Up or down? Oil spent much of last year climbing, climbing until the irrationally exuberant among us began to rub their hands together with glee (that would be the traders). This week, the market placed a speed bump in the road to $100-a-barrel and beyond. Today, oil closed with its biggest one-week fall in five months, plunging to $88.03, Bloomberg reports. As we discussed earlier this week, prudence is called for in the oil markets. Traders might want to look at some arbitrage between crude varieties, however -- that $88.03 price refers to West Texas Intermediate. Brent crude is selling at a $5 premium, closing at $93.44 a barrel, notes Gregory Meyer at the Financial Times.

The trouble with subsidies: In response to a demand from the International Monetary Fund, Pakistan raised the price of gasoline by about 9 percent on New Year's Day. Eight days later, the government reversed the increase. In between those two moves, Punjabi Gov. Salman Taseer was assassinated, a key government ally pulled out of the government, and there was general mayhem in the street. I discuss this in an interview at CNN. A lot of the turmoil stemmed from a poisonous debate over the country's so-called blasphemy law, which prohibits insults against the Prophet Mohammed. But the gasoline subsidy was also a primary player in the turbulence, which may yet return. The IMF wants the subsidy lifted as a condition of providing $11 billion to Pakistan. But a subsidy, once given, is hard to take away.

Price of the spill: President Obama's Gulf oil spill commission returned an early verdict on last year's massive blowout in the Gulf of Mexico, with a stinging rebuke of BP and its partners in the Macondo well. As is usually the case with such reports, one could read into it almost whatever one wished to. That might explain how Wall Street treated the report. The shares of both BP and Transocean ended the week just about where they were before the report was issued, as though investors in the aggregate couldn't decide whether the results were good or bad for the companies.

Electric spying: The world's electric-car combatants take their war seriously, the French no less than the Chinese, the Americans, and the Japanese. So it is that Renault suspended three senior managers for allegedly passing on secrets about the company's electric car plans to China. Renault is partners with Nissan, whose Leaf was launched last month. The probe has been ordered all the way up the chain of command, by President Nicolas Sarkozy himself, the Guardian's Kim Willsher reports.

FP's editors are rounding up predictions for 2011 from their bloggers, so here are a couple thoughts from me on my beat:

First, with Russia's petro-driven geopolitical power shaken underfoot by uncertainty in its key European natural gas market, Vladimir Putin will step up his two-year-long public relations campaign and announce that he will seek to return to the Russian presidency in elections scheduled in 2012. In a swap of the so-called "tandem" of Russian power, current President Dmitry Medvedev will declare that he will be honored to serve as prime minister.

Meanwhile, oil prices will flirt with $100 a barrel, but stay generally in the $80 to $95 range because global crude oil stockpiles will remain at historic highs. This will temper the price of gasoline at the pump, and help the global economic recovery advance. But another global speculative bubble will form, this time in metals, driven by these same expectations of economic growth. What these traders always seem to forget is that all bubbles eventually burst -- but no one knows precisely when.

Oil prices are up today, another apparent notch in the belt of conventional wisdom, which is that we are on the way to another historic price spike -- $200 to $300 a barrel and $5 a gallon at the U.S. pump. The way this narrative goes is that these sky-high prices finally so aggravate U.S. consumers that they act on them: switching for good to hybrids and other high-mileage cars, weather-protecting their homes and buildings, and generally using much, much less oil. On the other side of all this, a decade or a bit more from now, we get a long, slow decline in global oil demand, paradise, and other fine things.

But is this valid? Not necessarily, if one considers a pair of reports out today from Barclays Capital, the research arm of the investment bank. Start with what leads people to such conclusions. First is the theory of peak oil: the evidence that we've just about reached the apex of our capacity to produce oil, and will be on a supply plateau of around 90 million barrels of oil a day for some time before the supply begins declining (global oil demand is about 85 million barrels a day). The other factor is that oil companies have in recent years curtailed their spending to find new oilfields. Together, these trends suggest that supply will stop keeping up with demand about mid-decade.

Where Barclays takes the punch away from this pessimists' party is a semi-annual survey of 402 oil and gas companies of all sizes around the world. Barclays finds that these drillers are back in the spending game. In what Barclays calls "The Original E&P Spending Survey" (sounds like a cheeseburger ad, right?), it finds that exploration and production spending is going to rise next year to almost half a trillion dollars. In precise numbers, that means $490 billion in spending, 11 percent higher than the measly $442 billion that will have been spent by the end of 2010.

