — like
Mexico and Algeria, for in stance — might be pushed into bankruptcy and would then
require a massive, and inevitably United States—led, bailout. 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.

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LINK: DECREASED US DEPENDENCEOIL PRICE DROPS


A decrease in U.S. oil consumption will tank global prices—biggest consumer

Churchill, 2k [Jason J., October 25, “Oil Consumption in North America,”


http://maps.unomaha.edu/Peterson/funda/Sidebar/OilConsumption.html\]

Currently, the United States consumes 19.6 million barrels per day, of oil, which is more than 25% of the
world's total.. As a result, the U.S produces one fourth of the world's carbon emissions. Despite
predictions that the U.S. will exhaust it's supply of oil in as little as forty years, the demand is on the
increase, and is predicted to continue increasing, because of the ever increasing population. Increase in
resource consumption is caused by three factors: population growth, new uses found for a resource, and
increase in demand for a resource to increase living standards. The rate of consumption for oil is increasing
at a rate of about 2% yearly.

ALT ENERGY DECREASES PRICE OF OIL

PTT, NO DATE

(Petroleum Authority of Thailand, “Why does oil prices rise and fall?”, No Date Given,
http://www.pttplc.com/Files/document/pdf/energy/petro_01_en.pdf)

Alternative energy The discovery and technology development to exploit other


alternative energy sources such as natural gas, coal and nuclear and others to
substitute oil at competitive prices and efficiently meet the consumers need, will
decrease the demand and price of oil. As long as the technology and development is
still limited, the price of oil will fluctuate and depend on the imbalance between demand
and supply. Nevertheless, the world oil crisis alerts the people who suffer from the oil
price to accelerate their plan to develop other alternative fuels. If alternative fuel can be
developed to replace oil, the equilibrium between demand and supply will then take
place.

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INTERNAL LINK: PRICE DROPOIL SHIFT


HIGH OIL PRICES IS THE ONLY THING KEEPING FOCUS ON RENEWABLES

ENERGY INFORMATION ASSOCIATION, 08

(Official Energy Statistics from the United States, “International Energy Outlook 2008”,
June 2008, http://www.eia.doe.gov/oiaf/ieo/highlights.html)

Coal and natural gas account for the largest increments in fuel consumption for electricity generation over
the projection period. The 3.1-percent projected annual growth rate for coal-fired electricity generation
worldwide is exceeded only by the 3.7-percent rate for natural gas-fired generation (Figure 6). Sustained
high prices for oil and natural gas make coal-fired generation more attractive economically,
especially for coal-rich nations like China, India, and the United States. The outlook for fossil-fuel-
fired generation could be altered substantially by international agreements to reduce greenhouse gas
emissions. The electric power sector offers some of the most cost-effective opportunities for reducing
carbon dioxide emissions in many countries. Coal—the world’s most widely used source of energy for
power generation—is also the most carbon-intensive. If a cost, either implicit or explicit, were applied to
emitters of carbon dioxide, there are several alternative no- or low-emission technologies that currently are
commercially proven or under development, which could be used to replace some coal-fired generation.
Implementing the technologies would not require expensive, large-scale changes in the power distribution
infrastructure or in electricity-using equipment. It could be more difficult, however, to achieve similar
results in the end-use sectors. In the transportation sector, for instance, large-scale reduction of carbon
dioxide emissions probably would require extensive changes in the motor vehicle fleet, fueling stations,
and fuel distribution systems, at tremendous expense. In contrast, substitution of nuclear power and
renewables for fossil fuels in the electric power sector would be a comparatively inexpensive way to
reduce emissions, as would improving the efficiency of electric appliances. Electricity generation from
nuclear power is projected to increase from about 2.6 trillion kilowatthours in 2005 to 3.8 trillion
kilowatthours in 2030, as concerns about rising fossil fuel prices, energy security, and greenhouse gas
emissions support the development of new nuclear generation. Higher capacity utilization rates have been
reported for many existing nuclear facilities, and it is anticipated that most of the older nuclear power
plants in the OECD countries and non-OECD Eurasia will be granted extensions to their operating lives.
Still, there is considerable uncertainty associated with nuclear power. Issues that could slow the expansion
of nuclear power in the future include plant safety, radioactive waste disposal, and the proliferation of
nuclear weapons, which continue to raise public concerns in many countries and may hinder the
development of new nuclear power reactors. Moreover, high capital and maintenance costs may keep some
nations from expanding their nuclear power programs. Nevertheless, the IEO2008 reference case
incorporates the improved prospects for world nuclear power. The IEO2008 projection for nuclear
electricity generation in 2025 is 31 percent higher than the projection published in IEO2003 only 5 years
ago. In the IEO2008 reference case, the world’s installed nuclear capacity grows from 374 gigawatts in
2005 to 498 gigawatts in 2030. Declines in nuclear capacity are projected only for OECD Europe, where
several countries (including Germany and Belgium) have either plans or mandates to phase out nuclear
power, and where some older reactors are expected to be retired and not replaced. On a regional basis,
IEO2008 projects the strongest growth in nuclear power for the countries of non-OECD Asia. Of the 68
gigawatts of additional installed nuclear generating capacity projected for non-OECD Asia between 2005
and 2030, 45 gigawatts is in China and 17 gigawatts in India. Outside Asia, the largest increase in installed
nuclear capacity among the nonOECD nations is projected for Russia, which is expected to add a
substantial 18 gigawatts of new nuclear generating capacity over the mid-term projection. High prices for
oil and natural gas, which are expected to persist in the reference case, also encourage expanded use of
renewable fuels. Renewable energy sources are attractive for environmental reasons, especially in
countries where reducing greenhouse gas emissions is of particular concern. Government policies
and incentives to increase the use of renewable energy sources for electricity generation are expected
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to encourage the development of renewable energy even when it cannot compete economically with
fossil fuels. Worldwide, the consumption of hydroelectricity and other renewable energy sources increases
by 2.1 percent per year in the IEO2008 reference case, from 35 quadrillion Btu in 2005 to 59 quadrillion
Btu in 2030.

