We need some balance in the Libyan oil story. Is this north African nation an unmitigated disaster for those elsewhere in the world running an economy or driving a gas-guzzling vehicle? Notwithstanding the turmoil, the answer so far is no.

For good reason, much attention is focused on Libya's oilfields, since they are the whole reason why the United States, Great Britain and a host of oil companies have been courting Col. Moammar Qaddafi since he reopened the country to the outside eight years ago. An as-yet unknown volume of Libya's 1.6 million barrels a day has been shut down. Traders have bid up oil prices above $100 a barrel for the first time since 2008, though that's not very surprising -- what are traders supposed to do with such uncertainty (read: opportunity) staring them in the face? In addition, there's valid concern about the stability of the Middle East's big oil monarchies -- Kuwait, Qatar and Saudi Arabia. As Cameron Hanover, the energy analytical firm, wrote clients in an overnight note: "With unrest all around them, is there any really strong reason to believe that the [United Arab Emirates] or Kuwait or even [Saudi Arabia] itself can remain oases in this swirling, engulfing sandstorm?"

Still, when it comes to oil, things are going surprisingly well in Libya considering the turbulence.

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Hundreds of thousands of Egyptians are in the streets, Bedouins are threatening the Suez Canal, and one of the West's most reliable Arab allies is on his way out. As a result, oil prices soared last week by ... 23 cents a barrel.

That's right, folks. Oil traders turned Friday into a manic scene of futures buying -- trading on the U.S. side of the Atlantic was at an all-time high, according to Bloomberg -- yet did not push the oil price through $90 a barrel. In the United Kingdom, Brent crude butted up against $100 a barrel, but again did not penetrate the psychological barrier. As of this morning, oil prices are down.

The takeaway: We are again seeing the intersection of so-called "spare capacity" -- how much surplus oil can be produced above and beyond current demand -- and the base desire of oil traders to earn really big money really fast.

A lot of traders did do well on Friday by pushing up the price by 4 percent (which compensated for losses earlier in the week), though they did so by hammering hedge funds that had earlier bet the other direction, Bloomberg reports.

Officially, the world's oil producers have about 6 million barrels a day of spare capacity -- their daily productive ability above and beyond what the market needs. But a lot of observers think the official number is exaggerated - they think spare capacity is more like 4.5 million barrels a day. The belief in the lower number is what is allowing traders sometimes to push up prices in a crisis such as Egypt.

Over at OPEC, there is consternation over prices. In a speech in the United Kingdom, OPEC secretary general Abdalla el-Badri noted that oil inventories are above their five-year average, and repeated a complaint of other OPEC officials in recent years -- in effect, oil traders drive up the price, and OPEC gets the blame. Bloomberg quotes him:

OPEC has consistently said in recent times that prices are disconnected from the physical oil market and are increasingly subject to the paper market. Consequently the market is dominated by financial players, which is misleading when it comes to understanding the behavior of the oil market.

Few oil traders are actually worried about the Suez Canal, through which about 1.8 million barrels a day of oil and oil products flow. Here is a snippet from a note to clients sent by Helima Croft and Amrita Sen of Barclays Capital:

We believe the Canal does not appear to be under immediate threat from the current political crisis in Egypt. Although the industrial city of Suez has witnessed some of the worst violence during the past week, there have been no reported attempts to target ships. Even if Western companies become a major target for the protestors, we believe that shipping traffic through the Canal is unlikely to be seriously imperiled, though some individual ships docked in port might be at risk of attack if the situation deteriorates further. Even in the unlikely event that the there is an attempt by some groups to disrupt shipping traffic, it would not necessarily be easy to accomplish. There are no indications that the protesters in Egypt have yet developed the intent or capabilities to carry out organized attacks on tankers like that seen in the case of the USS Cole.

That final sentence of course refers to the 2000 al-Qaeda attack on a U.S. naval vessel in Yemen.

Instead, we are seeing classic casino behavior. Here is Frank Verrastro, director of the energy at the Center for Security and International Studies in Washington, in an email conversation over the weekend: "Even if no barrels were impacted, the bullish run on oil will use this or any other supply threat to push prices up. "

One of our most prevalent current canards is the mantra that we must "get off foreign oil," by which we invariably mean Saudi Arabian crude -- and that we must generally distance ourselves from the kingdom and its leaders. Here is a rare issue that finds bipartisan traction. Last summer, for example, the comedian Jon Stewart looked and found that eight consecutive U.S. presidents starting with Richard Nixon, rolling through Ronald Reagan, both George Bushes, and finally Barack Obama have used the phrase in more or less the same formulation. Usually, the mantra is stated in the context of either the environment -- promotion of green industries -- or national security, meaning a way to confound terrorists who, it is said, are largely financed by Saudi and other Middle Eastern oil receipts. But ultimately they mean the same thing -- Saudi Arabia is bad, bad, bad.

