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Which is why the news that BAE Systems has delivered a functional, 32-megajoule Electro-Magnetic Laboratory Rail Gun (32-MJ LRG) to the U.S. Naval Surface Warfare Center in Dahlgren, Va., is exciting. Installation of the laboratory launcher is currently under way, and according to BAE, this is the first step toward the Navy’s goal of developing a tactical 64-megajoule ship-mounted weapon.

Globalisation – in particular the rise of China and India – is driving a lot of these changes. The world oil price has risen by 80 per cent over the past 12 months and – since 2001 – China alone has accounted for about 40 per cent of the increase in oil demand. Global food prices have gone up by about 50 per cent this year. There are short-term reasons for this, such as a drought in Australia and pig disease in China. But the biggest long-term driver of increased prices is growing wealth in China and India.

Urbanisation and industrialisation are both increasing demand for water, at a time when climate change is disrupting supply. The rains in China are moving north and becoming more intense. The level of the Yangtse river is falling. Other important rivers around the world are suffering in the same way: the Murray in Australia, the Colorado in the US, the Tagus in Spain and Portugal. Businessmen can see the problem growing. Andrew Liveris, chairman of Dow Chemical told the Davos meeting that: “Water is … the oil of the 21st century.”

The food, energy and water problems all touch on each other. America’s pursuit of alternatives to oil has led to massive investment in biofuels made from maize. That in turn has cut the amount of maize being used for food production and so contributed to rising food prices. The production of biofuels is also very water-intensive. Meanwhile, increased demand for agricultural land to grow more food is leading to the clearing of forest in Brazil – which could worsen global warming – leading to further stress on the world’s water supplies.

The potential for political conflicts increases along with the rise in food, energy and water prices. Ban Ki-Moon, the United Nations secretary-general, told the Davos meeting that water shortages had helped to cause the conflict in Darfur.

Jami Miscik, head of global sovereign risk at Lehman Brothers, points to a series of less dramatic events, which highlight the political strains caused by rising food and energy prices: riots in Mexico last summer, after sharp increases in the price of maize flour; mass protests in Indonesia this month, provoked by the rising price of soyabeans; a deadly stampede in western China last November, caused by a rush for subsidised cooking oil; a food-price freeze in Russia, introduced just ahead of the parliamentary elections in December; gas and petrol rationing in Iran; blackouts in Argentina and South Africa.

This month Hugo Chávez, the president of Venezuela, raised milk prices by 37 per cent and threatened military intervention and nationalisation if food producers did not sell more to the government.

All of these examples are confined within national boundaries. But competition for food, water and energy could also provoke conflict between countries. One session at Davos was devoted to the prospect of drilling for oil and gas in the Arctic. It heard that military activity in the area is increasing, as eight rival countries – including Russia, the US, Canada and Norway – gear up to assert their claims over the fossil fuels that lie beneath the melting Arctic ice.

—A seamless, global network of electronic “sniffers” will scan radio tags in myriad public settings, identifying people and their tastes instantly so that customized ads, “live spam,” may be beamed at them.

—In “Smart Homes,” sensors built into walls, floors and appliances will inventory possessions, record eating habits, monitor medicine cabinets — all the while, silently reporting data to marketers eager for a peek into the occupants’ private lives.

Science fiction?

The sale culminates years of work by Raytheon and partners devoted to the longstanding challenge of reliably extracting heavy oil from shale, tar sands and spent wells in a manner that is cost effective and environmentally sensitive, while also presenting new opportunities to support Schlumberger in its application of the technology in the field.

The arrangement between the two companies comes as demand for the world’s finite oil supplies continues to increase, the price per barrel is near record highs, and government and industry are looking for new sources of oil to lessen dependency on foreign suppliers.

If successfully harvested, shale could provide a long-term source of reliable, affordable and secure oil. Federal officials estimate that this resource — much of which is locked in a 16,000-acre formation beneath federal land in Colorado, Utah and Wyoming — could yield enough oil to meet U.S. demand at current levels for more than 250 years.