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INTERNAL LINK: PRICE DROP  OIL SHIFT


RENEWABLES MORE COSTLY

BULL, 01

(STANLEY R, Ph.D. Ph.D. degree from Stanford University and has degrees in chemical
engineering and mechanical engineering. He is currently the Associate Director for
Science and Technology for the National Renewable Energy Laboratory and Vice
President of the Midwest Research Institute, “Renewable Energy Today and Tomorrow,
8/1/01, http://ieeexplore.ieee.org/iel5/5/20361/00940290.pdf?arnumber=940290)

But despite the excellent technical progress of the last 20 years, electricity and fuels
from renewable energy are still generally more expensive than electricity and fuels
from conventional fossil-fuel sources, with some exceptions. Table 2 summarizes the
economic potential of major renewable energy electric systems. Although it is difficult to
compare costs of electricity from renewable technologies to those of conventional grid
electricity, it should be noted that the average retail price of electricity in the United
States is $0.07/kW h, which is less than most renewables. The cost of electricity and
fuels from renewable energy would easily be less expensive than fossil fuels if the true,
hidden costs of fossil fuels—environmental costs, health costs, and energy security costs
—were considered. But our society has not yet found acceptable ways to incorporate
these hidden costs into the cost of our energy.

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IMPACT: CHINESE MIL BUILDUP

OIL KEY TO CHINA MILITARY COMPETITION

Ronald Bailey, 2006

(Science Correspondent, “Is the planet running out of gas? If it is, what should the Bush
administration do about it?, http://reason.com/news/show/36645.html)

Unfortunately, you don’t have to go to Iran, Russia, or Venezuela to find energy


militants. We have some homegrown ones right here in America, and they think the
world is already in the opening stages of a global energy war. Last July, the conservative
Heritage Foundation in Washington, D.C., assembled some of the scariest American oil
war hawks for a program called “The Coming Energy Wars: A 21st Century Time
Bomb?”

All the participants apparently accept the idea that world oil supplies are about to decline,
and they all share a zero-sum view of natural resources. According to the Heritage
panelists, the chief villain in the coming energy wars is China. Referring to China as the
“Thirsty Dragon,” Cedoz warned, “China wants to lock up supplies at the wellhead with
long-term purchase contracts.” He darkly pointed to Chinese negotiations over oil
supplies in Sudan, Ecuador, and Colombia. (Actually, if the Chinese sign up for long-
term contracts, that would encourage producers to invest more in production. That would
benefit all consumers, not just the Chinese.)

Refurbished cold warrior Frank Gaffney, president of the Center for Security Policy,
opposed the $18.5 billion bid by the China National Offshore Oil Corporation for the
California-based oil company Unocal last year. “It’s a very ill-advised transaction,” said
Gaffney. “It’s not in our interests to turn over more of our finite resources to others. They
should be taken off the market.” Our finite resources? Seventy percent of Unocal’s
reserves and production are located in East Asia and the Caspian Sea region.

The Chinese company withdrew its bid after a number of congressmen promised to
outlaw the sale. But Gaffney isn’t breathing easier. China’s oil grab, he announced, “is
only part of a larger plan to deny us strategic minerals, strategic choke points, and
strategic regions. Their purpose is to deny the U.S. a dominant role in the world and if
necessary to defeat us.”

Ilan Berman, vice president for policy at the American Foreign Policy Council, regretted
that “energy is not viewed through a national security prism. We should be competing to
lock up supplies and diversifying and exploring new technologies.” Berman argued that
as resources become scarcer there is no way to avoid a zero-sum game. “We have to
approach this through the lens of the haves and have-nots,” he declared.

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IMPACT: CHINESE RELATIONS


DESTROYS RELATIONS

HATEMI AND WEDEMAN, 07

(Peter Hatemi is a professor at the University of Nebraska-Lincoln. Andrew Wedeman is


associate professor and chair of Asian Studies at the University of Nebraska-Lincoln,
“Oil and Conflict in Sino-American Relations” China Security, Vol. 3 No. 3 Summer
2007, pp. 95 - 118 2007 World Security Institute, < http://www.wsichina.org/cs7_5.pdf>)

Even in the absence of direct competition, Chinese companies’ aggressive pursuit of oil has created
tension between Washington and Beijing. When CNOOC tried to buy California-based UNOCAL,
for example, some on Capital Hill demanded the sale be blocked for national security reasons.51
More recently, President George W. Bush has warned “Beijing against trying to ‘lock up’ global sup-
plies.”52 The UNOCAL experience, therefore, is a likely harbinger of how commercial competition
might boil over into more significant political tensions as American and Chinese companies press
ahead with their search for oil.53 In short, companies from the United States and China have already
begun to jockey for position in the volatile oil fields of the Middle East, the Central Asian “stans,” the
Americas and Sub-Saharan Africa, prompting American and Chinese diplomats to compete for the favor of
these states. As a result, it seems reasonable to assume that as oil supplies tighten, Sino-American
competition is likely to increase.