I become suspicious of phrases that roll off the tongue and get me riled up, because often they are intended to accomplish just that outcome. Such is the case with the get-off-foreign-oil sloganeering, as I write in the latest issue of Foreign Policy. News from the Middle East and elsewhere exhorts the United States not to distance itself from Saudi Arabia, but in fact to more fully embrace this definitively central relationship. The reasons include top-tier U.S. strategic priorities regarding Iran, terrorism, Afghanistan, and of course oil.

WikiLeaks showed that the Saudis, unsurprisingly, have been in lock step with Western policy on containing Iran's nuclear program. The most dramatic recent example of the Saudi alliance paying off came in October, in the form of abortive terrorist attacks that were halted in Europe before they could reach the United States. Last summer and fall, U.S. intelligence agencies received three progressively more unnerving warnings from Saudi Arabia, all suggesting that al Qaeda was preparing to set off bombs in either Europe or the United States. The final alert, sent Oct. 28, was the most explicit, providing tracking numbers for two suspected explosives-laden packages on their way to Chicago from Yemen. A day later, police intercepted the packages at FedEx and UPS facilities in Dubai and Britain and defused bombs containing enough of the explosive PETN to take down the cargo planes on which they were to be shipped. Al Qaeda's Yemen affiliate claimed responsibility and warned of more such attempts. The take-away: Short of Saudi Arabia's insistent calls to the Central Intelligence Agency, there is almost certainly no chance that the bombs would have been detected.

What about the other main theater of current U.S. strategic interest, Afghanistan and Pakistan? With its long close ties to all parties in the region -- Pakistan, including the Army's jihadi-linked Inter-Services Intelligence directorate; Afghanistan; and the Taliban -- Saudi Arabia was asked early last year by Afghan President Hamid Karzai to help mediate a political settlement with the Taliban. In February, the Saudi foreign minister, Prince Saud al-Faisal, agreed to receive a delegation of former Taliban, but in November he froze contacts after the Taliban refused to repudiate Osama bin Laden and al Qaeda. Riyadh's position is not new: The Saudis adopted a similar posture position prior to 9/11, when they severed ties with the Taliban after its leader, Mullah Omar, refused to force bin Laden out of Afghanistan. Yet it is yet another example of crucial alignment in U.S.-Saudi policy.

All the while there is oil, although many people seem to suggest that as a source of strategic importance it is a temporary artifice. What are the facts? Not only will Saudi Arabia's predominant oil market position not shrink over the coming decades -- it will grow. Consider the current activities of Chevron, the original developer of Saudi oil, in the partition zone that the kingdom shares with Kuwait. Vice Chairman George Kirkland told me about Chevron's findings in the Wafra field, a reservoir of highly viscous, heavy oil in which the company is using a method of steam-injection drilling to recover an expected 10 billion to 15 billion barrels of petroleum. (For perspective, the industry regards a 1 billion-barrel field as a supergiant.) Saudi Arabia, Kirkland says correctly, is "at the top of the mountain as it is. [Wafra] reinforces a longer future delivering liquid hydrocarbons to the world economy." Meaning probably far into the second half of this century, adding up to another pinion of U.S. strategic interest. Here, Bloomberg's Wael Mahdi reports on Chevron's current progress at Wafra.

Those who suggest getting off Saudi oil are violating the basics of economics. As the pithy Anthony Cordesman of the Center for Strategic and International Studies expressed it to me: "What is the benefit for the U.S. of 'deplete America first'?"

Is Tehran convinced the United States is out to steal its oil? Here's Kazakh President Nursultan Nazarbayev, in a cable describing a Jan. 14, 2009, meeting in the capital city of Astana between Nazarbayev and U.S. Gen. David Petraeus, in which the Kazakh leader recounts his recent conversations with Iran's leaders:

[Nazarbayev] said Supreme Leader Ayatollah Khameni told him that even if Iran compromises on the nuclear issue, the United States would always find another reason to criticize "because they hate us -- all the United States wants is to conquer the entire region and steal the oil." General Petraeus interjected, "We could have bought all the oil in the region for 100 years for what we've spent in Iraq!" Nazarbayev, looking a bit amused, said, "I know. I'm just telling you what he said."

