Explainer of the Day

Gasoline prices

The Iraq Surplus

In Iraq, Far From a Deficit

Related Report;
Stabilizing and Rebuilding Iraq: Iraqi Revenues, Expenditures, and Surplus;

Iraq has an estimated 115 billion barrels of crude oil reserves, the third largest in the world. Oil export revenues are critical to Iraq's reconstruction, accounting for over 90 percent of the Iraqi government's revenues. In June 2008, GAO reported low 2007 spending rates by the Iraqi government for some critical sectors in the face of declining U.S. investments in these sectors. This report examines (1) Iraq's estimated revenues from 2005 through 2008, (2) Iraq's estimated expenditures from 2005 through 2008, (3) Iraq's financial deposits through 2007 and budget surpluses, (4) U.S. cumulative expenditures on stabilization and reconstruction activities in Iraq since 2003, and (5) factors affecting Iraq's efforts to accelerate spending. GAO analyzed relevant data and reviewed documents, including Central Bank of Iraq oil receipts data, International Monetary Fund's (IMF) reports, translated copies of Iraqi budget and expenditures, and U.S. agency funding data and reports. GAO also interviewed officials from the Departments of Defense (DOD), Energy, State, Treasury, and the IMF. This report contains no recommendations. Treasury agreed with the report's findings and stated that Iraq has adequate funds to make and maintain capital investments that deliver services and foster economic growth. State provided technical comments. DOD had no comments.

From 2005 through 2007, the Iraqi government generated an estimated $96 billion in cumulative revenues, of which crude oil export sales accounted for about $90.2 billion, or 94 percent. For 2008, GAO estimates that Iraq could generate between $73.5 billion and $86.2 billion in total revenues, with oil exports accounting for between $66.5 billion to $79.2 billion. Projected 2008 oil revenues could be more than twice the average annual amount Iraq generated from 2005 through 2007. These projections are based on actual sales through June 2008 and projections for July to December that assume an average export price from $96.88 to $125.29 per barrel and oil export volumes of 1.89 to 2.01 million barrels per day. From 2005 through 2007, the Iraqi government spent an estimated $67 billion on operating and investment activities. Ninety percent was spent on operating expenses, such as salaries and goods and services, and the remaining 10 percent on investments, such as structures and vehicles. The Iraqi government spent only 1 percent of total expenditures to maintain Iraq- and U.S.-funded investments such as buildings, water and electricity installations, and weapons. While total expenditures grew from 2005 through 2007, Iraq was unable to spend all its budgeted funds. In 2007, Iraq spent 80 percent of its $29 billion operating budget and 28 percent of its $12 billion investment budget. For 2008, GAO estimates that Iraq could spend between $35.3 billion and $35.9 billion of its $49.9 billion budget. As of December 31, 2007, the Iraqi government had accumulated financial deposits of $29.4 billion, held in the Development Fund for Iraq and central government deposits at the Central Bank of Iraq and Iraq's commercial banks. This balance is the result, in part, of an estimated cumulative budget surplus of about $29 billion from 2005 to 2007. For 2008, GAO estimates a budget surplus of between $38.2 billion to $50.3 billion. If spent, a proposed Iraqi budget supplemental of $22 billion could reduce this projected surplus. Since fiscal year 2003, the United States appropriated about $48 billion for stabilization and reconstruction efforts in Iraq; it had obligated about $42 billion of that amount as of June 2008. U.S. agencies spent about $23.2 billion on the critical security, oil, electricity, and water sectors. From 2005 through April 2008, Iraq spent about $3.9 billion on these sectors. U.S. government, coalition, and international officials have identified a number of factors that have affected the Iraqi government's ability to spend more of its revenues on capital investments. These factors included the shortage of trained staff; weak procurement and budgeting systems; and violence and sectarian strife. The United States has funded activities to help build the capacity of key civilian and security ministries to improve Iraq's ability to execute its capital project budget.

To Drill or not to Drill

Related;
Accord on the Tire-Gauge Question;

“Senator Obama said we should inflate our tires,” Mr. McCain said, according to a pool report of the evening. “I think we ought to inflate our tires. I’m all for it. The Triple A said we should inflate our tires. But that’s not all we should do.”

Tired of Talking Tires Yet?

Obama pokes at McCain over tire - pressure issue;

In mocking Obama, McCain told a motorcycle rally in Sturgis, S.D.: ''My opponent doesn't want to drill, he doesn't want nuclear power, he wants you to inflate your tires.'' The Republican National Committee widely distributed tire pressure gauges labeled ''Obama energy plan'' and suggested that was the Illinois senator's only idea for reducing oil imports, although both candidates have offered multifaceted energy proposals.

