Oil production has begun falling at all of the major Western oil companies, and they are finding it harder than ever to find new prospects even though they are awash in profits and eager to expand.

Part of the reason is political. From the Caspian Sea to South America, Western oil companies are being squeezed out of resource-rich provinces. They are being forced to renegotiate contracts on less-favorable terms and are fighting losing battles with assertive state-owned oil companies.

And much of their production is in mature regions that are declining, like the North Sea.

The reality, experts say, is that the oil giants that once dominated the global market have lost much of their influence ”” and with it, their ability to increase supplies.

“This is an industry in crisis,” said Amy Myers Jaffe, the associate director of Rice University’s energy program in Houston. “It’s a crisis of leadership, a crisis of strategy and a crisis of what the future looks like for the supermajors,” a term often applied to the biggest oil companies. “They are like a deer caught in headlights. They know they have to move, but they can’t decide where to go.”

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When Honora Wolfe and her husband moved to the outskirts of Boulder, Colo., she wanted an environmentally friendly way to commute to her job as a bookshop owner in the city.

Wolfe, 60, found her solution about a month ago: an electric bicycle. It gets her to work quickly, is easy on her arthritis and is better for the environment than a car.

“I’m not out to win any races,” she said. “I want to get a little fresh air and exercise, and cut my carbon footprint, and spend less money on gas. And where I live, I can ride my bike seven months out of the year.”

The surging cost of gasoline and a desire for a greener commute are turning more people to electric bikes as an unconventional form of transportation. They function like a typical two-wheeler, but with a battery-powered assist. Bike dealers, riders and experts say they are flying off the racks.

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High gas prices have prompted automakers to shift to more efficient cars and new technologies. Toyota’s Prius hybrid has been a runaway success. And General Motors has been pouring resources into its Chevy Volt, a plug-in hybrid expected in about 2010 that will run entirely on electricity for drivers going less than 40 miles per day.

Wind and solar energy are becoming more competitive as the result of advancing technology and the fact that prices have risen for coal and other traditional sources of electricity. And Americans are turning to public transit in record numbers.

These changes are much more dramatic than anything resulting from proposals borne of political expedience. To be sure, high prices cause hardships, and the worst could come this winter from painfully high home heating oil prices; Congress and the president should look hard at increasing funds to help the poorest through a tough winter. But if oil prices continue falling, much of the recent momentum could be slowed, to the delight of those who profit from feeding the nation’s addiction.

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Rapidly rising global food costs have contributed to the worst hunger crisis in East Africa for eight years, with at least 14 million people at risk of malnutrition, aid agencies said yesterday.

In Ethiopia, the worst-affected country in the region, the Government said that 4.6 million people faced starvation, but aid agencies claimed that the true figure was closer to 10 million.

Drought has worsened food shortages, and Oxfam said that the number of acute malnutrition cases had reached its highest level since the droughts of 2000, when mortality rates peaked at more than six people per 10,000 per day. The official definition of a famine is more than four deaths per 10,000 per day.

Ethiopian farmers said that the crisis was caused by the absence of the Belg rains, which were due in February and March. “It’s really hard. People are eating whatever they can find,” said Gemeda Worena, 38, the tribal head of Fendi Ajersai, a village in southern Ethiopia where six children died in one week this month. “We hadn’t had rain for the last eight months. We had to buy water to save our lives, but now we have nothing.”

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In recent weeks energy policy has moved to the fore in the US presidential contest. This is a welcome change: front and centre is where it belongs. Sadly, the issue has come to prominence in a way that inspires little faith that the next president will get it right.

To their credit, Barack Obama and John McCain have repudiated the Bush administration’s neglect of climate change. In addition, both emphasise the need for greater “energy security” and “energy independence” ”“ which is also fine, provided those terms are correctly construed. So far, however, neither has presented a good strategy for achieving these aims, and neither has even begun to prepare the electorate for the costs of such a policy. On this second point, in fact, it is rather the opposite.