The cable, signed by Richard Hoagland, the U.S. ambassador to Kazakhstan, is also interesting for Nazarbayev's pretty shrewd insights into Afghan politics. Nazarbayev is worried about publicized efforts to bring the Taliban into the Kabul government. Petraeus, then the head of U.S. Central Command, replies that this is just an attempt to break up the movement, while roping certain elements into the power circle. That's all well and good, Nazarbayev replies, but suggests that the Taliban is all about control, and not sharing power: "The Taliban leadership will never change its position," Nazarbayev says.

The battle over oil demand. Over at the Financial Times' Energy Source, Kiran Stacey explores the varying oil demand projections of OPEC and the International Energy Agency. The IEA projects oil demand of 99 million barrels a day by 2035. OPEC thinks it's going to be more like 116-121 million barrels a day. While it is impossible to reliably predict oil prices, supply, or demand, it is not an inconsequential exercise to try, since so much is at stake. Currently, the world uses about 85 million barrels a day. The prevailing wisdom falls into the OPEC camp; these thinkers look at China especially and see a huge uptick in demand going forward. A compelling minority of thinkers says the majority fails to consider underlying political trends in China; they say that China's oil demand curve will not be anywhere as steep as the majority believes.

For Japan, the rare earths embargo goes on. China continues to block Japan's rare earths. Beijing had signaled that the cutoff of the strategic elements was over, but Keith Bradsher at the New York Times quotes metals traders who say that while exports have been restored to the United States, not so for Japan. The unofficial export ban to Japan began Sept. 21 with a fishing dispute in the East China Sea and spiraled into an international incident.

Beets, anyone? Energy guru Charlie Maxwell forecasts $300 oil by the end of the decade, and a higher diet of root plants. Speaking with Olivier Ludwig of IndexUniverse, Maxwell points to depletion as the key factor -- the natural pressure in old oil fields is dropping, and by 2015 or so the energy world will begin to be out of balance. Demand will begin to exceed supply, and a price spiral will begin. When that happens, our current lifestyles will start to be too expensive. Maxwell says that the only way out is more energy efficiency.

Costly but with a high envy quotient. With the gift-giving holidays upon us, the world's luxury carmakers respond with sleek, fast and comfy wheels for the green-minded, Vanessa Furmans reports at the Wall Street Journal. Hybrid entries are here or about to be from Bentley, BMW, Ferrari, Mercedes, and Porsche. They carry steep price tags -- Porsche may charge north of $600,000 for the model it expects to market in 2013.

The latest oil boomtown. The oil flow is picking up out of long-declining producer Iraq, reports Chip Cummins of the Wall Street Journal. Cummins profiles the world's newest oil boomtown, Basra. The activity is the object of much attention because, to the degree that Iraq can boost production toward its target of 12 million barrels a day from the current 2.5 million barrels a day, the country will reduce concerns of a price spike in the latter part of the current decade. The consensus among analysts is that the production aim is quite high, but that Iraq may be able to reach about 6 million barrels a day.

Autumn of the son-in-law. Finally, we turn to the travails of Rakhat Aliyev, the estranged former son-in-law of petro-state leader Nursultan Nazarbayev, the president of Kazakhstan. For the last three years -- ever since Nazarbayev ran Aliyev out of the country under still unclear circumstances -- Aliyev, on a blog at LiveJournal, has been providing a gusher of entertaining taped conversations, articles, and even a book that he says expose the corruption and general perfidy of his former father-in-law. On Tuesday that came to an end with the unexplained suspension of the blog, reports Lenta.ru. LiveJournal is owned by SUP, a Russian media company.

The world versus China on rare earths. An unusually broad and multinational coalition of business associations wants the G-20 nations to help persuade China to reopen its exports of rare-earth elements. Some three dozen associations from the United States, Germany, Japan, South Korea, and elsewhere asked all G-20 members in a letter to "renounce interference with commercial sale of rare earth elements, domestically or internationally, to advance industrial policy or political objectives." The appeal follows a Chinese shipping embargo on rare-earth exports to Europe, Japan and the United States that began with a dispute over a fishing trawler in the East China Sea. The G-20 will start meeting next week in Seoul.

A Georgian vote for electric fleets. Shai Agassi got Israel to agree to be a guinea pig for his company Better Place, which aims to provide a network of battery-charging stations for electric cars. But now former Soviet Georgia wants to do him one better:  It says it will replace its entire government vehicle fleet with electric and hybrid cars over the next four years. The New York Times' Andrew Kramer figures  the plan will cost Georgia between $88 million and $166 million, depending on which commercial brands it buys. Georgia largely subsists on foreign aid, but the United States and Japan may welcome such ambition given current pessimism about electric-car sales.