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IMPACT: CHINESE GROWTH


CHINESE HORDE OIL-DROP INCREASES GROWTH

ZAHAROVA, NO DATE

(Tatyana, UKRAINIAN ENERGY FORUM “China’s Quest For Oil”, <


http://english.neftegaz.ru/analit/comments.php?one=1&id=1094>)

China has been very actively recently in the Eurasian region trying to gain new access to oil supplies
in order to satisfy the country?s increasing energy hunger and secure supplies. China has become
increasingly reliant on imported oil. 1992 the country was a net exporter but became a net importer in 1993.
By 2010 it is expected that China will need to purchase around 50 per cent of its oil abroad. Its oil
production will growth at 1 - 2 percent a year but the demand will surge to a yearly growth of up to 5 per
cent. 60 per cent of the today?s imports are coming from the fragile Middle East countries, giving China a
huge incentive to diversify its oil suppliers. These facts explain why China will become increasingly
involved in international issues concerning oil and gas. Although the country imports little oil from Iraq,
the potential damage to its economy by rising oil prices makes it highly interested in the developments of
the region, as an Iraq war for example could hypothetically have led to cancellations of oil shipments from
the Arabian Gulf. Due to higher oil prices, China suffered the first trade deficit last January in its whole
foreign trade history. It is estimated that an oil price increase of $10 per barrel will decrease China?s
economic growth by 1 percent. The country is also not interested to give the United States, a potential
rival, a close grip on a region where most of the Chinese oil supplies stem from.

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IMPACT: CHINESE ECONOMY

CONTINUED DEPENDENCE ON OIL THREATENS THE GLOBAL ECONOMY-


SPECIFICALLY CHINA AND INDIA

Tom Whipple, 2008

(Associate for the study of peak oil and gas, “The peak oil crisis: The blackouts spread,”
http://www.energybulletin.net/node/45942)

Of the 266 distinct nations or entities on the world today, nearly 100 are now reporting
continuing energy shortages, mostly in the form of inadequate electricity supply, but in a
growing number of cases, shortages of liquid fuels and natural gas. The actual number of
countries affected is probably well over 100 but there are dozens of isolated island-states
scattered around the world that are rarely heard from and are almost certainly suffering in
silence while waiting for the next oil tanker to come in.

The majority of these energy-short states are small, poor and play only a minor role in
world trade. While we should feel sorry for the plight of their inhabitants who are, or
shortly will be, enduring severe hardships from greatly reduced supplies of electricity,
water, food and use of motor transport, the impact of their problems on the better-off
OECD world is likely to be minimal for a while.

Shortages, however, are not confined to small, poor states, but, in an increasing number
of cases, are appearing in large, relatively well-off and active states on which the OECD
world of North America, Europe and parts of Asia are very dependent. Several of the
countries having energy problems are actually oil exporting states that, for one reason or
another, are not able to turn their increasing oil wealth into smoothly functioning
shortage-free economies. Unfortunately, several major countries appear to be on the path
to an energy shortage-induced economic and perhaps political collapse within the
foreseeable future which obviously will have serious consequences for us all.

Currently, the most serious situations appear to be in Pakistan and Bangladesh. Both are
nations with populations in excess of 150 million people that are ensnared in devastating
power shortages that have destroyed their export industries. Both are facing water and
agricultural problems that threaten their food supplies. Liquid fuels are running short and
reductions in exports threaten their ability to import oil and natural gas. It was recently
revealed that the Saudis already are forgiving $6 billion of Pakistan's $12 billion annual
oil import bill.

On top of this, Pakistan has nuclear weapons and its strategic location is vital to the
course of the insurgency in Afghanistan. Worsening blackouts, the liquid fuels shortage
and probably the food situation are likely to lead to serious political instability before the
year is out.

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The next important pair of countries in terms of their impact on western economies is
China and India, and although their situations are nowhere near as serious as the
problems in Pakistan and Bangladesh, both are beginning to suffer from electricity
shortages which will impact economic growth. China, which now has a shortfall of
around four percent of its normal electricity production, is compensating by cutting back
on production of aluminum and zinc which consume prodigious quantities of electric
power. The recent earthquake has given Beijing pause in its ambitious plans to expand
hydro and nuclear power production. If China cannot increase coal production rapidly
enough to keep up electricity generation for its rapidly expanding economy, it is likely to
increase imports of coal and oil keeping pressure on world prices.

So far there is no indication of an unusually large increase in Chinese oil imports as there
was during the power shortage four years ago. The world price of diesel is simply too
expensive to be used to generate electricity for industrial production these days.

India's energy shortages are more serious than China's.

Its nuclear power plants are failing, hydro-power from the Himalayas is drying up due to
global warming, and the costs of imported fuels are soaring. Over 85 percent of India's oil
must be imported and coupled with the subsidies of oil prices the increasing costs are
taking a heavy toll on the state budget. Although the situation in India is not yet as bad as
in Pakistan, blackouts and liquid fuel shortages are being reported almost every day
somewhere in the country. There is no end in sight to this situation and likelihood of an
economic slowdown, coupled with water and food shortages, is increasing.

Several members of OPEC are having electricity and/or liquid shortages. In Nigeria, and
Iraq where there are active insurgencies that have damaged the infrastructure, the
shortages are endemic. Indonesia, which is just about out of OPEC due to lack of
exportable oil, is beginning to face frequent power blackouts and fuel shortages. Even
Venezuela and Iran have occasional electricity and fuel supply problems as they are
trying to do without substantial foreign technical assistance. In Mexico, demand for
gasoline has outrun refining capacity and the country is forced to rely on imports. There
are now daily diesel shortages along the border as Americans cross over to fill-up on
subsidized half-priced Mexican fuel.

Aside from the major oil-producing states, most countries in Africa, Latin America and
Central Asia are enduring some form of energy shortages. In a number of important
mineral producing countries such as South Africa, Chile and Zambia, they have already
reduced production due to shortages of electricity and diesel fuel.

The global wave of blackouts and shortages is almost certain to get worse. Although most
governments have announced optimistic plans to increase electricity production and bring
oil to market within the next few months or years, these are almost certain to fail. The
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cost of building electrical generation capacity is soaring and finding affordable fuel
unlikely.