The problem is that climate change, economic stability and geopolitics are not the factors that have pushed energy to the fore. The price of petrol at the pump ”“ which one can describe, without exaggeration, as a national obsession ”“ gets the credit for this. At $4 a US gallon, less than half of what one pays in the UK, the distress is extreme. The candidates therefore have to deal with contradictory public sentiments. Voters genuinely want the country to curb its carbon emissions and moderate its addiction to imported oil, but more than that ”“ much more than that ”“ they also want cheap petrol. Presidential candidates are understandably inclined to tell voters they can have everything they want, even when, as in this case, they cannot.

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The oil-price shocks of 1973 and 1979 motivated Japan, in particular, to become more energy-efficient. In 1980, when U.S. consumers were griping about $1.25-a-gallon gas — $3.30 in today’s prices — their counterparts in Japan were paying roughly twice as much. They started using a lot less. In 1983, Japan consumed about 25% less oil per person than it had in 1973. Last year, Japan used 14 barrels per person, and the countries in the euro zone consumed 17. The U.S. used 25 barrels per person.

—From a recent Wall Street Journal article entitled “U.S. Retools Economy, Curbing Thirst for Oil”

Barack Obama thinks the government should intervene on gas prices to “give families some relief,” and last week called for releasing 70 million barrels of crude from the Strategic Petroleum Reserve. John McCain proposes an end to the ban on offshore drilling and has pushed for a gas-tax holiday because “we need it, we need it very badly.”

But both candidates and the public are evidently unaware of a basic fact: Gasoline is more affordable for American families now than it was in the days of the gas-guzzling muscle cars of the early 1960s. Prices are beginning to come down somewhat, but this was true even when the national average was at its summer peak.

Two-thirds of American voters say they think that the price of gas is “an extremely important political issue,” and many believe that it will cause them “serious” financial hardship, according to a recent survey by the Associated Press and Yahoo.

Although it’s true that the real (inflation-adjusted) and nominal (posted) prices of gasoline are higher than at any time since World War II, even at the recent peak national average of $4.11 a gallon (California’s average Friday was $4.17), gasoline is still more affordable today than it was during the Kennedy administration. Federal Reserve Chairman Ben Bernanke worries that increasing fuel prices might eat up so much disposable income that it flat-lines consumer spending and tanks the economy. But it’s difficult to square that worry with what we call the “affordability index” — the ratio of the average person’s disposable income to the price of gasoline.

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Retailers are typically obsessed with what to put under their roofs, not on them. Yet the nation’s biggest store chains are coming to see their immense, flat roofs as an untapped resource.

In recent months, chains including Wal-Mart Stores, Kohl’s, Safeway and Whole Foods Market have installed solar panels on roofs of their stores to generate electricity on a large scale. One reason they are racing is to beat a Dec. 31 deadline to gain tax advantages for these projects.

So far, most chains have outfitted fewer than 10 percent of their stores. Over the long run, assuming Congress renews a favorable tax provision and more states offer incentives, the chains promise a solar construction program that would ultimately put panels atop almost every big store in the country.

The trend, while not entirely new, is accelerating as the chains seize a chance to bolster their environmental credentials by cutting back on their use of electricity from coal.

“It’s very clear that green energy is now front and center in the minds of the business sector,” said Daniel M. Kammen, an energy expert at the University of California, Berkeley. “Not only will you see panels on the roofs of your local stores, but I suspect very soon retailers will have stickers in their windows saying, ”˜This is a green energy store.’ ”

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Frankly, when you compare how America has responded to the 1973 oil shock and how Denmark has responded, we look pathetic.

“I have observed that in all other countries, including in America, people are complaining about how prices of [gasoline] are going up,” Denmark’s prime minister, Anders Fogh Rasmussen, told me. “The cure is not to reduce the price, but, on the contrary, to raise it even higher to break our addiction to oil. We are going to introduce a new tax reform in the direction of even higher taxation on energy and the revenue generated on that will be used to cut taxes on personal income ”” so we will improve incentives to work and improve incentives to save energy and develop renewable energy.”