In order to create new momentum for extracting oil from shale, Raytheon utilized one of its many intellectual property reserves (radio frequency, or RF, technology), developed a small business partnership for an aspect of the solution that research determined is critical to success, and then pursued and solidified interest from companies such as Schlumberger, a global innovator in the energy industry.

“Raytheon is expert in applying RF technology to radar and communications systems, and with this agreement we look forward to applying this expertise to the energy industry,” said Lee Silvestre, vice president of the Mission Innovation group of Raytheon Integrated Defense Systems (IDS). “Schlumberger is the world leader in bringing new technology to the field for the exploration and production of oil. Its acquisition of this technology is an important milestone in Raytheon’s approach to applying proven technology that can unlock new potential in adjacent markets.”

Raytheon’s solution combines RF with critical fluids (CF) processes of small business partner CF Technologies in Hyde Park, Mass. The RF/CF combination uniformly heats buried shale rock, separates the petroleum from the shale, and directs the liberated oil so that it may flow into tanks for extraction. The method is more economical and environmentally responsible than older oil shale extraction techniques as it uses far less power, does not severely disrupt the landscape or leave behind residue that can enter groundwater supplies.

The bank says the trader, Jerome Kerviel, did not appear to have profited personally from the transactions and seemingly worked alone — a version reiterated Sunday by Jean-Pierre Mustier, chief executive of the bank’s corporate and investment banking arm.

But, in a conference call with reporters, Mustier added: “I cannot guarantee to you 100 percent that there was no complicity.”

Kerviel’s lawyer said the accusations of wrongdoing against his client were being used to hide bad investments by the bank related to subprime mortgages in the United States.

“He didn’t steal anything, take anything, he didn’t take any profit for himself,” the lawyer, Christian Charriere-Bournazel, told The Associated Press by telephone. “The suspicion on Kerviel allows the considerable losses that the bank made on subprimes to be hidden.”

Officials said Kerviel was cooperating with police, who held him for a second day of questioning Sunday, seeking answers to what, if confirmed, would be the biggest-ever trading fraud by a single person.

The questioning was “going very well and the investigation led by the specialists of the financial police is extremely fruitful,” said Jean-Michel Aldebert, head of the financial section of the Paris prosecutor’s office.

Kerviel was giving “very interesting” explanations, Aldebert added. “From what he told me, he was fine psychologically.” He refused to say whether Kerviel might face preliminary charges.

Kerviel, 31, has not been seen in public since the bank’s bombshell revelation Thursday that his unauthorized trades resulted in 4.9 billion euros ($7.1 billion) in losses.

Even before his massive alleged fraud came to light, Kerviel had apparently triggered occasional alarms at Societe Generale — France’s second-largest bank — with his trading, but not to a degree that led managers to investigate further.

“Our controls basically identified from time to time problems with this trader’s portfolio,” Mustier said.

But Kerviel explained away the red flags as trading mistakes, Mustier added.

“The trade was canceled, there was no specific follow-up to do,” he said. “From our understanding today, the number of mistakes was not higher than (for) any other trader, so from our understanding that was not a reason to ring a bell.”

Kerviel’s lawyer said the trader made money for the bank through 2007 and has since been “thrown to the wolves of public opinion.”

“He made profits for the bank until Dec. 31. From Jan. 1, he took risky positions like all traders,” said Charriere-Bournazel, who is also president of the Paris bar association.

In a five-page statement Sunday, the bank said Kerviel used its money to build massive positions in futures contracts tied to the performance of baskets of stocks traded on exchanges in London, Paris, Frankfurt and other European markets.

Since those bets greatly exceeded the amount of capital he was allowed to put at risk, Kerviel entered fictitious and offsetting trades in Societe Generale’s computer system that appeared to minimize the odds of big losses, the bank said. The trades were purposely chosen to avoid detection because they did not require cash contributions and were not subject to margin calls, which would require putting up more money if the fictitious bet soured, it said.

