A collection of articles on Oil, The Economist

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[FONT=verdana,geneva,arial,sans serif][SIZE=-1]“WE’RE not running out of hydrocarbons,” insists Tony Hayward, the boss of BP, one of the world’s biggest listed oil firms. To back up this view, he cites various comforting figures from the latest edition of the firm’s “Statistical Review of World Energy”, released on Wednesday June 11th. Enough oil has already been discovered around the world, Mr Hayward says, to maintain consumption at current levels for another 42 years. As he recently put it, humanity has guzzled through 1 trillion barrels, but has its next trillion already lined up, and could probably unearth a third trillion if it really applied itself. Why then, are oil prices hovering over $130 a barrel?[/SIZE][/FONT]

[FONT=verdana,geneva,arial,sans serif][SIZE=-1]Mr Hayward blames poor policy-making or, in his florid phrase, “the madness of men”. Some 80% of the world’s oil reserves, he says, are in the hands of state-owned oil firms, which tend to allow firms like his only limited access. He believes that if these riches were fully exploited, the world could easily produce 100m barrels a day (b/d) or more. That’s a big increase on last year’s figure of 82m b/d, and a level that other oilmen, such as the boss of Total, another big Western firm, think impossible.[/SIZE][/FONT]

[FONT=verdana,geneva,arial,sans serif][SIZE=-1]At first glance, BP’s own data seem to support the gloomier case. The firm reckons that global output fell by 130,000-odd b/d last year. Worse, proven reserves also fell, by about 1.6 billion barrels. This suggests that the world is consuming oil faster than it can be found—a worrying thought, even if reserves are large.[/SIZE][/FONT]

[FONT=verdana,geneva,arial,sans serif][SIZE=-1]But Christof Rühl, one of the report’s authors, points out that data on reserves are slow to appear. For several countries, BP had to make do with last year’s numbers. When the updated figures are in, he expects they will actually add up to an increase. Global reserves have risen by 36% since 1987.[/SIZE][/FONT]
[FONT=verdana,geneva,arial,sans serif][SIZE=-1]As for output, Mr Rühl breaks last year’s decline into involuntary and deliberate portions. There are countries, such as Mexico and Norway, whose output is in inevitable decline. Others, such as Nigeria, saw declines brought on by political unrest. But by far the most precipitous drop last year took place in Saudi Arabia. Some argue that it too is testing the limits of geology’s bounty. But ostensibly, at any rate, the production cuts were intentional.[/SIZE][/FONT]

[FONT=verdana,geneva,arial,sans serif][SIZE=-1]Early last year OPEC was worried about rising stocks and falling prices. It resolved to trim its output, and Saudi Arabia did most of the trimming. Mr Rühl, for one, believes that it could raise its output again if it wanted.[/SIZE][/FONT]

[FONT=verdana,geneva,arial,sans serif][SIZE=-1]In terms of consumption, too, BP reports a mixed picture. Demand for oil in rich countries fell by almost 1% last year—the biggest decline since 1983. But in poorer ones, it grew by over 4%, partly because developing economies are growing faster than those of the rich world. But subsidies for fuel consumption also play a big part. According to Mr Rühl, consumption is falling in countries with heavy taxes and rising only sluggishly where taxes are moderate. But in countries with subsidies, it is rising faster than normal, and fastest of all in the countries with the highest subsidies.[/SIZE][/FONT]

[FONT=verdana,geneva,arial,sans serif][SIZE=-1]In other words, the root of the high oil price in BP’s view is not a mismatch between strong demand and feeble supply, but failure on the part of various governments to allow markets to work their magic. There are hints of an improvement on the demand side: several Asian governments have recently decided they can no longer afford subsidies. But it is hard to imagine the world’s ardent energy nationalists suddenly throwing their doors open to foreign investment.[/SIZE][/FONT]

