When Hillary Clinton signed on to John McCain's proposal to suspend the 18.4-cent federal gas tax this summer and Barack Obama didn't, the Democratic candidates suddenly had a real substantive difference to debate.

The trouble is, there's not much to argue about. Everyone who's looked at this knows that a gas-tax holiday is a silly idea. With gasoline supplies pretty much fixed in the short term, demand will increase and the price will go back up. But instead of the U.S. government capturing that revenue, the oil companies will pocket it. Factcheck.org tried and failed to find a single economist who thought gas prices would drop as a result of the holiday. PBS couldn't find a supporter, either.

Asked about this by ABC's George Stephanopoulos Sunday, Hillary sniffed, "I'm not going to put in my lot with economists." What's it going to be then, prayer circles?

PAUL J. RICHARDS/AFP/Getty Images

Now, you might say: There's almost zero chance this proposal will go anywhere, so what's the harm? Well, it makes no sense to say you're for "energy independence" while vowing to cut gas taxes. If anything, the U.S. government should raise the federal gas tax to at least 50 cents a gallon, not cut it. Or better yet, tax carbon and bring coal emissions into the mix, too. But above all, don't mislead voters about the choices before them.

Guardian blogger Richard Silverstein has posted a translated excerpt from the Swiss newspaper Sonntag that explores Israel's apparent oil purchases from Iran:

Israel imports Iranian oil on a large scale even though contacts with Iran and purchasing of its products are officially boycotted by Israel. Israel gets around the boycott by having the oil delivered via Europe. A reliable Israeli energy newsletter, EnergiaNews, reported this last week [March 18] ...

EnergiaNews got the information about the Iran trade from sources with ties to the management of Israeli Oil Refineries Ltd ... According to EnergiaNews the Iranian oil is liked in Israel because its quality is better than other crude oils.

The report by EnergiaNews editor Moshe Shalev states that the Iranian oil reaches various European ports, mainly in Rotterdam. It is bought by Israelis and the necessary European bill of lading and insurance papers are supplied. Then it is transported to Haifa in Israel. The importer is the Eilat-Ashkelon Pipeline Co (EAPC), which keeps its oil sources secret.

Silverstein also links to a Haaretz article from last October which reports that Israel planned to import oil from Iran to sell to the Palestinian Authority. It seems that despite its stated boycott of Iranian products, Israel doesn't actually formally define Iran as an "enemy nation" so this deal isn't technically illegal. Still, it's a bit hard to reconcile with the apocalyptic rhetoric of some Israeli politicians. I'm also curious to see how Iran's leaders justify trade with the "Zionist entity."

From this morning's press conference with President Bush:

Q What's your advice to the average American who is hurting now, facing the prospect of $4 a gallon gasoline, a lot of people facing --
 
THE PRESIDENT: Wait, what did you just say? You're predicting $4 a gallon gasoline?
 
Q A number of analysts are predicting --
 
THE PRESIDENT: Oh, yeah?
 
Q -- $4 a gallon gasoline this spring when they reformulate.
 
THE PRESIDENT: That's interesting. I hadn't heard that.
 
Q Yes, sir.
 
THE PRESIDENT: Yes. I know it's high now.

Justin Logan of the Cato Institute and Matthew Yglesias of the Atlantic Media Empire protest that, contra my short post about U.S. President George W. Bush and his relationship with the Saudis, the United States needn't coddle King Abdullah.

Logan writes:

There's nothing about the fact that [the United States]–or Europe, or China, or Japan–consume oil that mandates that we play kissy-poo with Abdullah or anybody else. There are a few theories why we would want to kiss up to the Saudis, and none of them hold water.

Yglesias adds:

The United States has what I'd deem an unduly chilly relationship with Venezuela at the moment, but the oil still flows and Citgo stations are still around. The process by which oil-rich states in the Persian Gulf export oil to oil-consuming states is a business arrangement for mutual advantage driven by the exchange of money for fuel.

Or, as Duncan Black colorfully puts it, "Hugo Chavez is a Tyrannical Menace to Civilization... And the Saudi royals are delightful tea party guests."