Because it was smart taxes and incentives that spurred Danish energy companies to innovate, Ditlev Engel, the president of Vestas ”” Denmark’s and the world’s biggest wind turbine company ”” told me that he simply can’t understand how the U.S. Congress could have just failed to extend the production tax credits for wind development in America.

Why should you care?

“We’ve had 35 new competitors coming out of China in the last 18 months,” said Engel, “and not one out of the U.S.”

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…the price of a barrel of crude has been falling: from a peak of $145 in early July, it came down to $117 and was trading yesterday at $120. That’s almost a 20 per cent drop in little more than three weeks.

If the trend continues into September at anything like the same rate of descent, most of the inflationary spike of the past 12 months will miraculously have been sliced away. This is a dramatic reversal, and it is worth trying to work out why it is happening and what it means.

Just possibly, it means that what investors refer to in shorthand as the great “oil up” story has finally revealed itself not as the fundamental reflection of scarce supply that its adherents liked to claim, but as a simple, speculative bubble that was always going to burst.

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An earlier column talked about several converging crises–energy, economy and environment. Since then the price of gas has gone down! Proof that I was wrong. Not!

As a nation we are so shell-shocked by the energy crisis that we think a 10-cent reduction in the price of gas is a big break, forgetting that less than a year ago we were paying under $3 a gallon.

I see churches adapting to these three interrelated crises in several ways:

–Redefinition of “church.” Church will no longer be the place we go. Church will be the people we share faith with. Churches will still meet together for worship at a central time and location, but that will become secondary to the ministry performed during the week. Church buildings will become the resource hub in community ministry, like the old Celtic Christian abbeys. Church impact will replace church attendance as the new metric.

–Restructuring of church operations. Due to the high cost of fuel and a struggling economy, churches will become smaller, more agile and less expensive to operate than in the past. Churches will need to provide direct relief to individuals and families with meal programs, shelters, clothing, job training, and more.

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Ten kilometres above the earth, the Pope delivered a message to the people of Sydney: the world is God’s creation and humanity needs to safeguard it against the ravages of climate change.

His message, unexpected and delivered in Italian, called for a spiritual response to the environmental crisis and asked Catholics – especially young people – to find “a way of living, a style of life that eases the problems caused to the environment”.

“We need to rediscover our earth in the face of our God and creator and to re-find our responsibilities in front of our maker and the creatures of the earth he has placed in our hands in trust,” he said.

“We need to reawaken our conscience ”¦ I want to give impulse to rediscovering our responsibilities and to finding an ethical way to change our way of life and ways to respond to these great challenges.”

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Crude oil’s brief jump past $147 a barrel Friday arrived not only as the United States and Israel view Iran as a growing threat, but also as the U.S. dollar fell and worries erupted over possible supply disruptions in two other major oil-producing nations: Nigeria and Brazil.

Those factors contributed to new all-time trading highs in crude, gasoline and heating oil. It looks like $4-a-gallon gasoline might be here to stay, and that heating oil costs might cause further problems for consumers as the weather gets colder. Futures prices for natural gas turned lower Friday, but are still about twice as high as a year ago.

“If you think your gasoline bills are expensive now, wait till you get your home heating bill this winter,” said Stephen Schork, an analyst and trader in Villanova, Pa.

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One of the benefits of being around a long time is that you get to know a lot about certain things. I’m 80 years old and I’ve been an oilman for almost 60 years. I’ve drilled more dry holes and also found more oil than just about anyone in the industry. With all my experience, I’ve never been as worried about our energy security as I am now. Like many of us, I ignored what was happening. Now our country faces what I believe is the most serious situation since World War II.

The problem, of course, is our growing dependence on foreign oil ”“ it’s extreme, it’s dangerous, and it threatens the future of our nation.