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The International Energy Agency -- the autonomous Paris-based research group funded by an array of mostly European and Asian governments -- has released its annual energy outlook (English language executive summary here), one of the most eagerly awaited big-picture prognostications in the business. The takeaway from this year's report, which was leaked to the Financial Times last week, is that governments matter: What they do, or don't do, about climate and energy policy in the next decade will determine what we pay for oil, and how much of it we have.

In the IEA authors' words, "the age of cheap oil is over." The question is how expensive it gets. Consider this chart:

We're looking at several energy scenarios for the next quarter-century: a business-as-usual scenario (the red line above), a scenario in which industrialized countries pursue the relatively modest policy goals they agreed to at the last year's botched Copenhagen summit (the blue line), and a scenario in which those countries pursue the sort of ambitious overhaul of their energy use that would be required to hold the atmospheric concentration of carbon dioxide to the level that climate scientists believe is necessary to avert the worst of climate change, or a 2-degrees Celsius rise in global temperatures (the green line).

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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.

CNOOC, Statoil Invest $1 billion in south Texas' Eagle Ford oil shale. Guess who will be scrutinized and who won't? The betting is that the Chinese National Offshore Oil Corp. will not suffer another fiasco like in 2005, when it lost in its attempt to land Unocal. This time it will manage to hold on to its investment, in this case a $1.1 billion buy-in into the scorching hot shale bonanza. Yet some analysts say that election-year jingoism in the United States could again leave China out in the cold. Ditching the deal will be difficult, however, since it was announced on the same day -- Oct. 10 - that Norway's Statoil unveiled its own, $1.3 billion deal with Talisman involving another section of the Eagle Ford field. Given the continued interest of U.S. energy companies in China, the Administration and Congress may have to tough out any instinct to scuttle the CNOOC project.

IEA Bumps Up Oil Demand Forecast for 2010, 2011. The Paris-based International Energy Agency lent credence to those who believe that the global economy is slowly recovering with its much-watched oil report. The agency said increased demand in both developing and  industrialized countries means the world will use 86.9 million barrels a day this year, 300,000 barrels a day higher than previously forecast, and a full 1.5 million barrels a day more than last year's recessionary pullback. Next year, the IEA predicts, demand will rise another 1.3 million barrels a day. What does this mean? Not lower gasoline prices at the pump, that's for sure. Possibly, however, that the record inventories of oil around the world will start falling, and put a floor under what this year has been a volatile market. Reports by Deutsche Bank, France's Total and a couple of think tanks have foreseen comparatively high oil prices headed into the middle of the decade, before falling again, and this could be the start of that climb.

Oil: another target in the Afghan war. Militants linked to the Taliban have spent much of the last 10 days or so blowing up NATO oil and fuel tankers plying routes from Pakistan into Afghanistan. Today there was another attack in the Khyber Pass leading from the Pakistani city of Peshawar into eastern Afghanistan near Jalalabad, where two died in an attack on a NATO fuel truck. It is a time-tested strategy -- war combatants have been targeting each other's fuel supplies ever since Winston Churchill triggered the age of strategic oil just before the outbreak of World War I. Over at Wired's Danger Room blog, Katie Drummond writes of a three-mile-long jam of NATO fuel trucks on the very same route (the piece includes must-see satellite images of the bottleneck by DigitalGlobe).

Moratorium lifted in the Gulf of Mexico. Taking no chances with control of Congress on the line in Washington, President Barack Obama lifted a moratorium on drilling in the Gulf of Mexico more than a month before scheduled. Six months after five million barrels began spilling into the Gulf from BP's Macondo well, the administration said that oil companies again can drill in both  shallow and deep water, though under a tighter regulation regime, and with more surprise inspections. At Investing Daily, Jim Fink calls it Obama's "October Surprise." But Obama was wrong if he thought the move would silence the hecklers. Over at the State Column, a still-dissatisfied Louisiana Gov. Bobby Jindal took a swipe at Obama and his "harsh," "job-killing," "arbitrary," and "capricious" decisions regarding the Gulf.