Here's the thing. As the only country with spare production capacity, Saudi Arabia plays a vastly different role in the global economy than does Venezuela. Unlike Chávez, the Saudis have the power to control the price of the marginal barrel of oil. Until the U.S. economy becomes much less dependent on oil than it is today, that means the Saudis get treated with special deference. Hence the aforementioned kissy-poo.

Logan maintains that Saudi Arabia chooses to expand or cuts back on production based on its own economic self-interest, not because a U.S. president begs it to. We have differing views on the 1970s oil embargo, obviously. Today, Saudi Arabia regularly prevents OPEC from cutting back on production, in line with U.S. requests. And then there's petrodollar recycling—the practice of investing money back into Western economies, often at key times and in key sectors. Surely this is all coincidence?

Perhaps a more hands-off approach to Saudi Arabia would work, as Logan and Yglesias suggest. But no U.S. president has dared try it yet.

UPDATE: Gal Luft has a different take on Bush's begging in Saudi Arabia.

You might look at this picture and say, "Wow, U.S. President George W. Bush sure is tight with the dictatorial King of Saudi Arabia. They behead people and fund the spread of Wahhabist ideology. What a corrupt relationship."

But the reality is, if you're a gasoline-consuming American, you're deeply complicit in this marriage, too. So laugh all you want at Bush, but he kisses Saudi cheek for thee—just as U.S. presidents have done for decades. There's nothing particularly unique about Bush's relationship with the Saudis.

MANDEL NGAN/AFP/Getty Images

UPDATE: Justin Logan and Matt Yglesias dissent vigorously.

Yesterday's brief foray into $100-a-barrel oil territory was due to "an independent trader apparently intent on securing his place in market history," according to the Financial Times. The unnamed trader bought 1,000 barrels, the minimum allowed, and sold them shortly thereafter for a loss.

In theory, it's a meaningless number. But markets are not simply mechanistic aggregators of supply and demand; they're deeply psychological. So the fact that the price of oil briefly surpassed $100 a barrel today is significant. Many people will be wondering if the high prices mean that we're finally running out of oil—that the peak that some folks have been warning about is finally upon us. FPTV recently sat down with Vijay Vaitheeswaran, who wrote "Think Again: Oil" for our November/December issue, and Robert L. Hirsch, the lead author on a famous report about peak oil, and got very different perspectives on that vital question.

Check out the video here:

It always makes me depressed to think about how little attention the vast majority of Americans pay to the rest of the world. Passport readers are, of course, an exception. But I'm reminded of how isolationist the general American public can be whenever I stumble across stories like this, Time magazine's Top 10 Underreported Stories of the year. Of the 10 stories on the list, seven of them have to do with international developments (OK, this item is arguably a domestic story, but I'm including it in my tally because it's about nukes). And of those seven stories, only one of them was a surprise to me: Brazil's announcement that it had made the largest oil discovery since 2000. (I'm chalking up missing this story to the fact that it happened around Thanksgiving time, when I wasn't paying attention to the news as I should.)

Granted, it's my job to pay attention to what's going on in the world. But honestly, should it really be new news to people that the U.N. reduced its estimates of those afflicted with AIDS, or that tensions are getting worse between Ethiopia and Eritrea?

At any rate, I suppose I should be grateful that Time is bringing its readers' attention back to these important topics. But for stories that really went underreported, check out FP's The Top Ten Stories You Missed in 2007. And make your family and friends add "pay more attention to international news" to their list of New Year's resolutions.

JAVIER MAMANI/AFP/Getty Images

Bolivia appears to be on the verge of a constitutional crisis after four of its richest states declared their autonomy over the weekend. At issue is a new draft constitution—approved by supporters of President Evo Morales—that leaders in the energy-producing lowland states of Santa Cruz, Tarija, Beni, and Pando fear will put the country on the path to Hugo Chávez-style socialism. The new constitution would greatly increase the power of the presidency and give the central government greater control over the economy. There is a racial aspect to the split as well. The mostly European population in the lowlands object to new policies that would redistribute wealth to Bolivia's indigenous population, of which Morales is a member.