It's official: Higher oil prices are coming. Over the last two years, petroleum behemoth Saudi Arabia has endorsed oil prices in the $70-per-barrel range, and that is largely where they have stayed. Now the influential kingdom is backing a price boost to $90 a barrel, and prices have recently moved in that direction, closing over $86 a barrel. Saudi oil minister Ali Naimi signaled the shift in a statement in Singapore. Meanwhile JPMorgan Chase and Bank of America Merrill Lynch are both forecasting a jump to over $100 a barrel next year, and the International Energy Agency says prices will be tempered in the coming decades only if governments enact climate-change rules that cause oil demand to drop.

The coming Caspian oil boom. The International Energy Agency is projecting that the Caspian states -- Azerbaijan, Kazakhstan, and Turkmenistan -- will produce 5.4 million barrels a day by 2025, double today's volume, and enough to satisfy 9 percent of total global demand at that time. The IEA also notes, however, that Russia continues to choke off the Caspian natural gas exports.

Shell in trouble for palm-greasing. Royal Dutch/Shell, Switzerland's Panalpina World Transport and five oil service companies  are paying $236 million in penalties to settle a bribery case with the U.S. government. The companies admit that they paid millions of dollars in bribes to officials in seven countries -- Angola, Azerbaijan, Brazil, Kazakhstan, Nigeria, Russia, and Turkmenistan -- in order to facilitate customs shipments and to circumvent other rules.

Elon Musk's new friends. Panasonic is investing $30 million for a 2 percent share of Tesla Motors, the Silicon Valley electric-car startup run by Elon Musk. The Japanese electronics-maker joins Daimler and Toyota as big-ticket investors in Musk's company. Tesla already produces a $109,000 high-end car called the Roadster, and wants to build a mid-range vehicle called the Model S.

Worries about geopolitical bogeymen can overwhelm good sense. Case in point: today's melee over the discovery that Iran has been regularly handing Afghan President Hamid Karzai fistfuls of cash. Just who is Tehran endangering by keeping Karzai lubricated with pocket change? For one, the fellows U.S. troops are fighting: the Taliban. Karzai calls the payments "normal," and he is right. In the case of Afghanistan, Iran is in effect a U.S. ally.

It's useful to keep in mind that Iranian influence in Afghanistan is traditional. The two countries share a language, after all -- making it easy for the Iranians, for instance, to be particularly close to the leaders of the populous Herat and Balkh provinces, in the west and north of the country. Since the mid-1990s, the Iranians have served a useful balancing purpose to the Pashtun Taliban.

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The rare earths imbroglio continues. The New York Times' Keith Bradsher has another report on the slowdown of rare-earth exports from China: This time, he wrote, the flow of the strategic elements has slowed to not just the United States but also Europe. The Obama Administration ordered an investigation into the report. Two weeks before the U.S. mid-term elections -- in which the dastardly Chinese are already emerging as a popular bogeyman -- the elements are likely to come up as a political issue.

Sanctions tighten on Iran. The United States succeeded in further tightening oil sanctions on Iran this week, when Japan's Inpex said it would join European companies and halt its relationship with Tehran, which Washington is attempting to push to the negotiating table over its nuclear development program. (The Iranian government, meanwhile, played down Inpex's announced withdrawal from development of the Azadegan natural gas field.) That now leaves China as the last major country with significant energy investments in Iran, John Pomfret reported in The Washington Post.

Did Britain just institute a carbon tax? Earlier this year, Britain's Department of Energy and Climate Change launched a carbon emissions reduction policy that would have levied a pollution charge -- about $22 per ton of carbon -- on Britain's 4,000 biggest energy users, then paid the money back to the same companies in the form of energy efficiency incentives. It was a revenue-neutral approach -- until Wednesday, when the government quietly decided to keep the money, on the order of $1.58 billion a year. David Roberts at Grist explains.

China braces for a flood of LNG. If you want to gauge how much liquefied natural gas a country plans on using in the coming years, look to the shipyards. Case in point: The Chinese shipbuilding company that has built all of China's LNG tankers to date is ramping up its tanker construction efforts in preparation for what it anticipates will be a quadrupling of LNG imports between now and 2015, one of the company's top executives told Bloomberg News on Thursday. China's LNG consumption, if it lives up to the current projections, will have ramifications far beyond the country's shores -- just ask the companies building pipelines in Alaska.