Is China still sore over the humiliation of tuna fisherman Zhang Qixiong? Is it China's 32 rare-earth metals exporters -- are they, as Chinese Commerce Minister Chen Deming suggests, so wound up over Japan in general that they have decided collectively to strangle Japan's electronics and hybrid-car industries, as Keith Bradsher and Edward Wong report at the New York Times?

China's ban on the export of the 17 so-called rare-earth metals -- indispensable as of now in the manufacture of high-tech products like wind turbines, advanced batteries and flat-screen TVs -- has now passed three weeks in length. Chinese Prime Minister Wen Jiabao says this isn't political: Beijing, he says, isn't attempting to demonstrate its dominance over Japan. That sounds right. Instead, this looks like standard economics.

What hasn't received much attention is that, while no rare-earth metals have gone -- at least legally -- to Japan since Sept. 21, China has continued to freely export finished products such as advanced magnets in which rare-earths are embedded.

Beijing Review has an interesting interview with Lin Donglu, of the Chinese Society of Rare Earths, and Wang Hongqian, of China's Foreign Engineering and Construction Co. In it, the two men discuss China's efforts to develop advanced rare-earth industries, and not be simply a raw-materials supplier to the world. They also cite western complaints about China's hardball incentives for western companies to relocate in China -- these companies are facing restrictions on rare earths that they can import, but are offered all the metals they wish, at lower prices, if they move their factories to China.

This may explain the China-Japan rare-earths standoff: Beijing is signaling more forcefully now that, if Japanese companies want broad access to rare earths, they should move to China, or buy their rare-earth components from Chinese companies.

Beijing is telling companies in the rest of the world the same thing: You could be next.

Moscow and Beijing have spent two decades trying to patch up relations that went bitter long ago in a battle over Communist purity. In the latest installment in the rapprochement, they are using their most hallowed mutual interest -- oil and gas -- to signal that this time bygones really are bygones. In Beijing today, Russia's Dmitry Medvedev agreed to supply a huge volume of oil and gas to China, not to mention coal and two 1,000 megawatt nuclear power reactors. Then came the pipelines. In a ceremony, Medvedev and China's Hu Jintao marked the completion of the first oil pipeline connecting the countries, a 624-mile project. Not to be outdone, another Chinese neighbor, Turkmenistan President Gurbanguly Berdymukhamedov, debuted new equipment that allows the former Soviet republic to almost double its natural gas supplies to China through a 4,300-mile long pipeline.

This is a multi-dimensional charm offensive. Beijing wants to show that, just because it's quarreling with Japan and the United States, it also can be quite a friendly chap. As for Russia, it wishes to issue a warning to Europe, which has spent much of the last four years loudly proclaiming an intention to wean itself off of reliance on Russian gas. The message: There are other fish in the sea.

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China, fresh off of building an international fracas out of a fishing captain with an errant wheel, has found a new arena for conflict with its closest trading partners: chicken feet. The New York Times' Keith Bradsher reports that Beijing yesterday levied a 105 percent tariff on U.S.-produced chicken feet -- sold almost solely to the Chinese -- while retaining its ban on the export of rare earth metals to Japan. But such brinksmanship rarely bodes entirely well in the end for the party unwilling to made amends once the hand of friendship is extended. China may yet become the world's biggest economy, but it may lose its highly strategic near-monopoly on rare-earths.

As of today, Beijing remains unbowed. Last week, Japanese Prime Minister Naoto Kan sustained a considerable political humiliation by flinching in his game of chicken with Beijing, and releasing Zhan Qixiong, the bad-driving Chinese trawler captain who was arrested after veering into two Japanese patrol boats on Sept. 7. Beijing continues to demand that Japan "apologize" and pay yet-to-be-determined "compensation." Now an emboldened Beijing is moving on to chicken feet, a tit-for-tat tariff in reaction to U.S. tariffs on Chinese tires: The United States said Beijing is dumping tires, now Beijing says the United States is dumping feet. But Beijing's dim sum tariff could backfire given the shortage of domestic supply of the delicacy.

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At graduate school, a professor of mine voiced a strong distaste for Steven Rattner, the New York Times' young chief economics reporter, based in Washington. This professor, an adjunct who worked at the World Bank, thought Rattner just didn't get economics; he advised us to rely instead on The Wall Street Journal. Soon after, Rattner left the Times for Wall Street, becoming a billionaire in the employ of the investment bank Lazard Frères (now Lazard), an influential voice in Democratic politics, and generally a guy with serious connections. Last year, President Barack Obama, beset with crises domestic and foreign, asked Rattner to figure out what to do about America's failing car industry. So it is that this week, we get Rattner's memoir of the car company rescue, Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry.