The state governments are now seeking support for a referendum that would place elections, public works, roads, and telecommunications under state control and protect private property rights to prevent redistribution of land. Morales meanwhile has declared their actions unconstitutional and placed the military on high alert. It should be stressed that this is a bid for greater local autonomy, rather than a declaration of independence like the one Kosovo will likely make in the next few weeks. However, Stratfor outlines how the situation could easily spiral out of control:

Morales cannot allow the country's sources of income to flout the authority of the center, and the lowlands cannot allow Morales to usurp both political and economic power from them. The questions now are: can Morales muster enough force to impose his will on the lowlands? Or can the lowlands resist?

Neither side has openly discussed the issue of secession or civil war, but once one security force starts firing on another, that is the next logical step.

That seems bit overly dramatic, but with Morales signing a $750 million deal with Brazil this week to exploit Bolivia's oil and gas reserves (most of which are in the lowlands), he certainly can't afford to lose control over his energy supplies. Could we be witnessing the birth of Latin America's Kurdistan? As Tyler Cowen complained on Sunday, this story should really be getting more attention.

NORBERT MILLAUER/AFP/Getty Images

Where's the most car-crazy place in the world?

An easy question, right? Of course it's United States, where the U.N. estimates there are 776 cars for every 1,000 people. But other countries are catching up. China has held the top spot for new-car sales for several years, and by 2012, India is projected to take over as the world's fastest-growing car market.

Indian officials are preparing for the jump. Along with the biggest highway-construction boom since independence, India will also be raising its speed limits from the current upper limit of 80km/h (48mph) to 100km/h (60mph), thereby lopping nearly 3 hours off the trip between New Delhi and Mumbai.

With all the highways and faster speed limits, India might have to come up with a better driver's licensing scheme. That is to say, the country might actually need to develop one. No driving test is required to obtain a license despite India's 96,000 traffic fatalities each year.

Cars seem to be a global right of passage for fast-developing countries, but with more cars and higher speed limits, critics are already complaining. With higher speeds generally comes lower fuel efficiency, increased carbon emissions, and higher global oil prices. Despite billions in new highway spending, increased public transportation is not in India's plans.

China and India both seem to look at the U.S. transportation system as a model worth replicating, but it's a system that was developed over 50 years ago at a time when oil was cheap and efficiency was not a concern. It's time to get a new model.

Update: It seems that this post has generated a bit of criticism from The Other Side, which takes exception to my characterization of the Indian driver's licensing system and the efficiency of motor vehicles. I'm not one to shy away from criticism so allow me to clarify two points:

1. Mr. Kumar is absolutely correct in that India does indeed have a driver's licensing system on the books. I was using a bit of blogger's "poetic license" to say that whatever system is in place is entirely unsatisfactory; a point made in the original Guardian article.
2. In regards to efficiency, one can debate endlessly about the engineering mechanics of combustion engines, the price of gasoline and the possibility that there could be great advances in alternative fuel technologies. But in the meantime, cars and trucks are still less efficient than transporting people and goods by other means, such as trains. The United States erred in investing heavily in highways starting in the 1950s when we could have instead promoted mass transit systems. India's trains, from what I can tell, are in need of some serious upgrades. Of course, there will always be a need and a use for highways but, in my opinion, India shouldn't attempt to copy our own outdated model.

On Tuesday, CNBC's popular stock-picker Jim Cramer discussed oil supply constraints at length, explaining why he likes ConocoPhillips because it's one of the few firms that really thinks oil prices are staying high and is investing accordingly. Most companies tend to evaluate projects for viability at around $40 per barrel of crude. That's mainly because the rise in oil prices has been moving higher than the supply-demand fundamentals suggest they should, which we have discussed recently (here and here). Cramer thinks ConocoPhillips is "ahead of the curve" and is well-positioned to take advantage of the current market.