In the OECD world, the effects of these shortages is likely to be felt in the form of much
higher prices for declining exports from the energy-poor. For the citizens of the energy-
poor world, life is going to become much harder very soon as electric lights, computers,
motor transport, refrigeration, fresh water and imported anything become scarcer and
scarcer.

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IMPACT: CHINESE ECONOMY

CONTINUED DEPENDENCY ON OIL THREATENS CHINENSE ECONOMY

Kevin O’ Brien, 2008

(Former investment banker who presently serves as an economic development finance


advisor to various governments and private sector institutions, “China’s negative
economic outlook”, http://seekingalpha.com/article/83459-china-s-negative-economic-
outlook)

China’s economy continues to experience pervasive inflation which is particularly


manifest in such consumer sensitive sectors as energy (e.g., petroleum prices which have
more than doubled over the past twelve months) and food staples (e.g., the price of food,
which increased 23% just during the month of February). Chinese consumers have benefitted from
the state control of energy prices, which has also resulted in the loss of over 50% of the value of Sinopec shares within
the last six months as the government continues it attempt to control fuel costs for consumers. Such trends are
unsustainable for a country with a population in excess of 1.3 billion and which imports approximately 78% of its
petroleum. Data published by the U.S. Energy Information Administration indicates that China’s increase in oil demand
represents a majority of the total global increase in demand. With increasing demand and relatively flat domestic
production since 1986, China’s reliance on petroleum imports is expected to continue,
subjecting the government to additional economic stress.
In its semi-annual Economic Outlook published this month, the Paris-based Organisation
for Economic Co-operation and Development [OECD] expressed concern regarding the
threat posed by persistent inflationary pressures manifest in China’s domestic market.
China’s consumer price index was officially reported at 7.7% in May and 8.5% during
April, and remains above its January level of 7.1%. Taking into account China’s
industrial consumption of commodities and that China produces very few commodities
domestically and is therefore reliant on global sourcing at prevailing prices to procure
raw materials for its manufacturing industry, the OECD expects wage and price inflation
to erode China's export competitiveness.
The OECD report states:
Coupled with ongoing weakness in external demand, exports and the pace of market
share gains are projected to slow markedly.
Such an outcome raises the risk of political instability resulting from increases in urban
unemployment and other factors as discussed in this assessment.

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[OIL DA] 83

IMPACT: US ECON COLLAPSE

CONTINUED DEPENENCE ON OIL WILL LEAD TO THE COLLASPE OF


THE UNITED STATES- A SWITCH TO ALTERNATIVE ENERGIES IS
NEEDED

Macleans, 2006
(Canadian Journal, http://www.lifeaftertheoilcrash.net/Index.htm)

What all of this means, in short, is that the aftermath of Peak Oil will extend far beyond
how much you will pay for gas. To illustrate: in a July 2006 special report published by
the Chicago Tribune, Pullitzer Prize winning journalist Paul Salopek described the
consequences of Peak Oil as follows:
. . . the consequences would be unimaginable. Permanent fuel shortages would tip the
world into a generations-long economic depression. Millions would lose their jobs as
industry implodes. Farm tractors would be idled for lack of fuel, triggering massive
famines. Energy wars would flare. And carless suburbanites would trudge to their nearest
big box stores, not to buy Chinese made clothing transported cheaply across the globe,
but to scavenge glass and copper wire from abandoned buildings. Source
Journalist Jonathan Gatehouse summarized the conclusions of Oxford trained geologist
Jeremy Leggett, author of The Empty Tank: Oil, Gas, Hot Air, and the Coming Financial
Catastrophe, in a 2006 Macleans article as follows, emphasis added:
. . . when the truth can no longer be obscured, the price will spike, the economy nosedive,
and the underpinnings of our civilization will start tumbling like dominos. "The price of
houses will collapse. Stock markets will crash. Within a short period, human wealth --
little more than a pile of paper at the best of times, even with the confidence about the
future high among traders -- will shrivel." There will be emergency summits, diplomatic
initiatives, urgent exploration efforts, but the turmoil will not subside. Thousands of
companies will go bankrupt, and millions will be unemployed. "Once affluent cities with
street cafés will have queues at soup kitchens and armies of beggars. The crime rate will
soar. The earth has always been a dangerous place, but now it will become a tinderbox."

By 2010, predicts Leggett, democracy will be on the run . . . economic hardship will
bring out the worst in people. Fascists will rise, feeding on the anger of the newly poor
and whipping up support. These new rulers will find the tools of repression -- emergency
laws, prison camps, a relaxed attitude toward torture -- already in place, courtesy of the
war on terror. And if that scenario isn't nightmarish enough, Leggett predicts that "Big
Oversight Number One" -- climate change -- will be simultaneously making its presence
felt "with a vengeance." On the heels of their rapid financial ruin, people "will now watch
aghast as their food and water supplies dwindle in the face of a climate going awry."
Prolonged droughts will spread, decimating harvests.