[FONT=verdana,geneva,arial,sans serif][SIZE=-1]That obliges the likes of BP to concentrate on marginal projects, either in difficult surroundings (the Arctic or deep water, for example), or with trickier forms of oil (such as tar sands). The development of such fields has been hampered of late because of a shortage of qualified engineers and suitable equipment. The traders who have been driving up the oil price believe that these bottlenecks will prevent global output from keeping pace with the developing world’s thirst for oil. For the past few years, BP’s number-crunching suggests, they have been right. But by the firm’s own admission, its statistics, although illuminating about the past, are no guide to the future.[/SIZE][/FONT]

 

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An oil saviour?
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May 27th 2008
From The Economist Intelligence Unit ViewsWire
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[FONT=verdana,geneva,arial,sans serif][SIZE=-1]Iraq has the potential to supply much more oil[/SIZE][/FONT]

[FONT=verdana,geneva,arial,sans serif][SIZE=-1]The growing concerns in the world energy market about the risks of a supply crunch have been a critical factor behind the recent surge in oil prices to a new record of US$135/barrel. Speculators are betting huge sums on the assumption that the oil market (and other primary energy markets) will remain tight for many years to come, owing to the inelasticity of demand and to the constraints on long-term supply. Saudi Arabia, the world's largest oil exporter, is doing its bit to allay these concerns, but has acknowledged that once its current crop of oilfield projects is complete in around 2013, there will be little scope for further capacity increases. Similar strains are evident in most of the other major oil-producing countries. One significant exception is Iraq, which holds (at least) 10% of the world's proven reserves, but accounts for only 2.5% of total production. Iraq has the potential to furnish a long-term solution to the oil market's long-term supply problem, but it will need to improve dramatically on its recent performance before buyers of oil futures will be convinced that it can deliver.[/SIZE][/FONT]


[FONT=verdana, geneva, arial, sans serif]All about oil[/FONT]
[FONT=verdana,geneva,arial,sans serif][SIZE=-1]If history had been kinder, Iraq could now be producing at a comparable level to Saudi Arabia. Instead, three wars, 13 years of sanctions and five years of internal conflict have eroded Iraq's oil infrastructure and human capital. However, Iraq also has a history of recovery. Production peaked at over 3.5m barrels/day (b/d) in 1980 on the eve of the Iran-Iraq war, but then averaged less than half that level during the eight-year war. It had nearly recovered to 3.5m b/d in 1990, after which the invasion of Kuwait and the subsequent UN sanctions severely limited exports, and hence production. In the five years before the US-led invasion of 2003, the sanctions regime gradually permitted greater exports, and production was often above 2.5m b/d. However, it fluctuated considerably due to the impact of years of underinvestment, restrictions on the import of spare parts and isolation from the international oil industry.[/SIZE][/FONT]
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[FONT=verdana,geneva,arial,sans serif][SIZE=-1]This volatility in production has continued in post-Saddam Iraq, although the average level has usually been below 2m b/d, and only exceeded the immediate pre-war level of 2.3m b/d for the first time at the end of 2007. Operations have been frequently disrupted by events ranging from the bombing of pipelines to the murder of oil workers. Moreover, the competition between political factions for influence at every level in the industry—as well as widespread corruption—has not provided suitable conditions for a revival of the industry. There is even concern that damage may have been caused to some fields in order to maintain production at modest levels.[/SIZE][/FONT]
[FONT=verdana,geneva,arial,sans serif][SIZE=-1]Things may be changing. Iraq's deputy prime minister, Barham Salih, said in April that Iraq's total reserves, could be as high as 350bn barrels, triple the 115bn that has been its officially stated level for many years. The figure is aspirational and should be treated carefully but, given that there has been barely any new exploration of Iraq's promising geology in 30 years, an upward revision of the official reserves figure seems long overdue. This underlines Iraq's uniquely large reserves-to-production (RP) ratio, which was already the world's highest and, based on Mr Salih's estimate and at the expected production level of 2.3m b/d in 2008, would stand at a remarkable 415 years (compared with a world average of about 40 years). If Iraq were able to achieve the average Middle East RP-ratio of 80 years then it would be pumping 4m b/d based on the current reserves, and 12m b/d based on Salih's aspirational estimate. Getting there would take some time, around five years for 4m b/d and probably more than 20 years for the most optimistic level. It would also require Iraq to achieve a sufficient degree of stability. However, if there are promising signs of progress over the next 18 months, then it might be enough to mitigate fears of shortages next decade and dampen the futures market.[/SIZE][/FONT]