In making his case, Cramer read a quote from a recent presentation by ConocoPhillips CEO Jim Mulva that I think is significant coming from an industry leader, given that is sounds a lot like a measured endorsement of peak-oil theory:

Talking a little bit about the supply challenge. This is a slide that's been prepared by International Energy Agency and it just shows if you take all of the oil production around the world today, say, 86 million barrels a day, the natural decline on average is about 8% a year.

"So, if we're going to stay with 86 million barrels a day, we've got to be out there adding 6 or 7 million just to stay flat. So the question is, where is that all going to come from when you see Saudi, Arabia saying they're going to go to 12 million to 12.5 million and maybe up to 15 million barrels a day? How is this going to happen? It's not so important just what I think or say, but I know we've been saying for the better part of nearly 12 months. Personally, I don't think we're going to see --- for three reasons, I don't think we're going to see the supply go over 100 million barrels a day. The reason for that is, where is it all going to come from?

"Second, it's going to be from a climate change greenhouse gas emission? I'm not so sure that the world, even if you could get up to those levels, would allow us it be done. So we have -- Demand maybe going up, but it's going to be constrained by supply." 

The transcript of the presentation is unfortunately not available online, as it comes from the November 2007 Merrill Lynch Global Energy Conference.

iStockphoto.com

We've all heard about cars powered by wacky biofuels, including switchgrass and leftover French fry oil. Now, two British men who love the environment are trekking from Britain to Timbuktu in a truck whose fuel comes from cocoa butter extracted from waste chocolate (as in, like, misshapen Easter bunnies).

The vehicle is a Ford Iveco cargo truck, and as it travels 4,500 miles to Timbuktu, it will burn 2,000 liters of biodiesel originating from 4,000 kg (8,800 lbs.) of misshapen chocolate. That's enough of the sweet stuff to make 80,000 chocolate bars.

On Friday, the chocomobile crossed the English Channel by ferry, and after a sweet ride through France and Spain, it will hop onto another ferry to Morocco. Once it vrooms through Mauritania, it will plow through Mali's deserts until it arrives at Timbuktu, the city once regarded in the West as being at the ends of the Earth and which today is in a region that is being buried under sand.

The two Brits behind this stunt are, of course, trying to bring attention to biodiesel, a renewable resource that generates lower carbon emissions than fossil fuels. It seems unlikely that fueling vehicles with cocoa butter could be achieved at a large scale—that would require a tremendous amount of chocolate or, perhaps, tanning oil—but if the men's journey makes more people aware of the benefits of biofuels in general, that would be a sweet success.

An Indian official telling a New York Times reporter he'd like to see the trade in crude oil banned from the New York Mercantile Exchange is kind of extreme, but not surprising given the context.

One of the unique features of this period of high oil prices is that oil derivatives (basically contracts such as futures and options) are now being traded on a massive scale. Like never before, paper oil is changing hands, to the point where crude oil has become an asset class. You've got to have it in your portfolio the way you have to own gold, stocks, and bonds. Back in the 1970s, there was no IntercontinentalExchange (ICE) where oil was traded globally. Nor were there as many different ways for investors, such as exchange-traded funds, to play crude. Around 85 million barrels were actually consumed in the world Wednesday. But on the same day, over 600 million barrels worth of crude futures were traded via ICE (adding up the contracts for two kinds of crude traded, West Texas Intermediate and Brent).

With so many factors affecting prices—not least the fact that oil is a commodity denominated in the declining dollar—there's a big debate among energy analysts about whether and to what extent all this trading is responsible for the high prices we've been seeing. Many people in developing country behemoths such as China and India certainly think it is. On a recent visit to China, I met with several energy analysts and policymakers who perceived the massive trading volumes as distorting prices upward. Same in India. They look at the supply and demand fundamentals and don't believe that they justify nearly $100 per barrel.

Most market analysts would probably concede that at least some of the upward pressure is due to derivatives trading. What really captured this were comments Wednesday by Addison Armstrong, a leading energy-market watcher. He said that although he thinks oil should be around $60 on the supply-demand fundamentals, he thinks it's going to $109 before it cools off. Why $109? Because it's a "technical level" (derived from market data) that would signals traders to sell. It'll be interesting to see if he's right.

