8 - The Michigan Daily - Tuesday, October 26, 2004
Oil spending grows to almost $300 billion dollars
The Associated Press
While Americans wince as they fill up their
SUVs with $2-a-gallon gasoline, market forces
are smiling on the Saudi Arabias and Exxon
Mobils of the world.
A transfer of wealth of historic proportions
is taking place as worldwide spending on oil is
expected to grow this year by about $295 billion,
or 27 percent, compared with 2003, according to
government data. Consumers and businesses are
paying substantially more for gasoline, heating
oil, diesel and other products derived from crude
as demand and prices surge.
While the corresponding windfall of profits for
oil exporting nations and petroleum companies is
sapping strength from the international economic
recovery, it's not causing the kind of financial
shock that followed the oil crises of the 1970s.
Still, experts warn that the market constraints
underlying high and volatile energy prices suggest
that higher oil price could be here to stay. "There's
not a consensus out there, but the question is being
asked more now than it has been at any time in
the last 20 years," said Jim Burkhard, director of
global oil at Cambridge Energy Research Associ-
ates in Cambridge, Mass.
Rising oil costs are linked as much to Amer-
ica's apparent drive-at-any-price car culture and
China's raging industrial expansion, as they are to
the world's unusually thin supply cushion, a con-
dition that has magnified anxieties about poten-
tial supply disruptions in Venezuela, Russia and
Consumption continues to rise in spite of higher
prices that are expected to slow global economic
growth by about 0.5 percent in 2005. Much sharp-
er financial pain will be felt in poor, developing
countries that are net oil importers.
"As with most things, the global impact is not
spread evenly around the world," said JeffreW,
Lewis, manager of international finance research
at The World Bank. Lewis predicted that, without
emergency funding, much of the organization's
$2.5 billion aid to struggling nations this year
will have to be reallocated to fuel purchases by
local governments, leaving health and education
programs grossly underfunded or scrapped alto-
With oil futures marching to the $55 a barrel
level this month - up from about $30 a year ago
- the list of winners is topped by Saudi Arabia,
Russia, Norway, Iran, Venezuela and other lead-
ing exporting nations. Saudi Arabia alone sup-
plies about 12 percent of the world's daily oil fix.
Exxon Mobil Corp., Royal Dutch/Shell Group
and the rest of the private petroleum giants are also
flush with cash as profits and stock prices soar.
The same goes for oilfield services firms such as
Schlumberger Ltd. and Baker Hughes Inc., as well
as the countless smaller providers of the equip-
ment, ships and workers needed to produce and
transport some 82 million barrels a day.
The extra $295 billion spent on oil this year
comes courtesy of, but not without complaint
from, motorists, homeowners, manufacturers, air-
lines and truckers. The biggest share would come
from (no shocker here) Americans, who account
for nearly one quarter of global daily oil demand.
United States consumers are expected to shell
out an additional $40 billion this year just to heat
their homes and fuel their cars and trucks. The
greatest financial squeeze is felt by low- and fixed-
income families, who spend about three times as
much of their wealth on energy as do middle-
European economies are generally worse off,
with the prospects for rising inflation and unem-
ployment in the region somewhat higher, accord-
ing to a report by the International Energy Agency
and the International Monetary Fund.
European countries do not have as much of
their own oil production as the United States,
where roughly 2 out of every 5 barrels consumed
is pumped domestically.
To keep consumption in check, European
nations levy significantly higher fuel taxes than
the United States, which helps to explain why the
total imports of GermanyFranceItaly and Spain
are about a third smaller than America's. Even
so, the four countries combined will spend about
$25 billion more for oil in 2004 than they did in
2003. In Germany, Europe's largest economy,
experts are worried that the country's nascent
financial turnaround could falter next year, in
part because of higher energy prices, but also
because of an indirect oil-price pinch as exports
to China and the United States taper off. This
comes at a time when Germany's unemployment
rate is around 10 percent and consumer demand
has barely risen in three years.
In Asia, the picture is somewhat mixed.
In China, where daily oil imports have risen an
estimated 35 percent, or roughly 700,000 barrels
a day, and have helped propel global demand and
prices to unexpectedly high levels, the rising cost
of fuel is merely contributing to a minor slowdown
of the country's economic boom. Put another way,
mammoth industrial growth is dwarfing any neg-
ative impact caused by higher energy prices.