[FONT=verdana, geneva, arial, sans serif]Fair share[/FONT]
[FONT=verdana,geneva,arial,sans serif][SIZE=-1]The issue on which everything hinges is the basis on which Iraq's oil will be developed. Although at its height in the 1970s, Iraq's national oil industry would have had the capacity to implement a significant part of the exploration and development needed, it has been severely eroded since then. Therefore, it is widely recognised that foreign expertise will be needed, but Iraqis are split on two important issues which have so far held back progress. The first is whether the development and operation of the oil sector will be managed entirely from Baghdad or also at a regional level, particularly in the Kurdish region. The second is the terms under which international oil companies (IOCs) will be invited to participate. In particular, the idea of production-sharing contracts (PSCs) has aroused such considerable opposition—from parliamentarians and oil workers' unions who believe that Iraq should fund the development itself (particularly now that there is a large budget surplus)—that the government has apparently backtracked. These controversies have blocked the ratification in parliament of a national hydrocarbons law which was first approved by the cabinet in February 2007. Although no draft has so far emerged that elicits a majority of support, it may yet pass this summer as part of a bundle of laws.[/SIZE][/FONT]


[FONT=verdana, geneva, arial, sans serif]Stop-gaps[/FONT]
[FONT=verdana,geneva,arial,sans serif][SIZE=-1]In the meantime, the oil minister, Hussein Shahristani, announced plans in January for a series of two-year technical service agreements to upgrade five existing fields by 100,000 b/d each. This is a relatively uncontroversial first step, simply paying IOCs for their services without granting them any claims on revenues or reserves—but none of the contracts have yet been finalised. Then, in mid-April, Iraq released a long-delayed list of 35 IOCs initially approved to bid for more substantial long-term contracts covering exploration, development and production. Theoretically, bidding on the first round of contracts could be complete by the end of the year, and if Iraq—or at least the regions containing the respective oil fields—is sufficiently stable, then work could begin soon afterwards. However, there is a significant risk that this timeline could slip due to bureaucracy and possibly to political shifts following the provincial elections in October.[/SIZE][/FONT]


[FONT=verdana, geneva, arial, sans serif]Kurdish exception[/FONT]
[FONT=verdana,geneva,arial,sans serif][SIZE=-1]In contrast to delays at the national level, there has been a great deal of activity in the Iraqi Kurdistan region. The Iraqi Kurds had long felt that their region had been deliberately deprived of an oil industry by successive governments in Baghdad, and therefore pressed ahead with development in their essentially autonomous region. The Kurdistan Regional Government (KRG) began drawing in IOCs both because it had little capacity itself and also to provide some international leverage in the inevitable confrontation with Baghdad. Given their weak position and limited finances, the KRG has been happy to sign PSCs, and the first oil well was drilled by Norwegian company DNO in 2006 and now produces about 7,000 b/d. It has signed PSCs with other IOCs including Canada's Western Oil Sands, the UK's Sterling Energy and most recently with Niko Resources of Canada in May. Also, in frustration at the failure to agree a national hydrocarbons law, the KRG passed its own in August 2007. Until now most oil majors have avoided the KRG because of the potential backlash from Baghdad, demonstrated by the fact that companies such as the Korea National Oil Corp that have signed contracts with the Kurds were explicitly excluded from the list of 35 approved IOCs.[/SIZE][/FONT]


