I caught up to the Obama-ate-dog story only in replays of the White House correspondents dinner, but this is important: I confess that I ate dog meat, too. It was in the Philippines, in my first foreign posting. I was wandering through the mountains of Cebu province, looking for members of the outlawed New People's Army (remember them?) to interview. The owner of the hut in which we stayed one night offered up breakfast on our way out. "It's black dog," the fellow said, smiling and holding out the delicacy with both hands. "Why thank you," I replied. I dined gratefully. This is called going with the flow. (Memo on how to eat black dog meat while searching for rebel fighters in mountain hideouts: Don't think. Eat. Smile at host.)

My next posting was Pakistan. On a trip through Afghanistan during the Najibullah days (remember him?), I was the guest of some mujahedin in Kandahar province. Near the end of an outdoor dinner, the local commander bestowed on me the most honored morsel he could think of -- a fistful of raw sheep's fat. Mmmmmm. Scrumptious. (Memo on how to eat fistful of raw sheep's fat while with Pathans: Wrap it in naan. Eat fast. Smile at host.)

After that came the former Soviet Union, and fresh camel's milk in Turkmenistan, horse meat in Kazakhstan, and who-knows-what-kind-of-innards in Chechnya.

What I was never offered in Kazakhstan or Kyrgyzstan was the most delectable nomad delicacy of all -- sheep's eyeball. In my first book, there is a photo of then-BP CEO John Browne (remember him?) being handed one during dinner over a big Kazakh oil deal that he desperately wanted. When you want an oil deal, you eat the eyeball, and Browne did.

(Memo on how to eat an eyeball -- or a sheep's ear -- during oil negotiations in Kazakhstan: Don't chew. Swallow fast. Smile at host.)

Let's say that the new conventional wisdom is correct -- that we ought to dispense of worries of resource scarcity, and embrace a dawning age of U.S. oil abundance and self-sufficiency. If we ask ourselves what that means, one conclusion is the apparent elimination of a central rationale for the development of clean energy technologies -- that the U.S. needs them to shed its reliance on unreliable oil imports from nefarious Middle East nations.

Clean-tech must be scrutinized through a political lens, because by and large, none of the technologies stands on its own feet as yet in the marketplace. They require political support to survive. Let's take a look at the calculus for clean-tech.

Industry analysts and journalists assert almost weekly (like Citigroup's Ed Morse and reporters at the New York Times) that U.S. shale oil and deepwater reservoirs, plus Canadian oil sands, are making the U.S. virtually self-sufficient in oil. (I myself have urged caution in this exuberance.)

In response, President Barack Obama said last week that oil drilling is not the "be-all, end-all strategy" of being energy self-sufficient, but rather that the U.S. requires "all of the above," meaning solar, wind and biofuels, too. He said this because he wants to retain federal support for cleantech companies and research, but is being pummeled by opponents who call such assistance a boondoggle, and accuse him of hostility to oil. The other reason he said this is that gasoline prices in much of the country are well over $4 a gallon.

Already, politics have knocked out another pillar of the clean-energy foundation -- the push to hold down CO2 emissions. Since there is no longer apparent majority U.S. political will to stave off global warming, clean-tech has seemed to lose that logic for public support.

Now goes the argument of energy security: If the forecasts of a U.S. bonanza are accurate, biofuels, advanced batteries and other technologies will be unneeded for the purpose of energy freedom from the Middle East.

With planetary collapse and energy security eliminated from the calculus, clean-tech would be back to basics -- its sole apparent remaining case for public policy support, at least in the U.S., would be the popularity of things clean. Promoters of these technologies would either have to make that case, or become cost-competitive and survive in the marketplace.

Read on

Look for President Barack Obama to order a significant release of oil from the Strategic Petroleum Reserve, the emergency stockpile held by the federal government. At most, it may trigger a short-lived drop in today's high gasoline prices. But Obama is battling history: Since Richard Nixon, gas prices have snuck up and startled otherwise occupied presidents, and led them into a flurry of actions that, while usually ineffective, have the virtue of making them look like they are doing something. Now is Obama's turn at the rite.

In a news conference yesterday, Interior Secretary Ken Salazar reached further into the past, noting that "all the way back to 1857, but bring it into the post-World War II era, you see the price shocks for both oil and gas that have occurred in this country and the different responses that are made." Salazar might have added that this vexing malady has afflicted not just U.S. leaders, but presidents and prime ministers around the world, most recently Nigerian President Goodluck Jonathan (and, pictured above, British Prime Minister David Cameron).

But the pursuit of sanctuary in history will do little good at the ballot box: Fresh polls in the New York Times and the Washington Post suggest that gas prices might be contributing to a drop in Obama's approval numbers. Though Obama spokesman Jay Carney yesterday assured reporters that "the Administration is not focused on polling data," that is belied by an outbreak of news conferences by members of Obama's team. The White House also yesterday released an update on its energy policy.