Rattner is getting serious attention. Tom Braithwaite at the Financial Times interviewed him. Jonathan Cohn at The New Republic interviewed him. Holman Jenkins, a writer for The Journal‘s editorial page, didn't praise the book, but did offer free publicity while using it as a platform for yet another swipe at unions and mileage-efficient cars.

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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.

Greenland or bust! On Tuesday the U.K. exploration firm Cairn Energy revealed that it has discovered natural gas in Baffin Bay, just off the west coast of Greenland. It's too early to tell whether the area contains commercial quantities of oil and natural gas, but the find is encouraging. The U.S. Geological Survey has estimated that the waters off the island could contain as much as 50 billion barrels of oil and gas, while melting ice has suddenly made a once-inhospitable area more viable for offshore drilling. Edinburgh-based Cairn is optimistic that the basin could be a major find, and other energy companies have hurried north to apply for exploration licenses. One company that won't be joining them is BP, whose less-than-stellar recent reputation with offshore drilling has forced it to back off. But despite mounting environmental groups' opposition to the drilling and the presence of a renegade ice island floating south, energy companies are likely to continue to flock to what could be the next frontier in oil and gas.

Nigeria's electricity privatization gamble.  Nigerian president Goodluck Jonathan announced yesterday that the country plans to privatize the state-owned power monopoly and attract foreign investment in the electricity sector. Electricity demand in Nigeria, the most populous country in Africa, has always strained the country's inadequate national grid thanks to heavily-subsidized prices, and power outages are common. Abuja hopes to drum up some $10 billion in foreign investment to make the necessary upgrades, and already investors from Canada, Turkey, Saudi Arabia, India, and China have expressed interest. In keeping with his other energy reform efforts, President Jonathan is trying to boost his reform credentials as his party heads into national elections in January 2011. Overcoming Nigeria's chronic power crisis would be a critical step forward in the government's pursuit of growth and development.

An unlikely partner in drilling safety. Lee Hunt, president of the International Association of Drilling Contractors, said on Wednesday that he would welcome Cuban state oil company Cubapetroleo (Cupet) to join the organization as "a member of the international drilling community." Hunt and other association officials were visiting Havana this week as Cuba prepares to drill a series of test wells in its section of the Gulf of Mexico over the next two years. Cupet's drilling partners in the project are all members of the industry group, which wants to bring in the Cuban company to ensure that drilling safety and technical standards are met. But the Houston-based organization will have to secure approval from the Obama administration first. While there are no signs that the 50-year old U.S. trade embargo will be lifted any time soon, informal industry cooperation over drilling safety standards could be a modest first step towards some normalization of commercial relations with Cuba.

Drilling ban's diminished impact. Concerns about the Obama administration's extended moratorium on offshore drilling may have been premature, according to John Broder and Clifford Krauss at The New York Times. After much protest from drillers and supply firms, who argued that the ban would endanger thousands of industry jobs and drive drilling from U.S. waters, the impact of the moratorium has been milder than expected. This is because oil companies have used the drilling freeze to perform needed maintenance and upgrades to their rigs, while concentrating more on onshore drilling. Job losses have been far below what the industry claimed they would be. Administration officials have also repeatedly hinted that the ban might be lifted before its November 30 expiration date. Meanwhile, the BP spill seems to have had little to no effect on the progress of other global offshore drilling projects, although other governments have announced new regulations and safety reviews.

China and South Africa ink nuclear energy deal. China and South Africa announced a series of high-profile business deals on Tuesday, one of which could see China National Nuclear Corp. construct a nuclear-power plant in South Africa. Talks are under way with the Chinese state-owned nuclear company to import nuclear technology to South Africa, while a banking partnership between the two countries would finance any joint nuclear efforts. The deals come as South African president Jacob Zuma visited Beijing this week to promote commercial relations with Beijing, South Africa's top trading partner. China has been trying to position itself as a leading exporter of nuclear technology, while continuing its broader strategy of strengthening its presence in Africa.