MARK RALSTON/AFP/Getty Images

Much ado is being made over PetroChina's debut on the Shanghai stock market today. In just a few hours on its first day of trading, the state-controlled company's market value tripled to reach nearly $1 trillion, twice the value of what is now the world's second-largest company, ExxonMobil. One trillion is an impressive number, for sure. But does it really mean anything?

For starters, let's take a look at oil prices. Undoubtedly, the fact that oil hit a record $96 per barrel last Friday contributed to the excitement over PetroChina's listing. And more fundamentally, its impressive IPO shows continuing investor confidence in China's bull market. But neither of those factors guarantee that PetroChina, or any large Chinese company for that matter, can sustain this momentum. After all, market value is nothing more than the perceived value of a company by a mass of investors at a given moment. Revenues offer a far more reliable indicator of a company's size, which is why the Fortune 500 uses them to rank the world's largest companies. Revenues measure real money, not imagined worth.

Then there is the difficulty in truly assessing a Chinese company's real value. Because companies like PetroChina are government-controlled and because the structures of such corporations can be very complicated, only a limited number of shares get floated on the public market. That scarcity can drive up prices far above those of companies whose shares are all up for grabs. In the case of PetroChina, 86 percent of its shares are still locked up by the government. As for the other 14 percent, foreign investors are only allowed to buy a small number of Chinese shares. And Chinese investors, in turn, are limited in their ability to purchase shares of foreign companies. So, comparing the value of PetroChina to that of ExxonMobil is like comparing apples to oranges. They're two completely different markets.

Obviously, I'm not saying that market value is irrelevant. Lord knows, I'm still kicking myself for not buying stock when Google had its IPO three years ago. But for a reality check, let's take a look at Google's stock price right now. Should it really be worth $720 per share?

AFP/Getty Images

In his article "Think Again: Oil" (subscribers only) from the new issue of FP, Vijay Vaitheeswaran of The Economist argues that despite all the doomsday predictions you hear, the world is not running out of oil. He singles out the tar sands in Alberta, Canada as an example of a relatively unexplored source. As it happens, Canada is already the largest supplier of oil to the United States. Tar-sand extraction has exploded since oil prices began to rise with the start of the Iraq war, and Canada's total oil output will soon double Kuwait's. But as Vaitheeswaran notes, tar-sand extraction comes at a much higher environmental cost than traditional drilling. A new article by Aida Edemariam in The Guardian makes clear just how great this cost is:

The extraction of the oil requires heat, and thus the burning of vast amounts of natural gas - effectively one barrel of gas to extract two of crude - and some estimate that Fort McMurray and the Athabasca oil sands will soon be Canada's biggest contributor to global warming; nearly as much as the whole of Denmark. This in an area that has already seen, according to David Schindler, professor of ecology at the University of Alberta, two degrees of warming in the past 40 years.

The oil sands excavations are changing the surface of the planet. The black mines can now be seen from space. In 10 years, estimates Schindler, they are "going to look like one huge open pit" the size of Florida. Acid rain is already killing trees and damaging foliage. The oil companies counter that they are replanting - grass for bison, 4.5m trees by Syncrude alone - but the muskeg (1,000-year-old peat bog and wooded fen, which traps snow melt and prevents flash floods, and is home to endangered woodland caribou) is irreplaceable.

Two barrels of water are required to extract one barrel of oil; every day as much water is taken from the Athabasca river as would serve a city of a million people. Although the water is extensively recycled, it cannot be returned to the rivers, so it ends up in man-made "tailings ponds" (tailings is a catch-all term for the byproducts of mining), which are also visible from space.