The bank said he plowed 30 billion euros ($44.1 billion) into the Eurostoxx index, another 18 billion euros ($26.5 billion) on the DAX in Germany and 2 billion euros ($2.9 billion) on the FTSE in London. The combined value of those positions, 50 billion euros ($73.5 billion), is far more than the bank’s market capitalization of 35.9 billion euros ($52.6 billion), and close to the annual GDP of countries such as Slovakia, Qatar or Libya.

Societe Generale took three days last week to sell or offset with hedges his contracts, which amounted to bets on whether market indexes would rise or fall. But the bank sought Sunday to counter suggestions that its sell-off had caused already falling markets to plummet further than they otherwise might have done. The bank said it unwound Kerviel’s positions in “a controlled fashion.”

“Our impact on the market was quite minimal,” Mustier said.

Societe Generale said Kerviel misappropriated other people’s computer access codes, falsified documents and employed other methods to cover his tracks — helped by his previous years of experience when he worked in other offices at the bank that monitor traders. Acquaintances described Kerviel as reserved and considerate, a young man who once taught children judo and held the door for elderly neighbors.

Kerviel’s downfall started in the days before Friday, Jan. 18, when Societe Generale tightened lending restrictions on one of its customers, an unnamed large bank. He had apparently used that bank’s name for one or more of his fictitious trades, and it led to what Societe Generale described as having “additional controls” put in place.

Kerviel’s superiors in Societe Generale’s equity trading division reviewed an e-mail that day from the large bank supposedly confirming trades he had booked. But they were suspicious about where the e-mail came from and launched an emergency investigation.

A day later, Kerviel was called to Societe Generale to explain. In the meantime, bank investigators confirmed that the large bank did not know about the trades.

After first not providing a clear explanation, Kerviel eventually confirmed that he had entered fictitious trades, the bank said. It then took a bank team throughout the night and into Sunday, Jan. 20, to identify all the exposure. Societe Generale’s chief executive, Daniel Bouton, notified the governor of the Bank of France that day, and a decision was made to unwind the trades as quickly and as quietly as possible.

A complicating factor was that the bank was finishing work that Sunday on details of a separate announcement about the size of the multi-billion-dollar charge it would take for bad bets on mortgage-related investments in the U.S. News of that misstep was delayed until Thursday, when along with the fraud losses, the bank said it would take a 2.05 billion euro ($2.99 billion) write-down.

Societe Generale traders began unwinding Kerviel’s losing bets at the beginning of European trading on Monday, just as Asian markets were in a free-fall and European shares were poised to plummet after a big drop in U.S. markets on the previous Friday. It took until Wednesday to finally close the books on Kerviel’s adventures, the bank said.

Kerviel’s lawyer cast suspicion on the way Societe Generale unwound the position, saying it did so in “totally unusual conditions.”

“This decision was driven by other motives,” he claimed, without elaborating.

Some experts have suggested Societe Generale may have exacerbated the fall and indirectly led to the U.S. Federal Reserve’s subsequent decision to cut rates.

But in its explanatory note released on Sunday, the bank defended itself by saying the trades represented no more than 8.1 percent of the volume in futures trading each day on the Eurostoxx, DAX and FTSE.

Mustier said Kerviel’s motivations were still unclear. “We don’t know, we don’t understand” what drove him to do it, he said.

“This event is a massive shock for us,” he said.

The bank said Kerviel built up two portfolios of investments — but that one of them consisted of “fictional operations,” leaving the bank hugely exposed.

“In order to ensure that these fictitious operations were not immediately identified, the trader used his years of experience in processing and controlling market operations to successively circumvent all the controls which allow the bank to check the characteristics of the operations carried out by its traders,” the bank’s statement said.

“He had a very good understanding of all of Societe Generale’s processing and control procedures.”

It was the bank’s most detailed explanation yet of the debacle that has further rattled the banking industry, already reeling from the subprime mortgage crisis in the U.S. Some observers have said the crisis could also leave the bank vulnerable to a takeover.

An aide to French President Nicolas Sarkozy suggested the state could step in to prevent any possible hostile bids.

“I think the state will not stand idly by if any predator attempts to take advantage of the situation,” Henri Guaino told RTL radio on Sunday.