Assorted

Urban congestion

China Quarterly Update, June 2008

A Simple Proposal to Make Exam Grading Easier

Mike Myers 'Love Guru' movie offends some Hindus

Barack Obama is a "choice architect" aiming to implement "libertarian paternalism

Chris Blattman's Links I Liked

Inside a 9/11 Mastermind’s Interrogation

Ten things for India to achieve its 2050 potential

In Turkey, Bitter Feud Has Roots in History

China’s One-Child Rule, Post-Earthquake

Pay For It: Radical Water Privatization for Poor Countries

Where Does the Money Go? Best and Worst Practices in Foreign Aid

Advice to impressionable young minds who want to change the world

Big Picture's LinkFest

The Perfect Siesta

Two Bubbles, Two Paths

A theory of military dictatorships

What Happens if We’re Wrong?;

The key word is “consequences.” I learned this lesson many years ago from studying Blaise Pascal, a French mathematical genius in the 17th century who spelled out the laws of probability more clearly than anyone before him. This was a thunderclap of an insight that, for the first time, gave humanity a systematic way of thinking about the future.

Pascal was both a gambler and a religious zealot. One day he asked himself how he would handle a bet on whether “God is or God is not.” Reason could not answer. But, he said, we can choose between acting as though God is or acting as though God is not.

Suppose we bet that God is, and we lead a life of virtue and abstinence, and then the day of reckoning comes and we discover that there is no God. Well, life was still tolerable even if less fun than we might have liked. Here, the consequences of being wrong would be acceptable to most people.

Suppose, however, we bet that God is not, and lead a life of lust and sin, and then it turns out that God is. Now being wrong has put us into big trouble.

RISK management, then, should be a process of dealing with the consequences of being wrong. Sometimes, these consequences are minimal — encountering rain after leaving home without an umbrella, for example. But betting the ranch on the assumption that home prices can only go up should tell you the consequences would be much more than minimal if home prices started to fall.

Stolper-Samuelson for the real world

"Canada's managers are under-achievers"

Nixonland: One, Two, or Many Americas?

The IMF as a reserve manager

Why Is Oil So High? Pick a View

Nothing Sells Like Celebrity

What if Adam Smith was right about poverty?

Steven Pinker: The evolutionary man

There is a better way to stop bank failures

Did the Iraq War Cause High Oil Prices?

Russian businesses fighting poverty in UK

Your Lawmakers at Work

The Same Old Song on High Gas Prices;

In one of the more pointed exchanges, Representative Maxine Waters, Democrat of California, seized on the record $40.6 billion profit of Exxon Mobil in 2007. She pounded on the company’s senior vice president, J. Stephen Simon, demanding to know if gas prices would be lower if the company earned a few billion dollars less.

At another point, Ms. Waters brazenly suggested that perhaps the American oil industry should be nationalized, acknowledging that it was an “extreme step” but one that might be necessary if outsize profits and exorbitant gasoline prices continued.

“Thank you for being here today,” Ms. Waters told the executives. “If you feel a little bit beaten up on, we all feel beaten up on, so just share the pain. We get our behinds kicked every day in our districts about what is going on.”

Guess the following oil producing country

The economy contracted during the first half of 2007. This was driven by a drop in oil production following a strong outturn in 2006, reflecting cutbacks to optimize oil field utilization as well as ongoing facilities maintenance. The government and private nonenergy sector, on the other hand, provided a positive impetus to growth benefiting from energy-related income spillovers.

Inflation is subdued and credit growth has only recently picked up. Inflation remains low at 0.1 percent (year-on-year) through the first nine months of 2007, partly due to price controls and declining prices on clothing and recreation. Credit growth rose by around 5 percent in the first half of 2007 following a contraction in 2006, reflecting base effects and more broad-based credit expansion. Although nonperforming loans (NPLs) in the banking sector remain high, these mostly relate to credit losses incurred in the late 1990s following financial problems in the corporate sector; provisioning appears broadly adequate and the generation of new NPLs is low. Moreover, local banks' capital adequacy ratios remain high at close to 20 percent.

High oil and gas prices continue to drive large fiscal and current account surpluses. As in the past, energy-related revenue windfalls are being largely saved and invested abroad. The primary fiscal surplus reached 21½ percent of GDP in FY2006/07 (April-March) as oil and gas revenues remained very high. The current account surplus reached 56 percent of GDP in 2006 for the most part reflecting high nominal energy exports.