[FONT=verdana, geneva, arial, sans serif]Hurdles[/FONT]
[FONT=verdana,geneva,arial,sans serif][SIZE=-1]Although there is some way to go, 2008 may be seen as the year in which Iraq's oil industry began to recover and, when the markets recognise this, it may take some of the edge off the oil price. However, given Iraq's history of dashed expectations, it would be unwise to factor major production increases into oil supply projections until Iraq has passed a series of important tests. One of these is whether the Iraqi army will be able to maintain security as the US draws down its troops. Another is whether the rival Shia movements led by Muqtada al-Sadr and Abdel-Aziz al Hakim can make the transition from street fighting to purely political competition—an issue that will probably not be resolved until the next general election in December 2009. Finally, the KRG and the rest of Iraq will need to conclude that it is worth reaching a compromise on Kirkuk (the disputed northern province that contains Iraq's largest oilfield) and regional autonomy in order to share in the benefits that a major expansion in the oil industry will bring.[/SIZE][/FONT]

 

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Long delays for Iran's LNG projects

[FONT=verdana,geneva,arial,sans serif][SIZE=-1]The indications that Shell and, most likely, Total will not meet Iran's mid-June deadline for them to commit themselves to going ahead with their long-standing liquefied natural gas (LNG) projects reflect both the difficulties of doing business in sanctions-hit Iran and the broader problem of escalating global costs of energy schemes of this sort. Major oil and gas projects are indeed stalled in Iran, but progress is also painfully slow elsewhere; according to Petroleum Economist, an industry magazine, only four LNG projects have attained "final investment decisions" over the past 18 months (in Peru, Australia, Algeria and Angola), and all of these have also faced long delays.[/SIZE][/FONT]


[FONT=verdana, geneva, arial, sans serif]Shell on the bench[/FONT]
[FONT=verdana,geneva,arial,sans serif][SIZE=-1]In response to reports that it had pulled out of its LNG project, which entailed integrating the development of Phase 13 of Iran's South Pars gasfield with a liquefaction plant and marketing strategy, Shell issued a statement suggesting a more nuanced picture. Shell said that it had "agreed the principle of substitution of alternative later phases for the Persian LNG project so that the National Iranian Oil Company (NIOC) can proceed with the immediate development of Phase 13". This statement suggests that the two sides have agreed that the development of Phase 13 should not be delayed any longer owing to the difficulty of agreeing final commercial terms for building the LNG plant for which the gas from this phase has been designated. At the same time, Iran seems to be concerned to keep open the option of enlisting Shell's technical and marketing know-how and financial input for an LNG project linked to a future phase of South Pars.[/SIZE][/FONT]
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[FONT=verdana,geneva,arial,sans serif][SIZE=-1]The South Pars reservoir is an extension of Qatar's North Field, which the Gulf Arab state has tapped for a series of LNG projects, enabling it to become the world's largest supplier of gas in this form (cooled to minus 162 degrees Celsius and transported by tanker to terminals where it is turned back into gas). Iran has divided South Pars into 25 phases, each involving the production of about 1bn cu ft/day of natural gas (roughly equivalent to 10bn cu metres/year). The first to be brought on stream was Total's Phase 2, in 2002. The first five phase are now operational, and the government expects the next three (6, 7 and 8, being developed with StatoilHydro) to reach full production by mid-2009, some two years behind schedule. Phases 9 and 10, being undertaken by South Korean contractors, are also getting close to completion, and Iranian companies are working on Phases 15 to 18.[/SIZE][/FONT]
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[FONT=verdana,geneva,arial,sans serif][SIZE=-1]Most of the South Pars phases have been dedicated to supply gas to Iran's domestic market, including power stations, home heating and petrochemicals, as well as for re-injection into oilfields in order to sustain or enhance crude production. The exceptions were Phases 11-14, which were designated for export as LNG or gas-to-liquids (GTL). Total has signed preliminary agreements for Phase 11, Shell (with Repsol) has been discussing Phase 13 (and some elements of Phase 14), and NIOC is working on Phase 12.[/SIZE][/FONT]