Another $1.5 billion for biofuels in the United States. After the collapse of efforts to pass cap-and-trade legislation and hopes fading for even more modest renewable energy legislation, these are not the best of times for the clean energy industry in Washington -- unless, of course, you're in the biofuels business. Reuters reports that the U.S. Department of Agriculture is throwing another $1.5 billion at the industry in an effort to meet congressionally mandated targets for the production of still-commercially-unproven advanced biofuels by 2022. As for the 54-cents-a-gallon tariff on imported ethanol -- a reliable source of teeth-grinding for Brazil's government and sugar cane industry -- Agriculture Secretary Tom Vilsack says it's probably sticking around, though it's likely to be phased out in the future. File that in the "I'll believe it when I see it" folder.

Chevron drills deeper. Well, that didn't take long -- barely a week after the Obama administration lifted its moratorium on deepwater drilling in the Gulf of Mexico, Chevron announced Thursday that it would develop two fields in the Gulf estimated to contain some 500 million barrels of oil. The project is pegged at $7.5 billion, and would involve drilling wells deeper than BP's ill-fated Macondo operation. "In the end, the United States needs the oil and gas and other countries need the oil and gas, and some of the best places to explore are deepwater environments," Bobby Ryan, Chevron's vice president for global operations, told the New York Times' Clifford Krauss.

The geopolitics of energy has rarely seen such a crowding of potentially disruptive events at the same time -- the Texas shale-gas breakthrough; the Qatari liquefied natural gas behemoth; the global push for electric cars; and Iraq's ambitions to multiply its oil production. What separates these from research into renewable fuels such as algae is that they are not notional -- they are really happening. Should they reach their potential and converge, they will shake up the geopolitical order as we know it.

But will they do so? As regular readers of this blog know, I think that these shifts are changing geopolitics as we speak, the most visible evidence being Russia's much-reduced fear factor in Europe. But it's useful to heed cautionary voices -- though even there, dispassionate doesn't always mean unemotional.

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Today, the Taliban set 22 NATO fuel tankers ablaze in the southern Pakistani border city of Quetta. That's a day after a fuel tanker was blown up at Torkham, the border post leading into Afghanistan. On Monday, the Taliban set 20 NATO oil tankers afire in Rawalpindi, outside the Pakistani capital of Islamabad.

In all, the Taliban's oil war has gone on for a week straight. This is a page straight out of the histories of the two world wars, in which access to -- and the absence of -- oil was the deciding factor in both making and breaking enemies.

Until now, the attacks have been explained as the Taliban capitalizing on a standoff between the United States and Pakistan over Pakistani casualties in drone attacks, to which Pakistan has responded by closing the border at Torkham, and leaving the fuel trucks exposed. But that doesn't explain today's attack in Quetta.

In fact, as the U.S. military has clearly documented, long  fuel convoys have been among the main sources of American casualties in both Iraq and Afghanistan. The Taliban are Exhibit No. 1 as to why the military is working to untether itself from fossil fuels.

Petrobras generates $70 billion in share issue. Petrobras finally made its long-anticipated share offering yesterday, announcing the sale of $70 billion of stock in the largest share issue in world corporate history. Despite earlier concerns over mounting debt, investors were attracted to the Brazilian energy company due to its enormous offshore oil fields, which at 50 billion barrels are the largest discovered in the western hemisphere since the 1970s; assuming oil prices stay above $45 a barrel, Petrobras could join the ranks of Saudi Aramco as one of the world's leading oil producers, according to the Financial Times Lex Column. The biggest winner in the deal is the Brazilian government, which will increase its stake in Petrobras from 40 to 45 percent in exchange for the exclusive rights to 5 billion barrels of oil. All eyes are now focused on how Brazil will manage to balance its rapid economic growth with the potentially harmful economic effects that come with being a major oil exporter, though the country's finance minister confidently pronounced that Brazil will avoid the "oil curse" that has plagued other exporters.

Moscow hosts dialogue on Arctic oil and gas. Three years after a Russian submarine planted a Russian flag on the seabed beneath the North Pole, an international conference met this week in Moscow to discuss rival claims to the Arctic Ocean's potentially lucrative oil and gas resources. The stakes from the dialogue are high, as the U.S. Geological Survey has estimated that 90 billion barrels of oil and 1.7 trillion cubic feet of natural gas could lie under the Arctic's surface, about a quarter of the world's reserves of both resources. As Arctic sea ice continues to shrink, these resources will become more accessible, and the countries bordering the region have begun to assert sovereignty over areas with no discernible geographic boundaries. Russia has been at the forefront of the push to carve up the region, first through the flag-planting episode and now by spending $64 million to prove that the disputed Lomonosov Ridge, an undersea mountain range near the North Pole, is Russian territory. The area lies outside the 200-mile range established by a U.N. convention, but Moscow is intent on its claim. Yesterday, Russian Prime Minister Vladimir Putin urged delegates from Canada, the United States, Norway, and Denmark to come to a deal on dividing Arctic energy resources. Whatever the outcome of the talks, the Arctic looks likely to remain at a focal point of geopolitical jockeying for years to come.