Obama's opponents have the knives out. One accusation is that Obama has manufactured high prices to encourage motorists to buy electric cars, to which Carney told reporters:

That is categorically false. This President is absolutely committed to reducing -- to doing everything we can to mitigate the effect of higher gas prices on American families and to lower gas prices. What he is not willing to do is to look the American people in the eye and claim that there is a strategy by which he can guarantee the price of gas will be $2.50 at the pump. Any politician who does that is lying, because it just -- that strategy does not exist. It is a simple fact that there is no such plan that can guarantee the price of oil or the price at the pump.

Read on

In the last episode, we were awash in gas: President Barack Obama is using the language of a shale gas enthusiast, crowing this week that the United States has sufficient reserves of the fuel to last 100 years. For that reason, the U.S. ought to push ahead with natural gas development, as long as safety concerns are kept in mind, said Obama (above, pictured this week on the campaign trail). Almost simultaneously, though, large volumes of that gas have vanished. First, the administration's own energy think tank -- the Energy Information Administration -- sharply lowered its estimate of U.S. shale gas reserves: rather than the 827 trillion cubic feet in unproved technically recoverable reserves announced last year, the EIA estimates that the country has 482 trillion cubic feet, or 41 percent less. The drop is understandable -- it has to do with the addition of completed wells, which provides more data points for the EIA to insert into its reserves model. But some serious analysts think even the lowered numbers are soft; Chris Nelder, for instance, writes that all that can be surmised credibly is an 11-year supply of gas at current consumption rates.

Then there is actual production. Chesapeake and ConocoPhillips have both announced the withdrawal of a substantial volume of gas from the market because of firesale prices that prevail, currently $2.77 per 1,000 cubic feet, compared with $13 in 2008. Chesapeake -- the second-largest U.S. gas producer -- said it will sell 8 percent less gas this year than last; Conoco says it will lower production by 4 percent. It is not that the companies are going broke -- as discussed previously, much of the gas is in the same geological formations as highly lucrative oil, so drillers themselves say they earn excellent profit regardless. Yet, they would like to earn greater profit still by driving gas prices higher through the law of supply and demand -- currently, there is a super-glut of gas; they would like to reduce that to a mere glut. Of course, the drillers in part have themselves to blame for sagging U.S. gas demand: In 2009, the shale gas industry vigorously opposed Obama's push for cap-and-trade legislation, under which electric utilities  would have accelerated their transition from coal- to gas-fired plants. The drillers would be selling much more gas, and prices would thus probably be higher. Alas, those politics were not to be. The Financial Times' Ed Crooks quotes Oppenheimer's Fadel Gheit: "I would expect all large gas producers without exception to scale back production this year."

These developments are important for a single reason: The U.S. is the epicenter of the global shale gas boom. Because of the U.S. bonanza, for example, Russia has been shaken in Europe. China might be next to join the boom. It is importing U.S. technology; if it succeeds in producing substantial shale gas, it could transform its own set of circumstances. But if the numbers are consequentially smaller than supposed, and if the market is slow to absorb the higher volumes, the geopolitical outcomes will be muted.

Go to the Jump for more of the Wrap

Read on

A key outcome of President Barack Obama's Asia tour is an apparent tactical withdrawal by China on drilling rights in the South China Sea. This does not mean that Vietnam, the Philippines and others in the sea can proceed with abandon, but -- at least for now -- Chinese naval ships may be less likely to interrupt oil and gas exploration. Locally there is some elation, with The Times of India calling it a "climbdown" by China.

The issue of who owns what waters in the East China and South China seas is wrapped up in both fortune and stature -- though the seas are relatively unexplored, some experts believe many billions of oil and gas lie underneath; in addition, China regards sovereignty over the waters as a sign of its great-power status. So over the last two years, numerous diplomatic and military confrontations have occurred between China and the oil-drilling plans of its neighbors. In 2010, it was particularly unseemly to observe Japan reduced to effective groveling after a confrontation with China over rare-earth minerals.

China being much larger, some of its intimidated neighbors have welcomed a stepped-up U.S. presence as an equalizer. That has played into narratives unfolding in the United States -- angst over a widely perceived national decline, along with Obama's difficult re-election battle.

All of these layers were on display Saturday, when 16 of 18 leaders gathered in Bali for an Asian summit one after another mustered their nerve and told Chinese Premier Wen Jiabao of their worry over the security of the waters off their shores. Obama expressed the same concern in the forum.

Read on

Oil traders are betting as a herd that they are on the cusp of potentially their most profitable period since the Libyan uprising stoked fears of Saudi Arabian oil being lost to the market. Hedge funds, among the biggest players in oil futures, are leading this charge, according to the U.S. Commodity Futures Trading Commission, which tracks such data. They have upped their bets on a serious rise in oil prices three weeks in a row -- the first time that has happened since late February-early March, Reuters reports.

We care about this directional betting because, if the hedge funds are correct, the global economic struggle faced by everyone except China will worsen. Plus, tens of billions of dollars will flow to petro-leaders -- in Russia, Venezuela, Iran -- whose behavior turns increasingly more discourteous when they are richer.