[FONT=verdana, geneva, arial, sans serif]Fine print[/FONT]
[FONT=verdana,geneva,arial,sans serif][SIZE=-1]Both Shell and Total have continued negotiating with Iran about their respective projects despite the growing clamour in the US about Western investment in the Iranian energy sector. Shell maintains that it has made relatively good progress with the upstream part of its project, but it concedes that it has proved to be more difficult to reach agreement on the contractual details of the LNG elements. This is likely to be the result of a combination of factors relating both to the increased difficulty of financing projects in Iran and securing the appropriate technology inputs, and to the problem of managing costs.[/SIZE][/FONT]

[FONT=verdana,geneva,arial,sans serif][SIZE=-1]Iran, for its part, is keen to move ahead with the next phases of South Pars to fulfil its growing domestic needs and to enable it to canvass a number of export options, including pipelines to Turkey and to gas-hungry Gulf Arab states such as the United Arab Emirates, Kuwait and Oman. Another important consideration for Iran is the fact that Phase 13 runs along the maritime border with Qatar, and is thus liable to be affected by the intensive activity in the North Field.[/SIZE][/FONT]

[FONT=verdana,geneva,arial,sans serif][SIZE=-1]The announcement from Shell has provided some insights into the challenges that Iran and its foreign partners face in getting an LNG industry off the ground. However, it also indicates that both parties remain committed to surmounting the obstacles to turning that aspiration into a reality.[/SIZE][/FONT]

 

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[FONT=verdana,geneva,arial,sans serif][SIZE=-1]THE price of oil may soon hit $200 a barrel—or so, at any rate, believes Shokri Ghanem, Libya’s oil minister. A few years ago such a prediction would have seemed absurd. But the price has doubled in the past year and has risen by 40% this year alone. It touched yet another record, of over $135 a barrel (before dipping slightly) on Thursday 22nd May. So more spectacular increases seem all too plausible.[/SIZE][/FONT]
[FONT=verdana,geneva,arial,sans serif][SIZE=-1]The immediate trigger for the latest jump seems to have been an unexpected fall in American oil inventories. But stocks, although falling, are not particularly low: in America, they are only slightly below the average of the past five years. Supplies of petrol and other refined fuels are actually a little above average. And since demand for oil and petrol are falling in America, lower stocks are not as much of a worry as they might normally be.[/SIZE][/FONT]

[FONT=verdana,geneva,arial,sans serif][SIZE=-1]Mr Ghanem’s explanation for this curious state of affairs is to blame speculators, who are investing ever more enthusiastically in oil futures. Many others share his view. Joe Lieberman, an American senator, points out that the value of investment funds that aim to track the price of oil and other raw materials has risen from $13 billion to $260 billion over the past five years. He blames these “index speculators”, for a big part of the commodity-price increases. He and his colleagues in the Senate are so worried that they are contemplating measures to curb the traders’ exuberance.[/SIZE][/FONT]

[FONT=verdana,geneva,arial,sans serif][SIZE=-1]Yet few bankers agree that speculation has much to do with price rises. For one thing, indexed funds do not actually buy any physical oil, since it is bulky and expensive to store. Instead they buy contracts for future delivery, a few months hence. When the delivery date approaches, they sell their contract to someone who actually needs the oil right away, and then invest the proceeds in more futures. So far from holding oil back from the market, they tend to be big sellers of oil for immediate delivery. [/SIZE][/FONT]
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[FONT=verdana,geneva,arial,sans serif][SIZE=-1]That is important because it means that there is no hoarding, typically a prerequisite for a speculative bubble. Indeed, as discussed, America’s stocks and those of most other countries are at normal levels. If the indexed funds were indeed pushing the price of oil beyond the level justified by supply and demand, then they would be having trouble selling their futures contracts at such high prices before they matured. But there is no sign of that. In fact, until recently, oil for immediate delivery was more expensive than futures contracts. [/SIZE][/FONT]
[FONT=verdana,geneva,arial,sans serif][SIZE=-1]Economic theory suggests that the future price is simply traders’ best guess of the shape of things to come. And traders seem to be very worried about the future. They recently pushed up the price of oil to be delivered at the end of 2016 to over $145 a barrel.[/SIZE][/FONT]