In Japan, the country's near-total dependence 7
on imports is offset significantly by the economy's
relatively high fuel efficiency. But like Germany,
it is very concerned about the weakening finan-
cial power of its trading partners due to soaring
East Asian countries are likely to be hit harder,
according to the Asian Development Bank, which
recently predicted the region's growth would
decline by 0.8 percent in 2005.
Russian-U.S. crew safely return
from joint space station mission
ARKALYK, Kazakhstan (AP) - A
Russian-U.S. crew returned to Earth from
the international space station Sunday in
a pinpoint landing on the Kazakhstan
steppe, and NASA's chief said the United
States wanted to continue the joint rela-
tionship on future missions to Mars.
Russian rockets and the nonreusable
Soyuz space craft have been the only
way NASA can get to the space station
and back since the U.S. shuttle fleet was
grounded after the Columbia burned up
on re-entry in February 2003, killing all
seven astronauts aboard.
The bell-shaped Soyuz TMA-4, car-
rying Russian cosmonauts Gennady
Padalka and Yuri Shargin and American
astronaut Mike Fincke, parachuted down
to the landing site, some 55 miles north
of the Kazakh town of Arkalyk, at 4:36
The return marked Padalka's and
Fincke's first experience with grav-
ity after a six-month stay on the orbital
outpost. Shargin spent eight days on the
station after arriving Oct. 16 with the
station's new two-man crew, Russian
Salizhan Sharipov and American Leroy
Search crews took just 14 minutes to
reach the Soyuz capsule after its land-
ing, compared with the average 90-minute
search after nighttime arrivals, said Vasily
Tsibliyev, head of the Cosmonauts' Train-
ing Center at Star City, outside Moscow.
The Soyuz's return flight "was anoth-
er successful effort for a continuous
presence on the international station,"
O'Keefe said at Russian mission control
NASA Administrator Sean O'Keefe
praised the Russian space agency work-
ers, especially the helicopter-based search
and rescue crews, for their "tremendous
He also said the United States wants
to further that cooperation by drawing
on the Russian space program's extensive
experience in long duration flights when
NASA embarks on missions beyond the
moon and to Mars.
"The first international partner we see
to collaborate with most is our colleagues
Rosaviakosmos, given the vast experi-
ence they have had in long duration space
flights," O'Keefe said. Rosaviakosmos is
the Russian space agency.
Russian cosmonauts own all the space
endurance records, set on the Mir space
station. Cosmonaut Valeriy Polyakov
spent 438 days aboard the Mir for the all-
time record. Earlier, Vladimir Titov and
Musa Manarov spent 366 days in space.
The longest American stay in space
is 196 days by astronauts Carl Walz and
Daniel Bursch in 2001 and 2002, aboard
the international space station.
After being helped out of the capsule
by the search team, the three fliers sat in
chairs, sipping hot drinks and bundling in
blankets, and then underwent brief medi-
cal checks in a nearby tent before flying
to Star City.
The Soyuz spacecraft, the workhorse
of Russia's cash-strapped space program,
boasts a stellar safety record.
But minor glitches occasionally occur.
Earlier this month, the crew arriving at
the space station had to turn off the auto-
pilot, apply the brakes and manually con-
nect the Soyuz to the docking point after
an unidentified problem prompted the
craft to approach the station at danger-
ously high speed.
In May 2003, the first time American
astronauts returned on the Soyuz, a com-
puter malfunction sent the crew on a dive
so steep their tongues rolled back in their
mouths. The crew landed so far off target
that more than two hours elapsed before
rescuers knew the men were safe.
Now the Soyuz is outfitted with satel-
lite phones and a global positioning sat-
ellite system. Russia also requests that
the former Soviet republic of Kazakhstan
close off a large area of its airspace before
the scheduled landing.
NASA has said that shuttles should be
flying again by early summer.
American astronaut Mike Fincke, front, and Russian cosmonaut Yuri Shargin, third, get off a plane
at the Chkalovsky airport, just outside Moscow on Sunday.