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**AFFIRMATIVE ANSWERS-ENERGY TRANSITION DA**

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NON UNIQUE: NO SHIFT TO ALT ENERGIES

NO LONG TERM COMMITMENT TO ALT ENERGIES-MID EAST PRESENCE

YI, JULY 21ST


(DR. XIAOXIONG, professor at Marietta College and Director of the China InstitutE, “China's 'leap' in Middle East a potential source
for rivalry”, 7/21/08, http://www.lancastereaglegazette.com/apps/pbcs.dll/article?AID=/20080721/OPINION02/807210318)

China's rapid growth is proceeding in


AS a nation undergoing its Industrial Revolution in the Information Age,
tandem with its growing energy needs, which are placing enormous pressure on
world energy prices and fueling a fierce global competition for energy resources. "For
China these days," as Khody Akhavi of Inter Press Service notes, "it seems that nothing - not rising energy prices; not sanctions aimed
at its more unsavory business partners; not even the prospect of a nuclear Iran - can curb its thirst for oil." As
China's
energy demands grow at a rate much faster than any other country in the world, so
too have its relationships with the oil-producing nations in the Middle East. With
half its oil imports from the region, China's Middle East policy is on the verge of a
"great leap forward." Chinese strategy for securing energy resources, said Peter Navarro,
author of The Coming China Wars, "is a zero-sum game played against the West. China seeks to
gain physical control of these resources. It does this by first ingratiating itself with
foreign governments, then encircling the country's natural resource riches with
virtually every strategy described by Lenin in the 'imperialist playbook.' " A noticeable example of China's new "leap
forward" Middle East strategy can be seen in the case of China's Iran policy. China gets about 14 percent of its oil imports from Iran.
Beijing is in the process of importing Iranian natural gas - China's oil giant Sinopec Group has signed a mega-gas deal worth $100
billion with Iran. Billed as the "deal of century" by analysts and energy specialists, Sinopec is to buy 250 million tons of liquefied
natural gas in 30 years from Iran, and helps Tehran to develop its giant Yadavaran oilfield in exchange for Iran's commitment of
exporting 150,000 barrels per day of crude oil to China for 25 years at market prices after the startup of the field. Beijing's plan is to
become a comprehensive participant in exploration, drilling, petrochemicals, pipelines and other upstream and downstream services
In order to establish its long-term control of Iranian energy
related to Iran's oil and gas industries.
resources, China's economic and strategic initiatives in Iran go far beyond the
energy field and include a wide spectrum of areas, ranging from infrastructure
construction and nuclear proliferation to trade, tourism, and military cooperation. Economically, China is helping Iran to build
dams, steel mills, shipyards and many other projects. More than 100 large Chinese state companies are working in Iran to develop
ports and airports in all major Iranian cities, mine-development projects and, of course, oil and gas. Trade between the two countries is
expected to hit a new record of $11 billion in 2008, compared with $9.5 billion in 2007. Politically, Beijing has provided Iran with
diplomatic cover and veto power at the U.N. for Tehran's nuclear development program, in exchange for exclusive access to Iran's
huge natural gas and oil reserves. China's new Middle East strategy is poised to challenge U.S. interests in the region. For one thing,
not only are the U.S. and China dependent on energy resources from the Middle
East, but these two powers are offering competing approaches to state-to-state
relations, with the Chinese approach becoming increasingly popular in the region. As
Chietigj Bajpaee, a Hong Kong-based energy analyst, points out, "In many ways, there has been a role reversal for the U.S. and China.
While China had originally fueled revolutionary change through sponsoring anti-colonial struggles and communist insurgencies, it is
now the U.S. that is attempting to fuel change in the region. "While the U.S. has traditionally favored stability even at the cost of
supporting unsavory regimes, it is now China that increasingly favors stability in the region, even if it means supporting pariah regime
such as Iran." Moreover, China's close relations with governments of Iran, Libya and Syria, as well as the proliferation of ballistic
missile technologies and other weapons platforms to these countries, creates sources of tension between the U.S. and China. China's
increasingly significant presence in the Middle East has become a fait accompli. Though China and the U.S. are not currently engaged
in open confrontation in the region, China's quantum leap into the Middle East energy market certainly has the potential for future
Sino-U.S. rivalry.

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UNIQUENESS O/W LINK

NO LONG TERM COMMITMENT TO ALT ENERGIES-MID EAST PRESENCE


YI, JULY 21ST
(DR. XIAOXIONG, professor at Marietta College and Director of the China InstitutE,
“China's 'leap' in Middle East a potential source for rivalry”, 7/21/08,
http://www.lancastereaglegazette.com/apps/pbcs.dll/article?
AID=/20080721/OPINION02/807210318)
China's rapid growth is proceeding in
AS a nation undergoing its Industrial Revolution in the Information Age,
tandem with its growing energy needs, which are placing enormous pressure on
world energy prices and fueling a fierce global competition for energy resources. "For
China these days," as Khody Akhavi of Inter Press Service notes, "it seems that nothing - not rising energy prices; not sanctions aimed
at its more unsavory business partners; not even the prospect of a nuclear Iran - can curb its thirst for oil." As
China's
energy demands grow at a rate much faster than any other country in the world, so
too have its relationships with the oil-producing nations in the Middle East. With
half its oil imports from the region, China's Middle East policy is on the verge of a
"great leap forward." Chinese strategy for securing energy resources, said Peter Navarro,
author of The Coming China Wars, "is a zero-sum game played against the West. China seeks to
gain physical control of these resources. It does this by first ingratiating itself with
foreign governments, then encircling the country's natural resource riches with
virtually every strategy described by Lenin in the 'imperialist playbook.' " A noticeable example of China's new "leap
forward" Middle East strategy can be seen in the case of China's Iran policy. China gets about 14 percent of its oil imports from Iran.
Beijing is in the process of importing Iranian natural gas - China's oil giant Sinopec Group has signed a mega-gas deal worth $100
billion with Iran. Billed as the "deal of century" by analysts and energy specialists, Sinopec is to buy 250 million tons of liquefied
natural gas in 30 years from Iran, and helps Tehran to develop its giant Yadavaran oilfield in exchange for Iran's commitment of
exporting 150,000 barrels per day of crude oil to China for 25 years at market prices after the startup of the field. Beijing's plan is to
become a comprehensive participant in exploration, drilling, petrochemicals, pipelines and other upstream and downstream services
In order to establish its long-term control of Iranian energy
related to Iran's oil and gas industries.
resources, China's economic and strategic initiatives in Iran go far beyond the
energy field and include a wide spectrum of areas, ranging from infrastructure
construction and nuclear proliferation to trade, tourism, and military cooperation. Economically, China is helping Iran to build
dams, steel mills, shipyards and many other projects. More than 100 large Chinese state companies are working in Iran to develop
ports and airports in all major Iranian cities, mine-development projects and, of course, oil and gas. Trade between the two countries is
expected to hit a new record of $11 billion in 2008, compared with $9.5 billion in 2007. Politically, Beijing has provided Iran with
diplomatic cover and veto power at the U.N. for Tehran's nuclear development program, in exchange for exclusive access to Iran's
huge natural gas and oil reserves. China's new Middle East strategy is poised to challenge U.S. interests in the region. For one thing,
not only are the U.S. and China dependent on energy resources from the Middle
East, but these two powers are offering competing approaches to state-to-state
relations, with the Chinese approach becoming increasingly popular in the region. As
Chietigj Bajpaee, a Hong Kong-based energy analyst, points out, "In many ways, there has been a role reversal for the U.S. and China.
While China had originally fueled revolutionary change through sponsoring anti-colonial struggles and communist insurgencies, it is
now the U.S. that is attempting to fuel change in the region. "While the U.S. has traditionally favored stability even at the cost of
supporting unsavory regimes, it is now China that increasingly favors stability in the region, even if it means supporting pariah regime
such as Iran." Moreover, China's close relations with governments of Iran, Libya and Syria, as well as the proliferation of ballistic
missile technologies and other weapons platforms to these countries, creates sources of tension between the U.S. and China. China's
increasingly significant presence in the Middle East has become a fait accompli. Though China and the U.S. are not currently engaged
in open confrontation in the region, China's quantum leap into the Middle East energy market certainly has the potential for future
Sino-U.S. rivalry.