Growth will remain weak in the near term, but recover over the medium-term. Output is projected to slow to around ½ percent in 2007 and decline fractionally in 2008 due to extensive oil sector facilities upgrading as well as the maturation of oil fields; nonenergy private growth is expected to remain solid. The main risk to the near-term outlook is a global slowdown leading to lower energy prices. Over the medium term, growth is expected to recover and reach around 3 percent as oil production returns to current levels, with new and upgraded facilities coming on stream, and government capital spending is stepped up with improved implementation. There are upside risks to this outlook related to possible new hydrocarbon discoveries.

Bryan Caplan on Fox

Welcome to a New World- Police guard rice fields and other development news

Simon Maxwell of the Overseas Development Institute, and Francis Moore-Lappe of the Small Planet Institute


Thai farmers guard rice harvests

The Darling of IFI's- Bhutan

Bhutan hopes to cash in on hydro-electric power


Fed-Up Money Treks to Bhutan to Grasp Gross National Happiness ;

Tshering Jamtsho uncoils the burgundy robe from around his chin and smiles as the first light of a Himalayan dawn streams through the casement chiseled into a stone-cold cell at the Pangrizampa Monastery.

Twigs crunch outside, a voice calls out from the dark and an apprentice enters the chamber gripping the ``Mopai.'' The ancient 250-page goatskin volume provides human calculators, called ``tsips,'' with intricate mathematical and astronomical formulas to compute a client's fate and fortune before birth, during life and in the afterlife.

``I am one of the 40 calculators,'' Jamtsho says over cups of the pungent yak-butter tea his predecessors began serving clients here in the Kingdom of Bhutan more than 1,500 years ago.

``What is your investment question?'' the 25-year-old financial analyst and Buddhist lama adds. ``Large numbers of Western businessmen come for our guidance.''

Last year, Jamtsho says, some 300 American and European bankers and businessmen made the grueling journey to Bhutan -- a country smaller than Switzerland, with 180 broadband subscribers, five elevators and less than 700,000 inhabitants -- to have the calculators of Pangrizampa use the hand-scripted Mopai as a financial forecasting tool.

``There's nothing extraordinary about this,'' says Tashi Yezer. He should know. Yezer is the chief executive officer of the Royal Securities Exchange of Bhutan Ltd., the country's stock market, where the trading bell only rings on Tuesdays and Fridays at 11 a.m. ``The exchange closes when our four stock brokers are done,'' Yezer says....

Bhutan now harvests only 2,000 megawatts, with plans to export 5,000 megawatts by 2020 and reach a capacity of 10,000 megawatts by 2028. ``We could have full capacity in a matter of years, if we followed the accepted market path,'' Dorji says, sitting beneath an embroidered tapestry of Buddha in the country's capital city, Thimphu, about 10 miles from the monastery...

``I intend to ultimately export Bhutanese bankers to New York and London and have them carry the philosophy of GNH as the model for corporate governance,'' Tshering says. ``The last thing I want is Western bankers coming here to modernize us with anything other than technology.''

Over at the stock exchange next door, the ground floor of a traditional Bhutanese timber building decorated with lotus flowers, clouds and phalluses to ward off hobgoblins, trading in the 16 listed companies has stopped and the combined market value holds firm at $25 million.

``We take a holistic approach to capital markets that's missing in the West,'' Yezer says, focusing on the nearby mandala, a geometric pattern that represents the universe. ``Buddhism isn't a religion or an excuse for how we do business, but it is based around a basic economic fact: What goes around, comes around. We call it karma.''

Technology trap in Africa- World Bank

Technology trap and poverty trap in Sub-Saharan Africa;

Summary: Since the industrial revolution, advances in science and technology have continuously accounted for most of the growth and wealth accumulation in leading industrialized economies. In recent years, the contribution of technological progress to growth and welfare improvement has increased even further, especially with the globalization process which has been characterized by exponential growth in exports of manufactured goods. This paper establishes the existence of a technology trap in Sub-Saharan Africa. It shows that the widening income and welfare gap between Sub-Saharan Africa and the rest of world is largely accounted for by the technology trap responsible for the poverty trap. This result is supported by empirical evidence which suggests that if countries in Sub-Saharan Africa were using the same level of technology enjoyed by industrialized countries income levels in Sub-Saharan Africa would be significantly higher. The result is robust, even after controlling for institutional, macroeconomic instability and volatility factors. Consistent with standard one-sector neoclassical growth models, this suggests that uniform convergence to a worldwide technology frontier may lead to income convergence in the spherical space. Overcoming the technology trap in Sub-Saharan Africa may therefore be essential to achieving the Millennium Development Goals and evolving toward global convergence in the process of economic development.