[FONT=verdana,geneva,arial,sans serif][SIZE=-1]They seem to be motivated by the sobering realities of supply and demand, rather than reckless speculation. The output of several big oil exporters, such as Russia, Mexico and Venezuela, is declining. Yet none of those countries allows foreign investors unfettered access to develop new fields or increase production from existing ones. Many of the most promising areas for exploration, including Saudi Arabia, Iraq and Iran, are in effect off-limits to Western oil firms. Worse, the cost of developing new fields is rising almost as fast as the oil price. Cambridge Energy Research Associates, a consulting firm, believes it has more than doubled since 2000.[/SIZE][/FONT]
[FONT=verdana,geneva,arial,sans serif][SIZE=-1]All this means that global oil production is growing only slowly. Global demand, meanwhile, continues to rise, thanks to an ever-increasing thirst for oil in fast-growing developing countries such as China and India. Their increased consumption is more than compensating for falling demand for oil in rich countries. In other words, the investors that Messrs Lieberman and Ghanem accuse of unfounded speculation may instead have concluded that the world will be short of oil for some time to come. Instead of hectoring speculators, perhaps Mr Lieberman should be hounding Mr Ghanem and the leaders of other oil-rich countries to allow foreign oil firms more access.[/SIZE][/FONT]

 

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Now consider Franklin Roosevelt's first Inaugural Address, a portion of which I repost for your review.

This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days.

In such a spirit on my part and on yours we face our common difficulties. They concern, thank God, only material things. Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone.

More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment.

Yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it. Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because the rulers of the exchange of mankind’s goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men. ... They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.

The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.
Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men. Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance; without them it cannot live.

 

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......

 

[contrail67]

Is this all you have to do with yourself???

Like we cannot read any of this in the news...

 

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The US News seems to feed fear. Looking for balance.

 

[Jmoney]

Yep-

I agree-we are nowhere NEAR running out of any hydrocarbon products. This market has just worked itself into a frenzy-over absolutely nothing!

On thing that is a little different this time, though:de-regulated futures markets in the U.S. You now don't have to be a broker-you don't have to hold a seat, anyone anywhere can trade oil futures over-the-counter in the U.S market.

The significance here is that this allows collusion. Let's say you are a huge institutional investor and you want to practically guarantee a 3% rate of return in a day. All you have to do is find another equally huge investor to agree to buy say $50 billion in futures for 1 dollar more than you paid. You can then agree to turn around and do exactly the same thing for this other investor. Do this a few times in a day, you will both make huge returns-and with amounts of this size and you will reliably move the market.

I don't doubt that tihs is going on-and I certainly don't doubt that it is moving the market. The problem is that this lack of oversight has the potential to really destory the economy. This market has only been de-regulated tihs way for a few yers. This scenario used to be impossible.

Americans really tend to stick our heads in the sand until the problem really becomes too severe to ignore. This kind of runaway investment must be delt with decisively before it completely wrecks our world. It is a shame that we live in a country full of economic illiterates who have not the slightest clue what damage this can do.

 

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J Money:

I think you are correct and even further, entities called "Soveriegn Wealth Funds" are heavy in the commodities market. We are not talking regular investors, or hedge funds, but foreign governments playing with the funds of their central banks. Countries like Iran, Russia, China and Venezuela.

The volume of trades in the NY Merchantile Exchange has tripled since 2004. We do know oil index funds have risen from 13 billion to 260 Billion from then to now. That is probably just the tip of the iceberg.

I agree that the commodities market is ripe for supervision. But I think there are structural issues as well.

China has increased its oil reserves by 50% for the demand anticipated by the Olympics and has shifted coal plants to run on oil in a last ditch effort to clear their sooty skies before the World comes to visit.