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2005 – 2003 – 2002 – 1999 – 1998 – 1995 – 1994 – 1980 – 1978 – 1973 – 1966 – 1959 –
1958
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[OIL DA] 87

UNIQUENESS O/W LINK

UNIQUENESS O/W RISK OF RESIDUAL LINK-OIL PRICES CAN’T REVERSE


TREND

PAULSON, 08
(SECRETARY HENRY M, On the Fourth Meeting of the U.S.-China Strategic Economic Dialogue at the Carnegie Endowment for
International Peace, 6/10/08, http://www.ustreas.gov/press/releases/hp1016.htm)

The environmental aspects of the ten year framework build upon a solid foundation. We have a
memorandum of understanding to combat illegal logging and promote sustainable forest management. And
we have launched efforts to help China develop a nationwide program on sulfur dioxide emissions trading.
U.S. and Chinese private sector companies are also helping to create the "green" economy. Whether it is the
public sector or the private sector, this work is aspirational. Recent meetings between U.S. and Chinese
leaders have shown great promise for collaboration on green buildings, energy efficient infrastructure
projects and creating "Eco-cities." China adds 2 billion square meters of new construction every year, and
has 40 billion square meters of existing buildings that need retrofitting. China's leaders know that the
development of green buildings is a critical need. As we establish this cooperative framework, my
friends in China often ask what can be done about China's immediate energy and environmental
challenges. My answer is that China, given its current economic growth and prosperity, can leapfrog the
United States and the rest of the world in deploying and using advanced energy and environmental
technology. Adopting advanced technology will increase China's energy efficiency and reduce the
emissions of greenhouse gases and harmful pollutants. But bringing this technology to China is
hindered by the tariff and non-tariff barriers that China places on environmental goods and services.
A high priority should be eliminating barriers on products, goods and services that can improve the
health and welfare of the Chinese people. For example, there is a water membrane technology
available right now. If installed properly, it could help local communities take significant steps towards
reducing the pollution entering rivers from power plants. That means that within months, some Chinese
citizens could have cleaner water. Yet a tariff of 22 percent on water membranes makes this technology too
expensive for many communities. Significant opportunity exists for the United States and China to achieve
immediate progress and make long-term strides towards energy security and environmental sustainability.
Through a ten year framework of cooperation, I believe that we have the foundation to meet these
challenges in a sustained, collaborative manner.

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[OIL DA] 88

NO LINK: CONSUMPTION WONT DROP

DECREASE IN US CONSUMPTION WON’T DROP PRICES

OIL VOICE, 08

(“U.S. Oil Consumption DeclineS”, 4/5/08, <


http://www.oilvoice.com/n/US_Oil_Consumption_Declines/ff895835.aspx>)