Related;
New Limits to Growth Revive Malthusian Fears


State of Planet '08

Jeff Sachs on water policy

Follow the Oil Money

Follow the Oil Money is an interactive tool that tracks the flow of oil money in US politics.

Winning the War on Terror by Breaking Free of Oil?

"Energy Victory: Winning the War on Terror by Breaking Free of Oil," by Robert Zubrin

Mr. Caruso goes to the World Bank

A recent event from the World Bank on oil price volatility;

Arvind Gupta, Lead Financial Sector Specialist at the World Bank, introduced the main speaker, Guy Caruso, noting the many different perspectives Caruso brings to the topic of oil price volatility. Caruso, an Administrator in the Energy Information Administration (EIA) of the United States Energy Department, stated that the EIA periodically publishes reports on the subject on the state of the world oil market and provides analysis for hypothetical policy scenarios.

Caruso talked about the main drivers behind the prices of oil, stating that this is still explained by the fundamental principles of supply, demand, inventories, and productive capacity. He also cited the decisions made by the Organization of Petroleum Exporting Countries (OPEC) last year to reduce oil production as a factor that will continue to influence the market through 2008. Caruso noted the recent uncertainty about oil supply and demand due to geopolitical events, unprecedented global economic growth in the last 4 or 5 years, and even extreme weather events. In the short term, he said, these factors will ensure that oil prices stay high.

Caruso went on to cite the most recent report produced by the EIA, which indicates that in the coming years, there is a strong likelihood that prices will come down slightly. However he acknowledged that the present volatility of the market may lead to variations in these predictions. Caruso returned to the subject of OPEC, noting the reduction of the production of oil in 2006. In the last few months he explained, this production is again rising to meet growing demand.

Caruso pointed out that another fundamental driver of world oil prices in the last five years is the sharp reduction in spare productive capacity as a result of strong growth in the global economy, particularly in China. This, he said, has limited the ability of the world market to react to changes in supply or demand. The fact that spare productive capacity is now increasing might be one of the factors leading to a small decline in oil prices in the coming months. Caruso also explained the impact of the weakness of the US dollar. This, he said, is creating a widening gap in the price of oil for those who are paying with the stronger currencies relative to the dollar based countries.

Caruso noted the multiple sources of uncertainty in the world oil market, particularly the tensions with Iran and Venezuela and the state of the US economy. He also mentioned that while the continued inflow of money from hedge funds perhaps plays a role in the volatility, he does not believe it to be the main driver of prices. Caruso concluded by explaining the different projections outlined in the latest EIA report, pointing out that all the information is available to the public online.

In the question and answer session, audience members asked about what the prices in graphs meant in real terms, about the motivation behind OPEC’s interest in keeping prices of oil high, how prediction scenarios are estimated, and whether there are underlying assumptions of existing reserves in these predictions.

Related;
Michael Lewis, an analyst at Deutsche Bank AG, - about factors driving energy and food prices, the dollar's performance and his investment strategy in commodities (podcast)

The Economist commodity-price index

Why are commodity prices rising so fast?

Commodity prices (wonkish)

Falling Interest Rates Explain Rising Commodity Prices

Explainer of the Day

Falling Interest Rates Explain Rising Commodity Prices

Recent Videos from World Bank

OIL PRICE VOLATILITY, ECONOMIC IMPACTS, AND FINANCIAL MANAGEMENT: RISK-MANAGEMENT EXPERIENCE, BEST PRACTICE, AND OUTLOOK

CHINA, EXTRACTIVE INDUSTRIES, AND AFRICA

Oil Price Volatility and related

An upcoming conference from the World Bank;

Oil Price Volatility, Economic Impacts, and Financial Management: Risk-Management Experience, Best Practice, and Outlook

Co-sponsored with George Washington Univeristy- it is good to be located near the World Bank, you get lot of business.

Another Ethanol Fact of the Day

According to recent calculations, if oil prices fall back down to $40 per barrel, the implied tax paid by consumers because of ethanol mandates will be over $15 billion.

via Steven Levitt

Synthetic life- the future has arrived

Craig Venter: On the verge of creating synthetic life


State of the Art on Bio-Hacking


Related;
Top 10 New Organisms of 2007

This Weekend, Start Building a New Life Form

Bio Hacking Resources

Biological Engineering courses online- MIT

Introduction to Bioengineering- Video lectures

A cool graphic

Oil Prices Reach a Symbolic Mark