Could China push the world into alternative fuels? The Council on Foreign Relations' Geo-Graphics blog has an illuminating post this week depicting the potentially sobering effect of China's insatiable demand for oil. According to the chart, once a country's per capita income hits $15,000, oil consumption growth tends to increase exponentially. So far Chinese oil consumption has shown no signs of slowing down, but its per capita oil consumption remains less than 0.1 barrel per person per day, compared to the nearly 0.7 barrels per person per day by the United States. But as China approaches the $15,000 GDP per capita mark, world oil supplies could be in for a shock, as the projected increase in demand would necessitate unrealistic increases in global oil output. If China follows this consumption pattern, alternative energy sources may be looking like less of an alternative and more of a necessity.

Oil prices rebound, gas moves to new low. Crude oil prices were staring at a third straight week of declines before rebounding towards the end of the week, closing at $75.17 Friday in New York. Plummeting U.S. housing purchases and continued high U.S. stockpiles pushed oil prices to an 11-week low of $70.76 on Wednesday, before a reduction in jobless claims, a weaker dollar, and Friday's speech by Fed chair Ben Bernanke renewed confidence in crude. But a weak U.S. economy remains the primary concern for oil analysts, and reports of cooling Chinese oil demand are also likely to encourage bearish sentiments. Accordingly, OPEC has already announced a 0.3 percent cut in crude shipments. High stockpiles of natural gas also caused that commodity to take a beating this week, as prices fell to their lowest levels in nearly a year. And gasoline prices are also in a downward spiral, which should provide some added relief for drivers getting away this Labor Day weekend.

The countries of the Middle East might seem like the last places that would embrace non-hydrocarbon energy sources. With a total of 55 percent of the world's crude oil reserves and 41 percent of its natural gas, why should they? But the past year has seen a major push towards nuclear and renewable sources of energy in the Middle East, as the region's states work to solve the problems of burgeoning domestic growth through energy diversification.

In last week's Bloomberg Businessweek, Stanley Reed described the rise of the "nuclear option" in the United Arab Emirates, Saudi Arabia, and Jordan. At the forefront is the U.A.E., which placed a $20 billion order for four nuclear reactors from Seoul-based Korean Electric Power Corp. last December. The Saudis have followed with a plan to construct an entire city focused around nuclear energy, while Jordan's extensive nuclear ambitions, fueled by the discovery of large uranium reserves, see the country satisfying a third of its electricity demands with atomic power by 2030.

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India -- tired of losing bids for oil assets around the world to China -- is turning to a more aggressive, state-backed approach. One wonders, however, if it's a bit late in the game.

As Bloomberg's Rakteem Katakey and John Duce write, China's national oil companies outbid Indian firms in some $12.5 billion worth of contracts over the last year. The bidding rivalry -- and China's superiority in it -- goes back as far as 2005, when for example China National Petroleum Corp. twice beat out India's state-run Oil and Natural Gas Corp., acquiring the lucrative oil assets of PetroKazakhstan and Calgary-based EnCana Corp.'s oil and pipeline assets in Ecuador. That has stymied India's efforts to satisfy projected demand that, according to the International Energy Agency, will double to 6 billion barrels a year in oil-equivalent energy by 2030. The two Asian giants are not in a death grip -- each is pursuing its own interests. But there's clearly tension, at least on the Indian side.

New Delhi is fighting back. This year, Oil Minister Murli Deora (above right, with Hugo Chávez) has launched a worldwide charm offensive, traveling to Nigeria, Saudi Arabia, Uganda, and Venezuela in order to chat up local oil ministers and their staffs. The national oil firms, ONGC and Oil India Ltd., have been authorized to spend up to $1.1 billion on investment or acquisitions without government approval.

The most decisive action may be the creation of a sovereign wealth fund to back overseas energy investments. In March, the oil ministry proposed such a fund, to draw on India's foreign currency reserves, and last week the government advanced the idea  by forming a task force to draw up a more specific plan.

Yet the still-unnamed sovereign wealth fund comes long after China -- as well as the petrostates of the Middle East -- launched their own such vehicles. Beijing already has a $300 million energy sovereign wealth fund, earmarked out of $2.4 trillion in total foreign currency reserves; India's total foreign currency reserves, by comparison, are $277 billion. That is quite a bit of money in India's paws, but you get the picture -- the country could still face trouble in the bidding process.