Let me share a few facts: Each year we import more and more oil. In 1973, the year of the infamous oil embargo, the United States imported about 24% of our oil. In 1990, at the start of the first Gulf War, this had climbed to 42%. Today, we import almost 70% of our oil.

This is a staggering number, particularly for a country that consumes oil the way we do. The U.S. uses nearly a quarter of the world’s oil, with just 4% of the population and 3% of the world’s reserves. This year, we will spend almost $700 billion on imported oil, which is more than four times the annual cost of our current war in Iraq.

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The head of the Organization of Petroleum Exporting Countries warned Thursday that oil prices would see an “unlimited” increase in the case of a military conflict involving Iran, because the group’s members would be unable to make up the lost production.

“We really cannot replace Iran’s production – it’s not feasible to replace it,” Abdalla Salem El-Badri, the OPEC secretary general, said during an interview.

Iran, the second-largest producing country in OPEC, after Saudi Arabia, produces about 4 million barrels of oil a day out of the daily worldwide production of close to 87 million barrels. The country has been locked in a lengthy dispute with Western countries over its nuclear ambitions.

In recent weeks, the price of oil has risen higher on speculation that Israel could be preparing to attack Iranian nuclear facilities. The saber-rattling intensified this week with missile tests by Iran. That has further shaken oil markets because of concerns that any conflict with Iran could disrupt oil shipments from the Gulf region.

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Pledging to “move toward a low-carbon society,” leaders of the world’s richest nations on Tuesday endorsed the idea of cutting greenhouse gas emissions in half by 2050, but failed to set a short-term goal for reducing the toxic heat-trapping gases that scientists say are warming the planet.

The declaration of the so-called Group of Eight ”” the United States, Japan, Britain, France, Italy, Canada and Russia ”” called on developing nations like China and India to follow suit.

It drew immediate criticism from environmentalists, who said it did not go far enough.

But the leaders themselves cast the announcement as an important step forward in setting the groundwork for a binding international treaty on climate change, which is being negotiated under the auspices of the United Nations with the goal of an agreement by 2009.

“The G-8 nations came to a mutual recognition that this target ”” cutting global emissions by at least 50 percent by 2050 ”” should be a global target,” Prime Minister Yasuo Fukuda of Japan said in announcing the agreement.

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Outside the thriving oil patch, it makes for a bleak economic picture. But it didn’t have to be this way.

Over the last 25 years, opportunities to head off the current crisis were ignored, missed or deliberately blocked, according to analysts, politicians and veterans of the oil and automobile industries. What’s more, for all the surprise at just how high oil prices have climbed, and fears for the future, this is one crisis we were warned about. Ever since the oil shortages of the 1970s, one report after another has cautioned against America’s oil addiction.

Even as politicians heatedly debate opening new regions to drilling, corralling energy speculators, or starting an Apollo-like effort to find renewable energy supplies, analysts say the real source of the problem is closer to home. In fact, it’s parked in our driveways.

Nearly 70 percent of the 21 million barrels of oil the United States consumes every day goes for transportation, with the bulk of that burned by individual drivers, according to the National Commission on Energy Policy, a bipartisan research group that advises Congress.

SO despite the fierce debate over what’s behind the recent spike in prices, no one differs on what’s really responsible for all that underlying demand here for black gold: the automobile, fueled not only by gasoline but also by Americans’ famous propensity for voracious consumption.

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Speculators do play an important role in setting the price of oil and other raw materials. But they do so based on their expectations of future trends in supply and demand, not on whims. If they had somehow managed to push prices to unjustified heights, then demand would contract, leaving unsold pools of oil.

The futures market does sometimes signal that prices are likely to rise, which might prompt speculators to hoard oil in anticipation. But it is not signalling that at the moment, and there is no sign of hoarding. In the absence of rising stocks, it is hard to argue that the oil markets have lost their grip on reality.

