240 comments on DrumBeat: August 21, 2008
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240 comments on DrumBeat: August 21, 2008
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The cut-off of oil exports via Georgia is the main driver IMHO.
It is beginning to bite.
Alan
But that was, what, two weeks ago?
Do these people have to actually register the decrease on some
meter before they realize that no oil is moving thru Georgia?
I don't think so.
Not with the number of times I've seen trades of buy the rumor, sell the fact.
Which in the case of Georgia the past two weeks would be "sell the rumor, buy the fact".
But you're right.
Zero oil is moving thru Georgia now.
when it used to be 1 mbpd.
The capacity of the BTC pipeline is 1 mbpd, but at the time it went off-line it was pumping 800 kbpd.
But that's just the BTC.
Oil was also moving by rail thru Batumi and the Baku Supska pipeline.
1.2 mbpd was the figure I think.
The BTC will reopen next week.
http://uk.reuters.com/article/businessNews/idUKLK16589820080820?sp=true
The utter drivel written in the MSM is exemplified by this:
I think we are witnessing a technical rebound from an oversold position - volatility on an exponentially rising uptrend.
The BTC will reopen next week
If the Russians want it to.
Qatar and Iran talked about reducing world oil exports to support prices. The Russians did something about it !
The geo-political-economic calculus on this one is "above my pay grade".
Alan
Alan, the BTC was shut by Kurdish separatists in Turkey blowing it up. It has now been repaired and is undergoing pressure testing.
I am prepared to listen to conspiracy theories about the Russians being involved in the Turkey attack (Turkey is a member of NATO and the OECD) - but do you have any evidence?
I would also entertain the idea that Russia may be eyeing Caspian oil.
One European perspective might be that Russia is a much more reliable supplier of oil and gas than is the USA.
The Kurds blew up/shut down the pipeline two days before their invasion of Georgia.
The Kurds had never attacked the pipeline before (in general, infrastructure attacks are not, AFAIK, part of their standard operating procedure).
A Russian operative with some money and promises could have motivated the Kurds, and probably did IMHO (circumstantial evidence only).
The money from oil exports is the KEY to the Russian economy. Lower prices are NOT good ! Russia has a major infrastructure program that will cost many billions, and they simply need high oil prices.
Alan
Inspectors in Turkey are reporting that the BTC pipeline was not bombed.
BP Says Unclear When BTC Pipeline Will Be Repaired, Bloomberg, Aug. 15, 2008
I case you have not noticed, Russia has extraordinary leverage over BP (I was about to write that they have "their nuts in a vise").
"Truth is the first casualty of war".
Alan
Hello TODers,
I hate to say it, but reality seems to be taking more plot twists and turns than a Tom Clancy novel:
All kinds of conflicting reports on GoogleNews relating to whether a Russia-Syria alliance means the basing of an Iskandar missle system on Syrian soil. Purely for defensive purposes; same as the Patriot ABM Battery in Poland. Additionally:
http://www.iht.com/articles/ap/2008/08/21/europe/EU-NATO-Black-Sea.php
-----------------------------
BRUSSELS, Belgium: NATO warships entered the Black Sea on Thursday for what the alliance said were long-planned exercises and routine visits to ports in Romania and Bulgaria.
-------------------------------
http://macedoniaonline.eu/content/view/2940/53/
--------------------------
The Russian aircraft carrier “Admiral Kuznetsov” is ready to head from Murmansk towards the Mediterranean and the Syrian port of Tartus. The mission comes after Syrian President Bashar Assad said he is open for a Russian base in the area. The “Admiral Kuznetsov”, part of the Northern Fleet and Russia’s only aircraft carrier, will head a Navy mission to the area. The mission will also include the missile cruiser “Moskva” and several submarines, Newsru.com reports.
---------------------------
and dont forget the once again declining $.
So, does oil go up because the dollar is falling, or is the falling dollar a response to rising oil prices?
Somewhere in your question is one that I would love ask;
Is the drop in net FFs the reason the economy is tanking?
Soup: I say it's the other way around...most of this mess begins with money supply. The economy is tanking for mainly financial reasons, which then cuts into FF demand.
On the face of it correct ...
Except that FF prices have been rising for some time now, and oil in particular has been rising for 9 years, currently up ~1150% - to pay the required interest the banking system must have growth, which is powered in part by growing oil use.
Econ 101 says you get less consumption if prices rise ... so, if the prices rise for long enough and far enough (and 1150% is quite far!) at some point growth based on that oil consumption must stop! ... and indeed it did ... about 4 years ago!
By 2 years ago the financial system was trying any trick to keep the growth going, but eventually that had to fail if there is no growth in the energy powering the world economy.
The downslope of world consumption post peak-oil implies that the oil is getting ever more expensive year after year in the 'net importing' countries, since we will have no option but to use less and less of it.
Thanks Xeroid
I agree with you 100% and it would be nice if some main stream economists would put 2 and 2 together and speak truth.
Cheers
what's all this fuss about French Fries?
It's a question I've been asking but don't really have any way to analyze. My guess is the declining EROI and diminishing absolute returns on resources - eg limits is right at the heart.
cfm in Gray, ME
That's a good question, WT, and naturally it's not really a one-or-the-other matter, but I believe it's mainly the former.
Well, I guess we could say that a falling dollar is likely to lead to higher oil prices, and higher oil prices are likely to lead to a falling dollar.
An (overly) simple way to look at it is that when the dollar falls, the price of oil must go up, or else it will be devalued. Since it's a real and valuable thing, unlike a fiat currency, that wouldn't be right, and would confer an advantage to foreign buyers. I find it harder to argue that higher oil prices must lead to a lower dollar, however...that would be wagging the dog. Still, as a matter of trade balance, I grant that there is a bit of a chicken-and-egg story there.
The weasel, purchased at a local Wall Mart on a Visa credit card, was really a high tech, Japanese designed robot made in China. It was powered by a lithium battery that was being charged by a diesel generator made in France. The French diesel manufacturing plant was on a nuclear energy supplied grid...
Guess who the monkey is?
The falling $ is a response to a balooning trade deficit. The fact this has not happened much, much sooner needs to be viewed as anomalous.
If you run a current account deficit you're by definition running a capital account surplus. The money comes back as various kinds of foreign investment in companies and assets, loans etc. A current account deficit is not debt; nobody is owed something as a result of running a trade deficit. It can be transformed into debt(e.g. by lending this money to uncle Sam) but it doesn't have to be.
You could equally well say that America managed once again to attract more investment from foreigners than americans invested in foreign companies; the only way you'll be able to do this is if foreigners believe in the future profitability of american companies.