World's largest offshore wind farm opens. On Wednesday, Swedish utility giant Vattenfall officially inaugurated its Thanet wind farm, consisting of 100 wind turbines off the coast of Kent in southeast England. The turbines, which generate enough electricity to power 200,000 homes, are located seven miles offshore and spread out over a 35 square mile area. The completion of this project brings the United Kingdom's power generated from wind power to 5 gigawatts, enough energy to power all the homes in Scotland, while moving Britain further towards the European Union target of generating 15 percent of its energy needs from renewables by 2020.

Ghana and China ink oil and gas deal. The government of Ghana this week signed a series of deals accepting a total of $15 billion in loans from Chinese state banks, with $3 billion of the funding earmarked for infrastructure improvements in Ghana's burgeoning oil and gas sector. Ghana is set to export its first oil later this year, and speculation arose of a Chinese loan offer following a dispute between Ghana and Texas exploration firm Kosmos Energy over the sale of lucrative Ghanaian oil leases. The loans will be repaid to Beijing through commodity exports, following a similar loans-for-resources model that China has deployed throughout Africa.

Save the incandescent! House Republicans Joe Barton, Michael Burgess, and Marsha Blackburn introduced a bill this week that would roll back impending regulations designed to replace the venerable incandescent light bulb with more energy-efficient compact fluorescent light bulbs, or CFLs. Under regulations adopted by the 2007 Energy Independence and Security Act, beginning in 2012 all light bulbs sold in the United States must meet minimum efficiency standards, which are likely to push retailers to gradually stop selling incandescents in favor of CFLs. Congressman Barton and others supporting the bill have raised concerns of job losses, citing the closure this month of the last General Electric incandescent light bulb production facility in the U.S. the shuttering. Most CFL production, by contrast, takes place in China.

Oil rebounds amid new economic optimism. A rally in stock prices this week sent crude oil prices back up above the $75 mark this week, closing at $76.50 a barrel in New York on Friday. Favorable reports of business capital spending from the Commerce Department, combined with a falling dollar -- it's at a six-month low -- contributed to the gains, the highest in two weeks. But high American inventories seem set to put a cap on the price rise, with most analysts this week agreeing that oil will hover around the $75 marker. "King Abdullah said he wanted $75 oil," Adam Sieminski, chief energy economist at Deutsche Bank AG in Washington, told Bloomberg. "It's good to be king. When you're Saudi Arabia and have the ability to put oil on the market and take it off in the quantities you want, you can pretty much have what you want." OPEC, not surprisingly, announced that it would increase crude shipments later this year.

Macondo well to be "declared dead" this Sunday. Five months after a blow-out caused 4.9 million barrels of oil to spill into the Gulf of Mexico, the Macondo well is on track to be permanently sealed off by Sunday, according to National Incident Commander Thad Allen. On Thursday the relief well, which BP has been drilling since May 2, finally intersected with the blown-out well where it meets the oil reservoir some 2.5 miles below the Gulf's surface. Cement and heavy drilling mud are now being pumped down the relief well to kill the Macondo well once and for all. As the well is sealed, BP expects to scale back its spill response, a sign that cheered investors and ratings agencies on Thursday. Meanwhile, embattled BP CEO Tony Hayward, who will be stepping down from the post on October 1, made his first public appearance in weeks on Wednesday when he testified before a U.K. parliamentary committee. One week after BP published a report on the causes of the Gulf oil spill, Hayward told the committee that the company had exhibited "a lack of rigor and a lack of oversight of contractors," admitting that there had been a level of industry "complacency" towards offshore drilling risks prior to the accident.

China's coal and carbon conundrum. As Europe takes steps to scale back its coal usage, China remains as dependent as ever on black diamonds to fuel its rapid economic growth: The International Energy Agency has predicted that Chinese coal usage will more than double by 2050. After IEA executive director Nobuo Tanaka outlined this week that China's adoption of carbon capture and sequestration technology would be crucial to combating climate change, Elisabeth Rosenthal at the New York Times Green blog describes the challenge of making this adoption happen. Carbon sequestration is still an expensive technology, and it's not likely that China will be willing to embrace it on the massive scale needed to reduce its carbon emissions, unless it has outside investment. Beijing is already facing huge problems of meeting growth and energy efficiency goals at the same time, but given that it has poured $1.5 billion into green technologies, including $300 million for electric cars, attempts to mitigate the effects of its primary energy source may not be too far off.