Edemariam profiles the town of Fort McMurray, Alberta. In addition to the environmental impact of the nearby mining, Fort McMurray is struggling to deal with a population that has doubled in the last decade—not including the 10,000 itinerant construction workers from around the world who live there at any given time. Perhaps unsurprisingly, prostitution and gambling are booming as well. So, there's no such thing as a free lunch: The crude found in Canada's sands may be "safe oil" compared with what we buy from unsavory regimes in the Middle East, but it's hardly an attractive alternative.

In the next issue's Think Again: Oil (sorry, subscribers only), the Economist's Vijay Vaitheeswaran, right after he argues that the world still has plenty of oil left to pump, takes aim at the ecos' beloved Prius, reasoning that any car that still takes gasoline—hybrid or not—doesn't solve the world's oil addiction. Remaking the automobile altogether, he says, is the only serious way to wean the world off crude.

In that spirit, FP has compiled a short list of the cars of the future—plug-ins hybrids, diesels, all-electrics—in a special Web-only photoessay. Sure, some of the models still rely on a little oil to get from point A to point B. But they're a snapshot of where the auto majors (and a few start-ups) are heading in the quest to perfect the 21st century car. (Personal favorite: The all-electric Tesla Roadster at right, which goes from standstill to 60mph in a scant 4 seconds.)

Yesterday, Honda's chief executive, Takeo Fukui, took aim at one of cars profiled, the forthcoming Chevy Volt, which GM's Chairman Bob Lutz has said is more important to him than anything he's done in four decades in the auto business. Fukui argued that the Volt's electric motor (which is powered after a certain distance by a diesel fuel engine) is simply not as environmentally friendly as the auto industry ultimately needs to be, and that better, high-performing electric batteries that eschew the fuel engine backup are what's needed. It's clearly just a bit of corporate smack talk, but Fukui's thinking is on the right track. Hybrids are just the first step in what needs to be an auto revolution.

AFP/Getty Images

Most of the press on Vladimir Putin's historic trip to Tehran has focused on his warning to the U.S. not to attack Iran and the possibility of some sort of strategic partnership between the Kremlin and the ayatollahs. One could almost be forgiven for thinking that the meeting that Putin attended was some sort of trans-Caspian "death to America" summit. In fact, the real substance of the meeting was about the distribution of the Caspian Sea region's energy resources. On this front, almost no progress was made and more was revealed about Russia and Iran's differences than their agreements.

The Kremlin still views the Caspian as Russia's "near-abroad," and Iran's growth as a regional power is troubling to the Russians as well. The two countries didn't really see eye to eye at the summit, as the AP explained:

Iran, which shared the Caspian's resources equally with the Soviet Union, insists that each coastal nation receive an equal portion of the seabed. Russia, Azerbaijan and Kazakhstan want the division based on the length of each nation's shore, which would give Iran a smaller share.

Another back story behind the summit is CIA Director Michael Hayden's unexplained recent visit to Baku, Azerbaijan where he met with President Ilham Aliyev. Azerbaijani analysts have speculated that the U.S. is preparing to use the country as a staging ground for a war on Iran, though the Azeris and the Iranians continue to enjoy strong cultural and economic ties. But Hayden's visit might also have had something to do with the construction of a trans-Caspian natural gas pipeline to bypass Russia, a deal the Russians have wanted to scuttle from the beginning. Witness Putin channeling Al Gore here:

Projects that may inflict serious environmental damage to the region cannot be implemented without prior discussion by all five Caspian nations," Putin said, apparently suggesting each capital should have a virtual veto on energy transport.

The governments of Azerbaijan, Turkmenistan, and Kazakhstan are somewhat wary about that proposal as they seek to navigate a middle ground between Russia and the West. In the end, the five countries failed to come up with a formula for sharing the Caspian's resources—which was supposed to be the point of the whole summit—and could agree only on a resolution banning foreign military action from the region. That doesn't look like success to me.