Some claim that oil producers are in effect hoarding oil below the ground. But there is also little sign of that, either among companies or countries: all big exporters bar Saudi Arabia are pumping as fast as they can.

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Early last month, Jeanne Fair, 62, got her first hot meals delivered to her home in this lake town in the sparsely populated southwestern part of the state. Then after two deliveries the meals stopped because gas prices had made the delivery too expensive.

“They called and said I was outside of the delivery area,” said Mrs. Fair, who is homebound and has not been able to use her left arm since a stroke in 1997.

Faced with soaring gasoline prices, agencies around the country that provide services to the elderly say they are having to cut back on programs like Meals on Wheels, transportation assistance and home care, especially in rural areas that depend on volunteers who provide their own gas. In a recent survey by the National Association of Area Agencies on Aging, more than half said they had already cut back on programs because of gas costs, and 90 percent said they expected to make cuts in the 2009 fiscal year.

“I’ve never seen the increase in need at this level,” said Robert McFalls, chief executive of the Area Agency on Aging in Palm Beach, Fla., whose office has a waiting list of 1,500 people. Volunteers who deliver meals or drive the elderly to medical appointments have cut back their miles, Mr. McFalls said.

Read it all from the front page of today’s New York Times.

At St. Stephen Baptist Church in Louisville, the 14,000-member congregation billed itself as a “seven-day-a-week” hub of activity, with choir practices, ministry meetings or small groups scheduled every night.Then Pastor Kevin Cosby noticed a drop-off ”” people simply couldn’t afford the gas to drive to several activities on several different evenings.

So Cosby shuffled the schedule to combine all activities on Wednesday night to give parishioners a “one-stop-shop for your soul.” The church also bought a third 14-passenger bus to shuttle people to and from church.

“We thought it would be a better practice of stewardship,” Cosby said. “The good use and stewardship of resources is how we demonstrate our love for God.”

Read the whole article.

Warning that rising food and oil prices pose a crisis for the world’s poor, Robert Zoellick, the president of the World Bank, is calling on President George W. Bush and other leaders convening in Japan next week in an economic summit meeting to make new aid commitments to avert starvation and instability in dozens of countries.

“What we are witnessing is not a natural disaster — a silent tsunami or a perfect storm,” Zoellick said in a letter sent Tuesday evening to the major leaders of the West. “It is a man-made catastrophe, and as such must be fixed by people.”

Zoellick’s letter, obtained by The New York Times, came with a lengthy study of the impact of rising prices for food, fuel and commodities on the world’s poor. He sent the letter as Prime Minister Yasuo Fukuda prepares to host Bush and six other world leaders in the Group of 8 economic summit meeting on the northern island of Hokkaido.

In recent weeks, the United States and some other countries have stepped up their pledges to get food to the poor in the 50 hardest-hit countries. But Zoellick said in his letter that the World Bank, the International Monetary Fund and the World Food Program had short-term needs of $10 billion.

Bank officials said that the world faced a shortfall in aid, but that pledges of financing had not been channeled into a central place and the size of the shortfall was not clear. “This is a test of the global system to help the most vulnerable, and it cannot afford to fail,” Zoellick said.

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With less than six weeks before it plays host to the Olympic sailing regatta, the city of Qingdao has mobilized thousands of people and an armada of small boats to clean up an algae bloom that is choking large stretches of the coastline and threatening to impede the Olympic competition.

Local officials have initiated an all-out effort to clean up the algae by mid-July. Media reports estimate that as many as 20,000 people have either volunteered or been ordered to participate in the operation, while 1,000 boats are scooping algae out of the Yellow Sea. The official news agency, Xinhua, reported that algae currently covered a third of the coastal waters designated for the Olympic races.

Water quality has been a concern for the sailing events, given that many coastal Chinese cities dump untreated sewage into the sea. At the same time, rivers and tributaries emptying into coastal waters are often contaminated with high levels of nitrates from agricultural and industrial runoff. These nitrates contribute to the red tides of algae that often bloom along sections of China’s coastline.

