Bush to Arab nations: You're running out of oil

PRESIDENT George Bush yesterday told leaders of the oil-rich states of the Middle East that they must face up to a future without their precious hydrocarbons.

In a stark warning, he said their supplies were running out and urged them to reform and diversify their economies. The outgoing United States president told the World Economic Forum, meeting in the Egyptian resort of Sharm el-Sheikh, that it was time to "prepare for the economic changes ahead".

Mr Bush's family name is inextricably linked to the oil industry, and this was his strongest statement yet on the future of global supplies.

He told the conference: "The rising price of oil has brought great wealth to some in this region, but the supply of oil is limited, and nations like mine are aggressively developing alternatives to oil.

"Over time, as the world becomes less dependent on oil, nations in the Middle East will have to build more diverse and more dynamic economies."

Mr Bush also used his speech to call for more investment in people and "extending the reach of freedom", as well as urging other nations to prevent Iran from obtaining nuclear weapons, and to isolate Syria.

He particularly mentioned women's rights, saying they were key to building powerful economies. He cited Egypt as a model for the development of professional women, girls going to school in Afghanistan and women joining political parties in Iraq and Kuwait.

In an apparent criticism aimed at Saudi Arabia, he told the forum: "This is a matter of morality and of basic math. No nation that cuts off half its population from opportunities will be as productive or prosperous as it could be. Women are a formidable force, as I have seen in my own family and my own administration. As the nations of the Middle East open up their laws and their societies to women, they are learning the same thing."

The president's speech was made only days after he urged Saudi Arabia to increase oil production to ease prices at the pumps, as millions around the globe face increasing costs of filling up and even more grapple with rising food bills.

The future of Scotland's own North Sea oil supply is an issue for both politicians and consumers, who were given a taste of limited fuel shortages during the Grangemouth refinery dispute.

The US has turned dramatically towards biofuels, with Congress raising the federal requirement for using the oil alternative from 6.5 billion gallons last year to nine billion gallons this year. As a consequence, about a quarter of the American corn crop was used for biofuels last year, driving up the price of corn and, hence, also the price of food for millions of families.

Predictions of when the world's oil supplies will fall below global demand range from as early as the next decade, to as late as 2050. Mr Bush has been criticised throughout his term in office for not encouraging more energy alternatives in the US, and for allowing controversial drilling explorations for new fossil-fuel supplies in often environment-ally sensitive areas, such as Alaska.

Analysts warned last night that few in the Middle East, which has two-thirds of the world's oil reserves, are likely to heed Mr Bush. Many have already started diversifying their economies and do not like being preached to by someone so unpopular in the region.

Gerald Butt, editor of the authoritative Middle East Economic Survey, said: "The Gulf states have been trying to diversify their economies away from oil for years, so they'll say, 'This is like teaching your grandmother to suck eggs'.

"Arab states don't like being told what to do by outsiders, and especially by America, whose standing in the region is very low. Bush's comments will be dismissed as unwarranted interference."

Although he praised parts of the Arab world, commentators said Mr Bush had angered many with a speech at the Israel parliament last Thursday, in which he offered unflinching support for the Jewish state but mentioned the Palestinian dream of statehood only once.

Walid Khadduri, a Beirut-based consultant, pointed out that the Gulf states had already been investing windfall profits from high oil prices in major infrastructure projects, including education and housing, and in diversifying their industrial bases.

He said: "Bush's credibility is zero anyway. I really don't know anyone who follows what he says, especially after what has happened in Iraq and then his Knesset speech the other day."

The knock-on effect of rising fuel costs has led to increasing food prices and subsequent riots around the globe, as high prices hit some of the world's poorest.

There is now a desperate attempt to find oil from alternative sources to keep the supply flowing.

Potential sources in Canada would cost almost three times as much to produce as conventional crude oil because they have to be extracted from tar sands. Although the supply, in Alberta, is estimated to be second in size only to Saudi Arabian reserves, the production costs are unlikely to offer much relief for consumers.

While the Bush presidency has tried to reduce its dependence on foreign oil, it has yet to decrease fuel use, say critics.

While the UK produces about 0.3 per cent of the world's supply of oil and uses about 2 per cent, the US produces 2.5 per cent but uses 24 per cent.

Family dynasty is soaked in black gold

BOTH George H Bush and George W Bush will be remembered almost as much for their connections to oil as to the presidency.

Bush Snr owes his fortune to Texas crude, while his son also took posts in the industry before following in his father's footsteps into politics.

Commentators have accused Bush jnr's drive to war in Iraq as merely a quest for oil, with potentially billions of dollars in profit to be made from opening up the country's oil reserves – if Iraq was ever stable.

George Bush Snr, who was president from 1989 to 1993, became a millionaire off the oil industry by the age of 40 in Texas. He started the Bush-Overby Oil Development company in 1951 and co-founded the Zapata Petroleum Corporation two years later. He served as the firm's president from 1954 to 1964. He then entered politics.

After gaining an MBA from Harvard University, Bush Jnr worked in the family oil businesses.

He became a senior partner and chief executive officer of Arbusto Energy, Spectrum 7 and Harken Energy.

Arbusto Energy obtained financing early on from James Bath, a close Bush family friend and in 1979 the sole US business representative of Salem bin Laden, head of the wealthy Saudi family and brother of Osama bin Laden.

Don't expect high prices and shortages of petrol to improve in the short term

ANALYSIS: George Kerevan

HOW close are we to "peak oil", when the world's oil supplies will start to diminish? Petroleum output has shot up by a nearly third since the early 1990s to around 83 million barrels per day, suggesting we are able to squeeze more production when necessary.

But the International Energy Agency predicts oil demand will double between now and 2030 as a result of rising car use in countries such as China. As no major oil fields – those with over 500 million barrels – have been discovered for a generation, this rising demand will be very difficult to meet.

One source will be in small oil fields of the kind being hunted by Scottish companies such as Cairn Energy. Such fields are expensive to find and costly to tap due to the huge infrastructure required. The fact that oil has shot up to $128 (65) a barrel – the highest ever even taking account of inflation – might make this possible.

But it is unlikely there will be a serious increase in global output for around a decade given the time it takes to build pipelines and tanker terminals. So expect high petrol prices (and shortages) to remain for the near term. Even then, this is likely to be the last surge in oil output and we will reach peak oil by 2030, if not before.

Another source of oil lies in the vast tar sands of Canada. But extracting useable oil from tar involves a vastly expensive industrial process which also results in big emissions.

It is possible to squeeze extra oil from older fields such as the North Sea. This is done by pumping water (or ) into the wells to blow out more oil. But this destroys the sponge-like membranes which contain the petroleum, meaning you get more oil out in the short term but less in the longer term.

Gordon Brown wants Opec to pump more oil to bring down prices. But experts suspect that the size of Opec reserves (80 years at current consumption) have been greatly exaggerated by local politicians. If so, peak oil could be here sooner than we think – some predict as early as 2012.

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