STR/AFP/Getty Images

In a unique environmental scheme, Ecuador's government is asking developed nations to pay $350 million for them NOT to drill for oil in a major field in the heart of the Amazon. The sum represents about half of the estimated revenue that Ecuador would receive from drilling in the Yasuni National Park, a UNESCO-designated biosphere reserve that may contain up to a billion barrels of crude. Since Ecuador proposed the scheme last spring, politicians from Germany, Norway, Italy, Spain, and the EU have expressed interest, according to Ecuador's minister of energy. President Rafael Correa (pictured at left) had this to say:

Ecuador doesn't ask for charity [...] but does ask that the international community share in the sacrifice and compensates us with at least half of what our country would receive, in recognition of the environmental benefits that would be generated by keeping this oil underground."

Local residents are understandably skeptical that the government will be able to resist black gold's temptation for long. And despite their proven penchant for paying people not to do things, it seems unlikely that European governments would be willing to pay to keep the oil in the ground year after year. 

Meanwhile, U.S. oil firm Chevron remains embroiled in a 14-year-old lawsuit from 30,000 indigenous Ecuadorians who claim the company poisoned their region by dumping toxic waste water. The controversial case is a major factor in many Ecuadorians' opposition to further drilling:

What happened here we can't let happen anywhere else, least of all Yasuni," said the plaintiffs' lawyer, Pablo Fajardo.

STR/AFP/Getty Images

With the rise of China and India upending the world's consumption patterns, protecting increasingly tight oil supplies is proving to be no small undertaking. By some estimates, a major supply disruption could send oil prices spiraling above $100 a barrel.

In our September/October issue, FP took a closer look at moves by Russian oil giants Gazprom and Rosneft to establish their own private armies, equipped with machine guns and anti-riot gear, to guard their goods.

And now Saudi Arabia, a politically fragile country perched atop some 25 percent of the world's oil reserves, has stepped up its own efforts to protect oil plants and pipelines—the kingdom's economic lifeline—from potential attacks. After spending an estimated $5 billion and setting up a 35,000-strong security force, the Financial Times reports, Saudi Arabia will have more people guarding its petroleum than protecting the country's skies (Air Force: 18,000) or seas (Navy: 15,500) combined. Compared to a chaotic Nigeria and a stubborn Russia, Saudi Arabia has been a very reliable oil supplier. And the Saudis are keen on staying that way.

The kingdom's fears are not unfounded: This past February's foiled al Qaeda plot to blow up the Abqaiq oil center, which handles two-thirds of the country's oil supply, exposed potential security gaps. Plus, Osama bin Laden has been calling for attacks on the Arabian peninsula's oil installations since 2004. And the Saudis are no doubt expecting blowback from seasoned jihadis returning from Iraq.

Any substantial disruption to Saudi oil production would send shock waves through the global economy, and particularly the gas-guzzling United States. Accordingly, U.S. defense giant Lockheed Martin is actively training 5,000 Saudi personnel to use such nifty technology as laser security and satellite imaging. And how does Saudi Arabia plan on ensuring that a force this large will be impervious to radical infiltration? The FT says that recruits are being "heavily vetted" and sought from outside the country's existing security forces. That's going to involve a heckuva lot of background checks.

As FP has noted in the past, many see the Arctic as the last great frontier for oil and gas exploration. By one prominent estimate, the Arctic region may hold as much as a quarter of the world's undiscovered oil and gas reserves. The area's remoteness and harsh climate, however, mean that the technology is still not sufficient to access these reserves, and therefore profitable exploitation of them might not be feasible until 2050.

But oil and gas companies may not have to wait that long. In 2007, the extent of Arctic sea ice is likely to have declined further than in any other recorded year—reduced by an area greater than the size of California and Texas combined. This means the Arctic could become an energy center sooner than expected, not to mention one of the most critical sea lanes of communication in the world. The melting of the ice caps, along with improvements in shipping technology, will significantly cut the travel time between Asian manufacturing centers and western consumer markets.

While this may have some companies excited, it's certainly bad news for the Arctic's many inhabitants, including whales, walrus, seals, birds, fish and polar bears, as well as the Inupiat people who have resided in the area for 2,500 years. With their livelihoods already severely affected by global warming, the opening up of the Arctic to energy companies and shippers could ultimately mean the end of the Inupiat way of life.