Recent data shows that U.S oil consumption has declined in the first quarter by nearly 475,000 barrels
a day as compared to last year. This has been the biggest decline in oil’s demand in any quarter, ever
since the fall in oil consumption in the fourth quarter of 2001 after the 9-11 attacks. However, experts say
that drop in U.S. demand doesn’t suggest that oil prices will decrease because there is a strong
worldwide demand of oil. Revised data from the Energy Information Administration suggests oil demand
for the month of January dropped by 2.2 percent, meaning a decrease of 45,000 barrels a day leading to
20.114 million barrels a day when compared to the previous year. This has been the lowest demand in any
month, since April 2005. The figures showed a sharp decline of 2.8 percent, that is 574,000 barrels a day,
lower the then the initial estimate for the month. Jan Stuart, economist at UBS Securities LLC in New
York, said "Macro folks won't officially label the U.S. economic environment a recession for some time,
but at first glance (first-quarter) oil data sure look bearish," in a report Thursday. Initial data for the months
of February and March, which will most probably be revised, suggests that pressures from skyrocketing
crude oil prices and the restless U.S. economy have played a role in lowering the U.S demand for oil. Also,
the EIA data for past three months suggest that an average demand of more then 20.3 million barrels a day
fell by 1.4 percent, which is 300,000 barrels a day as compared to the EIA’s forecasts in early March. It has
fallen by 2.3 percent, or almost 475,000 barrels a day ever since last year. So, far the demand level in the
first quarter has been the lowest ever recorded, since the fourth quarter of 2003. This has been the largest
possible year-to-year decline since the fourth quarter of 2001 in which the demand dropped by 2.9 percent
that is 572,000 barrels a days, following the 9/11 attack on the U.S. There has been a slump in the first
quarter as front-month Nymex crude oil prices were recorded as $97.90 a barrel on average, up 68.3
percent from the previous year. The EIA predicted that U.S crude would settle at $96.79 a barrel on
average, in the quarter and it will slightly rise to average $97 for the second quarter. Retail prices of
gasoline, diesel fuel and domestic heating oil were highest according to the records, during this quarter. Ed
Morse, chief energy economist at Lehman Brothers warned about the fall in U.S and global demand for oil,
Thursday. He further added, "The main risk on the demand side is for more downward revisions as a U.S.
recession could affect global (gross domestic product) growth" The analysts further suggest that prices are
not expected to fall after this decline in demand. UBS' Stuart said that "Unless oil prices come down in
a hurry, they won't come down for some time," he further commented that, "Summer driving season is
approaching. And even in a recessionary economy, seasonal gasoline demand will pick up."

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NO INTERNAL LINK

DEVELOPMENT IN DOMESTIC DRILLING SOLVES THE INTERNAL LINK


REUTERS, 08

(“China CNOOC strikes oil, gas in new Bohai Bay well”, 7/7/08,
http://uk.reuters.com/article/oilRpt/idUKPEK2897720080707)

BEIJING, July 7 (Reuters) - Top Chinese offshore oil and gas producer CNOOC Ltd
(0883.HK: Quote, Profile, Research) (CEO.N: Quote, Profile, Research) announced on
Monday that it had struck oil and gas at a wildcat well in north China's Bohai Bay.
KL 10-1-1 well, drilled independently by CNOOC, spud about 980 barrels of crude and
100,000 cubic feet of gas per day, the company said on its website www.cnoocltd.com.
The offshore specialist aims to build Bohai field China's second-largest crude
producer in a few years' time, overtaking the ageing onshore field Shengli, company
executives said last October. By October 2007, CNOOC was pumping about 274,000
barrels per day of crude at Bohai Sea from 29 fields.

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US ALTERNATIVE INNOVATION KEY

US ALT ENERGY INNOVATION KEY-CHINA JUMPS ONBOARD

PAULSON, 08
(SECRETARY HENRY M, On the Fourth Meeting of the U.S.-China Strategic Economic Dialogue at the Carnegie Endowment for
International Peace, 6/10/08, http://www.ustreas.gov/press/releases/hp1016.htm)

The U.S. economy faces significant headwinds from a number of factors including rising
energy prices. Gasoline, food, and many common household items have become more
expensive for American families. There is an urgent need for U.S. energy policies to
significantly evolve to ensure U.S. energy security. Since the beginning of the Bush
Administration, the United States has spent nearly $18 billion to research, develop, promote
and bring clean and efficient technologies to market. We continue to develop new strategies – last December
President Bush signed the Energy Independence and Security Act, which responded to his "Twenty in Ten" challenge to improve
vehicle fuel economy and increase alternative fuels. But much more is needed if we are to adequately address
our energy security challenges. As the two largest net importers of oil, China and the
United States face similar challenges. We have a strong and shared interest in avoiding
supply disruptions, increasing energy efficiency, promoting the efficiency and transparency
of the global energy markets to the benefit of all oil importing nations, and expanding the
availability and use of alternative energy sources. To power its economic growth China has become the
world's largest coal producer and consumer. In 2006, it became the second largest purchaser of new vehicles, which is one of the key
reasons why China has now become the world's third largest consumer of oil. To find solutions to these shared challenges, the
U.S. and China have been working together under the SED to address energy security. We
already have an agreement to strengthen cooperation on next generation biofuels, to
increase industrial energy efficiency, strengthen cooperation on the certification of energy
efficient products, increase cooperation on nuclear safety, and a joint five-year commitment
to promote large scale deployment of alternative fuel technologies for vehicles. In conjunction with
the International Energy Agency, the IEA, we have also strengthened cooperation on strategic oil reserves. But to comprehensively
address its energy security, China must go beyond these joint efforts. China has made a good start by establishing
numerous plans and ambitious goals, highlighted by the Eleventh Five Year Plan, for 2006
to 2010, which established aggressive goals to reduce energy consumption per unit of GDP
by 20 percent. China has moved towards meeting some of these goals by reducing energy consumption over 3 percent per unit
of GDP output in 2007. While I applaud this continued focus and am encouraged by this progress, further results cannot come fast
enough.

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US ALTERNATIVE INNOVATION KEY

ALT ENERGIES ATTRACT INVESTORS-LOW COSTS

KONRAD 08
(Tom, investment analyst specializing in the Renewable Energy and Energy Efficiency companies, “Ten Solid Clean Energy
Companies to Buy on the Cheap: #1 Johnson Controls, Inc. (JCI)”, March, 2008, <http://www.altenergystocks.com/archives/2008/03/)

With half of the companies 2007 revenues coming from two of my favorite alternative
energy sectors (efficient buildings and automotive batteries), and these parts of the
company growing much more rapidly than the auto parts division (which is likely to be a
great competitive advantage in selling batteries and power systems to automakers,) JCI is
a must for alternative energy investors attracted by the superior economics of
energy efficiency. The stock has declined significantly since the start of the year, but it
currently seems only fairly valued to me at the current price of around $34. However, a
decline in auto sales caused by a slowing economy, along with an increased debt burden
due to recent acquisitions could easily hurt short-term profits. With continued stock
market weakness, patient investors could easily see some excellent buying opportunities
in the next 6-12 months. If we do, I will be buying more.