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How much you’re feeling the sting of high gas prices depends in large part on where you live. The people taking the biggest hit live in rural areas where driving long distances is usually unavoidable.

A good piece, although very hard to listen to.

As cars surged steadily down the road in Toledo, Ohio, a familiar melody rose from the circle of people gathered beside the gas pumps at the Exxon-Mobil station on the corner.

“He’s got the gas prices, in his hands. He’s got the gas prices, in his hands. . . ”

Heads bowed and hands clasped, Rocky Twyman and the congregants of his small worship session hoped to do what the country’s leaders haven’t: Put an end to the steep increase in national fuel prices.

“God is telling us to stop depending on ourselves so much and trust in him,” said Twyman, founder of Pray at the Pump. “Bush can’t solve this. McCain and Obama are not going to be able to solve this.”

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Watch it all (about three minutes).

Suddenly, the economics of American suburban life are under assault as skyrocketing energy prices inflate the costs of reaching, heating and cooling homes on the distant edges of metropolitan areas.

Just off Singing Hills Road, in one of hundreds of two-story homes dotting a former cattle ranch beyond the southern fringes of Denver, Phil Boyle and his family openly wonder if they will have to move close to town to get some relief.

They still revel in the space and quiet that has drawn a steady exodus from American cities toward places like this for more than half a century. Their living room ceiling soars two stories high. A swing-set sways in the breeze in their backyard. Their wrap-around porch looks out over the flat scrub of the high plains to the snow-capped peaks of the Rocky Mountains.

But life on the fringes of suburbia is beginning to feel untenable. Mr. Boyle and his wife must drive nearly an hour to their jobs in the high-tech corridor of southern Denver. With gasoline at more than $4 a gallon, Mr. Boyle recently paid $121 to fill his pickup truck with diesel fuel. The price of propane to heat their spacious house has more than doubled in recent years.

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President Bush is pushing offshore drilling as a way to increase production and cut oil prices. Robert Siegel talks to Henry Lee, director of the Environment and Natural Resources Program at Harvard University, who says offshore drilling may not have an immediate impact.

Listen to it all.

Sen. John McCain hopes to solve the country’s energy crisis with cold hard cash.

The Republican presidential nominee-in-waiting thinks the government should offer a $300 million prize to the person who can develop an automobile battery that leapfrogs existing technology.

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Iraq will award contracts to 41 foreign oil firms in a bid to boost production that could give multinationals a potentially lucrative foothold in huge but underdeveloped oil fields, an official said on Sunday.

“We chose 35 companies of international standard, according to their finances, environment and experience, and we granted them permission to extract oil,” oil ministry spokesman Asim Jihad told AFP.

Six other state-owned oil firms from Algeria, Angola, Pakistan, Thailand, Turkey and Vietnam will also be awarded extraction deals, Jihad said.

The agreements, to be signed on June 30, are expected to be short-term arrangements although the ministry has yet to provide a timeframe.

The deal paves the way for global energy giants to return to Iraq 36 years after late dictator Saddam Hussein chased them out, and is seen as a first step to access the earth’s third largest proven crude reserves.

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The headline above is the headline given in our local paper here, the ABC headline is: Everything Seemingly Is Spinning out of Control–KSH.

Is everything spinning out of control?

Midwestern levees are bursting. Polar bears are adrift. Gas prices are skyrocketing. Home values are abysmal. Air fares, college tuition and health care border on unaffordable. Wars without end rage in Iraq, Afghanistan and against terrorism.

Horatio Alger, twist in your grave.

The can-do, bootstrap approach embedded in the American psyche is under assault. Eroding it is a dour powerlessness that is chipping away at the country’s sturdy conviction that destiny can be commanded with sheer courage and perseverance.

The sense of helplessness is even reflected in this year’s presidential election. Each contender offers a sense of order ”” and hope.

Read it all.