A new use for those old oil wells. While the Interior Department on Wednesday ordered all non-producing oil wells in the Gulf to be permanently plugged, these wells might prove to be a new business opportunity for carbon capturing technology. BP and Shell may begin storing carbon dioxide by pumping the greenhouse gas into old oil wells in the North Sea, which could net them a sizeable profit as they work to extract the remaining oil in these wells. Though the costs of capturing, transporting, and pumping carbon dioxide into the wells remain high, turning older oilfields into CO2 storage sites could be a viable means of reducing carbon emissions.

As if the oil wasn't enough... Khalid al-Falih, the head of Saudi Aramco, revealed this week that Saudi Arabia could hold massive reserves of unconventional gas, totaling in the trillions of cubic feet. This is good news for the kingdom, which has lately been pouring more money into gas development than into oil, in a bid to satisfy its rapidly growing domestic energy demand. Burning oil for power generation is expensive and polluting, and a shift to natural gas-fired power plants would free up more oil for export, where profit margins are higher. However, developing the unconventional gas reserves poses new challenges; "fracking," the procedure used to access shale gas in the United States, requires large amounts of water -- clearly a problem for a country where water may be more valuable than oil. Aramco says it is working with the major oil companies to look at alternative extracting solutions.

The West's geothermal boom. Clean, renewable, and reliable, geothermal energy seems to be the perfect green energy source, but it has usually been difficult to develop due to the costs of locating geothermal resources on a commercially viable scale. However, technological advancements and government funding are giving geothermal energy a boost in the American West. Geothermal producers have been using such methods as aerial mapping and reflection seismology -- which uses man-made vibrations to map out geothermal resources underground -- to reduce exploration and development costs. At the same time, millions of dollars in federal grants towards renewable energy development, as well as state renewable portfolio standards, are suddenly making geothermal energy an attractive alternative in the West, where the U.S. Geological Survey estimates that there could be 30,000 megawatts of untapped geothermal power. Having proved itself in Iceland, geothermal energy could soon become a major electricity source for Nevada, Utah, and California.

Oil slips on lagging economic indicators. After topping $77 earlier this week, oil prices began a long slide, closing the week at $73.66 on Friday in New York. Crude saw a 3.7 percent loss for the week, the biggest weekly decline since mid-August and reaching its lowest price so far this month. Earlier in the week, pipeline operator Enbridge Energy reopened a major pipeline from Canada to the U.S., releasing tension in the markets that had helped push prices up last week after a leak near Chicago forced the pipeline's shutdown. Rising U.S. stocks and a falling dollar kept crude above $75 until Thursday, but continued high U.S. oil inventories and reports showing a drop in consumer confidence (indicating a negative economic outlook) contributed to a fall in prices towards the end of the week. Analysts continue to forecast oil in the $70 to $80 range, with Credit Suisse revising its estimates for 2011 prices down from $80 a barrel to $72.50.

Happy birthday, OPEC! The Organization of Petroleum Exporting Countries celebrates its fiftieth anniversary this coming Monday. Responding to a unilateral cut in the price of oil by the major Western oil companies, oil ministers from Saudi Arabia, Kuwait, Iraq, Iran, and Venezuela met in Baghdad for four days beginning on September 10, 1960. The result was OPEC, which was to forever change the oil industry by redefining the relationship between the oil companies and the exporting countries. Previously, oil-producing countries had granted concessions to the major oil companies, sharing in revenues but allowing the companies to determine the rate of production. The founding of OPEC marked the beginning of a shift in power towards the countries themselves, which reached its apogee in the 1970s with the 1973 oil embargo. OPEC has expanded its membership to twelve countries since its founding, and with the decline of oil supplies outside its member countries, it remains arguably as important and influential as ever. That importance also ensures that it will continue to be a lightning rod for criticism.