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US ALTERNATIVE INNOVATION KEY

ALT ENERGIES OPEN UP OTHER MARKETS

HUFFINGTON POST, 06

(COLLEEN ROWLEY, “A Great New American Enterprise”, 7/27/06, <


http://www.huffingtonpost.com/coleen-rowley/a-great-new-american-
ente_b_25899.html>)

A leader with real vision would see the opportunity behind the looming crisis, and rush to
embrace it. As global demand for energy outstrips production, new markets for
alternative energy technology will open up. U.S. innovators are poised to claim these
markets, if they receive the funding necessary to push cutting-edge technology out of
the laboratory. Researchers at New Mexico State University and Wake Forest have put
nanotechnology to use creating organic solar cells, which have myriad consumer,
commercial, and even military applications. University of Minnesota professor Lanny
Schmidt has developed technology which may bring fuel-cell powered transportation to
market years earlier than previously thought, by extracting hydrogen from ethanol. Of
course ethanol is already in millions of cars today, and unlike traditional corn or sugar-
derived ethanol, cellulosic ethanol can be produced from biomass (corn husks,
switchgrass, etc.) more cheaply, cleanly and efficiently than gasoline. An energy policy
based on biomass benefits American farmers as well as American innovators.
Moreover, if ethanol from biomass can easily be converted to hydrogen for fuel-cell
power, biomass can literally drive everything, from our cars to our furnaces to the
generators which power our electrical grid --- if organic solar cells don't render the
electrical grid obsolete. And for icing on the cake, replacing our existing carbon-intensive
fuels with these zero-carbon and carbon-neutral technologies will slow the effects of
global warming. Skeptics will argue that we could never produce enough ethanol to equal
our gasoline consumption. But one major industrialized nation already has done it: Brazil
is on track to free itself from dependence on imported oil by the end of the year. Indeed,
Brazil's sugar-based ethanol industry has been a victim of its own success, with demand
for the fuel outstripping the supply. The road of revolutionary change is always rocky;
the market in gasoline suffered precipitous swings between scarcity and glut on its
way to becoming the dominant economic force in the world. Breaking our addiction
to oil will bring some temporary withdrawal symptoms. But the world is at or near
peak oil production (and coal and natural gas and uranium . . .); it is not a question
of whether we adopt an alternative energy strategy, but when. And the sooner the
better. A race is starting to develop the cheapest, cleanest, most efficient means of
renewable energy production. In the end, we all win with a cleaner, greener earth, but
the first to the finish line will reap an economic windfall as well. America ushered in both
the nuclear age and the space age: it's time to put the full faith and credit of the United
States behind the technology boom of the 21st century.

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NO IMPACT-OIL WAR

NO U.S. WAR WITH CHINA OVER OIL

PEOPLES DAILY ONLINE, 04

(“China's oil strategy not conflicting with US interest”, 6/21/04,


http://english.peopledaily.com.cn/200406/21/eng20040621_146985.html)

At this juncture China's oil strategy shift is not seen as a threat to American national
interests - especially given the increasing consensus that Chinese economic growth
should continue. However, there is great concern in the US about increased
international dependency on Middle East oil and about the security of global oil
supplies as a result of instability and the potential for terrorist attacks on
production and export facilities in the Middle East - especially in Saudi Arabia. The
major fear is that a major rupture in the supply chain from Saudi Arabia in particular
would lead to prohibitive oil prices that would stifle the global economy, and also
encourage increased competition and even conflict over oil and energy supplies in
energy-poor regions like East Asia.

NO OIL CONFLICT

AFRICA NEWS, 08

(“Africa; China's Thirst for Oil”, International Crisis Group, 6/9/08, Lexis)

The fear of China "locking up" energy supplies around the world is misplaced, and
other countries should cooperate with it to ensure a more cooperative international
environment on both energy and wider security issues. China's Thirst for Oil, the
latest report from the International Crisis Group, examines China's need for energy and
assesses the impact of Beijing's energy policies on the resolution of conflict by
looking at Sudan and Iran as case studies. China's need for energy is growing faster
than that of any other country. Self-sufficient until 1993, China's three decades of rapid economic growth have led
it to look abroad to meet its energy needs. While its approach until now has been characterised by oil mercantilism, physical control of
supplies and distrust of international markets, it is increasingly recognising the value of treating oil as a commodity and adopting a
more open approach towards international energy markets and cooperation. Chinese companies' investment in oil exploration and
extraction in countries and regions suffering from deadly conflict has sometimes led China to take positions counterproductive to
conflict resolution, for example in the early stages of the Darfur conflict. At the same time, Beijing is willing to play a more
constructive role as it increasingly engages with the international system and learns the limits of a foreign policy based on the
traditional principle of non-interference. According to Stephanie Kleine-Ahlbrandt, Crisis Group's China Adviser and North East Asia
Project Director, "As policy options are formulated in the international community for ending crisis and resolving conflict, in the right
conditions,
China can play an important role in the solution." International cooperation
will be facilitated by a better understanding of Chinese energy policy and
behaviour. While many in the country's leadership recognise that domestic policy
must focus more on conservation, efficiency, reducing pollution, diversifying the
energy mix and upgrading clean technologies, both policymaking and
implementation are hindered by conflicting interests at the central, provincial, local

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and private levels. The need for a coherent energy policy and institutional apparatus
to manage energy is more urgent than ever. The rest of the world's interest in
China's quest for energy security has never been greater. "Energy security is not a
zero-sum game", says Charles Esser, Crisis Group's Energy Analyst. "Integrating China
into cooperative arrangements presents a chance to enhance global energy security".

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