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Oil's run shifts fate of nations

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

The consequences are evident in minds and mortar worldwide: anger at fuel pumps in China and inflated confidence in the Kremlin, new weapons in Chad and new petrochemical plants in Saudi Arabia, no-driving campaigns in South Korea and bigger sales for Toyota hybrid cars, a fiscal burden in Senegal and a bonanza in Brazil. Myanmar's recent demonstrations were triggered by a government decision to raise fuel prices.

U.S. pays heavy price

In the U.S., the rising bill for imported petroleum lowers already anemic consumer-savings rates, adds to inflation, worsens the trade deficit, undermines the dollar and makes it more difficult for the Federal Reserve to balance its competing goals of fighting inflation and sustaining growth.

High prices have given a boost to oil-rich Alaska, which in September raised the annual oil dividend paid to every man, woman and child living there for a year to $1,654. In other states, high prices create greater incentives for pursuing non- oil energy projects that once might have looked too expensive and hurt earnings at energyintensive companies like airlines. Even Kellogg's cited energy costs as a drag on earnings.

With crude-oil prices flirting with $100 a barrel, there is no end in sight to the redistribution of more than 1 percent of the world's gross domestic product. This new high point in petroleum prices has arrived over four years, and many believe it will represent a new plateau, even if prices drop back somewhat in the coming months.

"There's never been anything like this on a sustained basis the way we've seen the last couple of years," said Kenneth Rogoff, a Harvard University economics professor and former chief economist at the International Monetary Fund. Oil prices "are not spiking; they're just rising," he said.

Exporters reap riches

The benefits, to the tune of $700 billion a year, are flowing to the world's oil-exporting countries. Two of those nations - Iran and Venezuela - may be better able to defy the Bush administration because of swelling oil revenues.

Venezuela has used its oil wealth to dispense patronage around South America. And Iran could be less vulnerable to sanctions against its nuclear program.

The world's biggest oil exporter, Saudi Arabia, is using its rejuvenated oil riches to build four cities and has a budget surplus.

Russia, the world's No. 2 oil exporter, has increased its federal budget tenfold since 1999 while paying off foreign debt.

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The Economics of Hybrids

It's getting a lot easier to buy a hybrid -- but not necessarily cheaper.

Amid heightening concerns over America's proclaimed oil addiction, skyrocketing fuel prices and global climate change, auto companies are making more gasoline-electric hybrid cars and giving consumers more choices than ever before.

But marketplace dynamics in the U.S. -- including higher prices charged by the car companies, dwindling tax credits given to fuel-efficient cars and low gasoline taxes -- haven't yet allowed a hybrid or other more-efficient vehicle to become an economical choice for many consumers.

In Europe, by contrast, several countries offer significant tax breaks to people who buy more-efficient vehicles. And high fuel taxes also are propelling Europeans to invest in a more-efficient ride.

Mild or Full

There are several hybrids on the market now, using different technologies. But basically, a hybrid consists of a traditional internal-combustion engine paired with an electric motor. The electric motor gets its power from a storage battery, which is replenished by a recharging system within the car's powertrain. Electric motors boost power to the gas engine, allowing manufacturers to install smaller -- and thus more-efficient -- motors in these cars. Most hybrids sport four-cylinder engines as opposed to the six- or eight-cylinder motors found in many vehicles.

There are essentially two types of hybrids on the mass market today, often dubbed "mild" or "full" hybrids, each with fuel-sipping and emission-curbing features. A mild hybrid shuts off the engine at a full stop; uses regenerative braking, which utilizes dissipated energy from braking to recharge the battery; and uses the electric motor to help power the gas engine.

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Chevrolet to chase green label

General Motors Corp. wants to make Chevrolet, its largest brand, an environmental leader as the U.S. automaker invests in fuel-saving systems in a challenge to Toyota Motor Corp.

GM will use hybrids, fuel cells, more efficient gasoline engines and other technologies to vie for mileage and environmental bragging rights against competitors such as Toyota, vice chairman Bob Lutz told reporters last week in Memphis, Tenn.

"There is no environmental technology that will be untouched by Chevrolet," said Lutz, who was introducing a redesigned Malibu sedan. Details of the effort will be announced at the Los Angeles Auto Show next week, he said.

The Chevrolet initiative follows chief executive Rick Wagoner's pledge at last year's Los Angeles show that the Detroit-based automaker would use some of the billions saved by closing plants and cutting labor costs to pay for new technology and narrow an environmental image gap with Toyota. GM is trying to hold off the company and maintain its rank as the world's largest automaker.

GM on July 5 started a Fuel Solutions advertising campaign that uses the slogan "gas- friendly to gas-free" and was created by Interpublic Group of Cos.' Campbell Ewald unit.

"This campaign has been really quite effective," said Wes Brown, an analyst at Los Angeles-based market researcher Iceology Inc. "They have been able to convince people that they are trying to change their image, and people are paying attention."

GM, with the Chevrolet Volt car, is racing against Toyota to develop the first hybrid model that recharges at an electrical outlet. GM has also begun rolling out 100 prototype Chevy Equinox sport utility vehicles powered by hydrogen fuel cells.

Chevrolet vehicles such as the Silverado large pickup truck and Corvette sports car already lead their segments in fuel economy, GM spokesman Terry Rhadigan said.

Chevrolet is inviting reporters to drive its models next month in San Diego as part of the Fuel Solutions campaign.

That includes a gasoline-electric Tahoe SUV; the Aveo car, GM's most fuel-efficient model at 34 miles per gallon in highway driving; an Impala sedan that uses 85 percent ethanol fuel; and prototypes of the fuel-cell Equinox and the Volt electric car.

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The end of oil

A small - but growing - group of experts think world oil production will peak in the next few years, to devastating effect.

By This e-mail address is being protected from spam bots, you need JavaScript enabled to view it , CNNMoney.com staff writer
September 14 2007: 2:50 PM EDT

NEW YORK (CNNMoney.com) -- At some point in the near future, worldwide oil production will peak, then decline rapidly, causing depression-like conditions or even the starvation of billions across the globe.

That's the worst-case scenario for subscribers to the "peak oil" theory, who generally believe oil production has either topped out or will do so in the next couple of years.

What follows depends on who one talks to, but predictions run the gamut from the disaster scenario described above to merely oil prices in the $200-a-barrel range while society transitions to other energy sources.

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Industry News

Oil's run shifts fate of nations
WASHINGTON — High oil prices are fueling one of the biggest transfers of wealth in history. Oil consumers are paying $4 billion to $5 billion more for crude oil every day than they did just...
Read More ...
The Economics of Hybrids
It's getting a lot easier to buy a hybrid -- but not necessarily cheaper. Amid heightening concerns over America's proclaimed oil addiction, skyrocketing fuel prices and global climate change...
Read More ...
Chevrolet to chase green label
General Motors Corp. wants to make Chevrolet, its largest brand, an environmental leader as the U.S. automaker invests in fuel-saving systems in a challenge to Toyota Motor Corp. GM will u...
Read More ...
The end of oil
A small - but growing - group of experts think world oil production will peak in the next few years, to devastating effect. By Steve Hargreaves, CNNMoney.com staff writer September 14 2007: ...
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By Edward Fitzpatrick Journal Staff Writer PROVIDENCE — Local environmental advocates are hailing two developments in the legal battle over whether states, including Rhode Island, can ...
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