U.S. steelworkers cry foul over Chinese clean energy subsidies. The United Steelworkers union is filing a trade suit against China, accusing Beijing of maintaining illegal subsidies on its clean energy industries. The union alleges that the subsidies are giving Chinese exporters of solar panels and wind turbines an unfair advantage, violating World Trade Organization regulations. The trade dispute comes as China has rapidly become a hotspot for green energy investment and production, and follows Beijing's announcement earlier today of a $20 billion trade surplus for August 2010. As the White House decides whether or not to press forward with the case, the debate over China's trade policies once again returns to center stage, with Keith Bradsher of the New York Times examining in depth the country's "aggressive government policies" in the clean energy sector. Dissenting from the accusations towards Beijing is UCLA environmental economist Matthew Kahn, who points out in a blog post that Chinese prowess and innovation in clean energy will ultimately benefit both U.S. consumers and producers.

Kuwait's nuclear energy push. Kuwait unveiled plans on Thursday to construct four nuclear reactors for power generation by 2022. The decision to move into nuclear energy stems from burgeoning electricity demand -- expected to grow by 7 percent per year up to 2030 -- as well as expectations of oil prices above $50, which makes Kuwait's oil more valuable as an export than as an energy source. Kuwait's nuclear energy committee is expected to issue a "roadmap" for its nuclear development by January, and it has just signed a cooperative agreement with Japan to help it gain expertise in nuclear energy. The Gulf state joins a broader push into civilian nuclear energy in the Middle East, as Saudi Arabia, Jordan, and the United Arab Emirates begin to develop their first nuclear power plants.

The dive into deepwater continues. Chevron and BP have been approved by the Chinese government to take operating stakes in new deepwater drilling projects in the South China Sea. The two majors will operate alongside China National Offshore Oil Corporation to develop any oil found in the deep-sea blocks, which range from depths of 980 to 6500 feet. BP's damaged reputation after the Gulf of Mexico oil spill has evidently remained intact in China, and CNOOC executives have welcomed the addition of the Chevron and BP teams to the South China Sea projects.

Rewarding, rather than picking, winners. Ugo Bardi, a chemistry professor at the University of Florence and peak oil theorist, argued on the Oil Drum this week that it might make more sense for governments to award prizes, rather than research grants, to spark innovation in renewable energy. In the case of research grants, the government decides the themes on which the research should focus before any funds have been allocated, and this narrowing of the parameters may do little to actually achieve a marketable result from the research. But if prizes are awarded for innovations in green energy and energy efficiency research, the funds go to the accomplishment itself, and not the promise that it may or may not happen. Using the example of Europe's feed-in tariff system, Bardi claims that prizes are more effective in stimulating developments in green energy because they reward success and not failures.

Oil rallies to its highest levels in a month. Oil prices climbed above the $75 mark for the first time since August 11 this week, ending the week at $76.49 a barrel in New York. A variety of factors contributed to the rally. Chinese imports of crude climbed 10 percent in August from July levels, while the International Energy Agency revised its 2010 oil demand forecast upward by 50,000 barrels per day. Reports from the American Petroleum Institute revealed a decline in U.S. oil stockpiles, sparking expectations of increased future demand. And the dollar weakened slightly, driving traders back into oil. A final contributor to the 3 percent price surge today was the shutdown of a major pipeline from Canada, which sprung a leak near Chicago. Still there remains a generally unchanging view among analysts that the economic fundamentals of oil demand are weak, and some models show oil hitting $50 a barrel this winter.

Would you like a wind turbine with that inexpensive and fashionably Scandinavian-looking bookshelf? Furniture giant Ikea announced on Wednesday that it will acquire six German wind farms in order to keep up its company goals of generating its complete electricity needs from renewable energy sources. It's unlikely that this move towards electricity self-sufficiency will make the jump to other retailers, but the image-conscious Swedish company is hoping to be a trend-setter.

When the United Nations Security Council voted to impose its fourth round of sanctions on Iran in June, Iranian president Mahmoud Ahmadinejad -- always a guy with a way with words -- likened the resolution to a "used handkerchief," incapable of having any real effect on the country. Two months later, and after the opening of Iran's first nuclear power plant, Ahmadinejad's vice president is maintaining that Iran "won't bow to pressure" from the sanctions, thanks to the "self-determination of the Iranian nation." 

Public defiance notwithstanding, Tehran's leaders have reason to be genuinely worried -- the sanctions are serious trouble for Iranian energy interests. With vast oil and gas reserves and ready buyers in the emerging world, energy was supposed to be the get-out-of-jail-free card for Iran, but it hasn't exactly worked out that way. Earlier this month, the National Iranian Oil Company announced that it was suspending development on two major liquefied natural gas (LNG) projects. Officials from the company have cited costs and complexity, but the announcement should come as an implicit recognition that the sanctions have started to bite. It also makes Iranian officials' onetime claims that the country would soon rival Qatar's in LNG exports seem less plausible than ever.

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