Specifically, here is what we have -- "long" bets on oil prices in the most recent reporting week rose to 182,285. That is far below the casino peak during the Libyan-fever, when there were 350,000 such bets on the table; but it is still up 8 percent over the previous week, a reasonably large jump.

What is causing this betting frenzy? Some will say it's a widely expected tightening of oil supplies later this year. But that explanation is not exceedingly persuasive because the long bet has come abruptly. Something more immediate is likelier at work -- such as the federal debt acrimony in Washington.

Look at the price of gold, for example -- it continued breaking records over the weekend, crossing $1,615 an ounce, a play by bettors perceiving higher investment risk out there.

So it is with oil. The bet is that, even if President Barack Obama manages to strike a debt-ceiling deal with Republicans in the coming days, it will not include sufficient budget cuts to satisfy rating agencies such as Standard & Poor's. The reasoning is that, should S&P downgrade the U.S. credit rating to say AA, traders in the casino will sell off the dollar. When that happens -- when the value of the dollar is driven down -- the price of oil will likely go up.

Update: In his morning note to clients, hedge fund strategist Peter Beutel calls the above bet "a classic case of buying rumors only to need to sell the fact." Meaning, a price runup will be followed by a plunge if traders apply the smell test to any debt deal between Obama and Republicans, and are not impressed.Beutel said,

Raising the debt cap will get us through this immediate crisis, but it won’t lead to a single new job or a dollar in GDP (although its failure would lead to the loss of both). Once traders get over the euphoria of Congress reaching agreement, there will not be much to build on afterwards. And that makes a selloff seem likely after approval.

Oil whiplash in the Saudi kingdom:  Saudi Arabia, which may or may not have raised oil exports to compensate for the loss of Libyan crude, is now talking internally about increasing spare production capacity to meet an expected surge in oil demand in coming years. That's according to Petroleum Intelligence Weekly, which has been solid on the highly opaque Saudis.

The Wall Street Journal notes this week that confusing information about Saudi production has exacerbated the volatility of the oil market -- the kingdom is by far the world's largest crude exporter, and it cultivates a reputation as a stabilizing force. In February, the Saudis made it known that they were putting more crude on the market in order to compensate for lost Libyan volumes. But this week, Energy Minister Ali Naimi said that in March the kingdom actually lowered production by 800,000 barrels a day for lack of demand. Some traders believe that, before the Saudis made that steep cut, they had been producing about 9 million barrels a day since November for domestic reasons, and simply used Libya as a pretext to make it public.

Whatever the case, PIW reports that the Saudis are now thinking of raising their production capacity to 15 million barrels a day, which would be a 20 percent increase from their current capacity of 12.5 million barrels a day. The discussions revolve around concern about surging Asian demand.

Bidding, not setting: When traders are in the casino, they bid up and down the price of oil -- this week above a smoking $112 a barrel. But are they also counting cards? As soon as you ask such a question, suggesting that trading is a conspiratory sport, you are getting pretty far out there -- manipulation happens (just ask Enron's many victims), but not often enough to be looking over one's shoulder. This week, President Obama fed such suspicious thinking by forming a task force to investigate whether high oil prices are a result of fraud or manipulation. Okay, he is running for re-election. But if you want to reduce some of the spikes up and down in oil prices, charge a higher fee for traders to bet. If it costs more for a seat at the table, betters have more reason to think twice before sitting down.

Anger to the left me, anger to the right: When oil prices shook off the Goldman Sachs malaise this week and went back through a new roof, not only Obama was angered. In Shanghai, truckers went on strike to force down fuel costs and port fees, the Financial Times reported; it was another opportunity for the ultra-paranoid Chinese government to worry about the Arab Spring, and remove any speck of news from the Internet.  Meanwhile, Russia's Transneft is on the warpath against China over the price of oil. Transneft wants world prices for the crude it's shipping to China through Skorovodino, in Siberia, but somehow the two sides have a different idea of what that world price is, reports John Helmer on his blog. Prices are not going down soon, as we see in the worsening trouble reflected by Syria, and the world is only becoming more complicated, as I discussed with Scott Tong this week on Marketplace. And it's not even summer yet.

Good or bad luck in Nigeria? There is peace in the Niger Delta, but fury in the north as Nigeria -- the source of some 10 percent of the United States' crude oil supply -- prepares for its next round of voting, this time for local offices. So will we have debilitating trouble in another important oil state? Much depends on the actions of President Goodluck Jonathan, who won the right to continue for a full term in office after taking power on the death of his predecessor. Jonathan is from the south, which is generally what infuriated the north and supporters of his opponent. Writing in the New York Times, Dele Olojede, who edits the Nigerian newspaper NEXT, observes worrying signs in the unprecedented violence and disrespect of hallowed officials present in the north. Olojede calls for statesmanship by Jonathan and former military ruler Muhammadu Buhari, whom he defeated in the election.