The oil futures market participants can be roughly divided into two groups: 1) those who use oil commercially and need to have an insurance against too big price changes (i.e. hedging), and 2) those who want to make money purely by guessing where oil prices are going to go next (i.e. speculating).
Both serve a purpose, but the ordinary Joe only cares about the credit card charge at the pump and the price of an airplane ticket.
Now OPEC, that once mighty cartel of oil producers, is saying that the world (read: US) should curb oil speculators.
According to OPEC, speculators are not only responsible for the fast price hike last year ($147/brl), but also the abysmally low prices last year ($32/brl). OPEC is now saying through it's secretary general Abdalla el-Badri, that this cannot go on. Speculator must be stopped.
You can easily guess the market's reaction to this plea.
Everything from almost violent denial to manic laughter by all of the banks, brokers and traders - all of whom reaped gazillions of profit/losses last year by playing the market. They claim speculation is sacrosanct.
And fundamentally they are right. There's nothing wrong with it - in fact, the efficient market hypothesis calls for speculators, in case you still happen to believe in such a fairytale hypothesis after the fall of 2008.
So, OPEC might be onto something here.
Consider the situation in not too near future: the reserve buffer between maximum production flow and demand has diminished to almost nothing due to world oil production nearing peaking. There are still some reserves on the ground, but require huge investments. Speculators can influence the market either way, and help amplify supply-demand based huge price drops or spikes - at least for a while.
Nobody wants to invest in that scenario. So, the flow of oil diminishes. And the world faces a starvation of energy, and if continued, a true starvation of food.
Now, this scenario would be merely amusing if it only were hypothetical.
Because, depending on whom you ask from, that's exactly what's happened last year. Oil price spiked, then crashed, now all investments are postponed and the likelihood of steady oil-flow to support economies (once we get out of this current financial mess) is drastically reduced.
Now, whole opuses will be written about the previous oil bull market and who was the culprit for the rise and the fall. The average joe? The energy hungry Asians? Evil speculators?
Nobody knows for sure and nobody will ever find out.
What is clear is that the speculators did not help in balancing the spike in either direction.
That is what this is all about: should speculators allowed to play the market of the world's most important single commodity for the potential detriment of the most of the world?
Who wins if this is allowed to continue?
Surely not you or me.
Unless you are speculating on the oil market, which is btw - looking more and more enticing as each day goes by.
So, because the world is unlikely to curb any speculation - hop on and play the game. At least you'll have somebody to curse at, next time you're at the pump and the price has shot through the roof.
Wednesday, 28 January 2009
Monday, 19 January 2009
Gaza civilians running for their lives from Israeli army incendiary cluster bomb grenades
The recent blatant violations of various international laws and regulations by Israel may seem non-news to most, but this time the situation was different.
They bombed UN run schools, Christian church run hospitals, women, children, practically anything that moved. And yes, using incendiary phosphorus weapons (look them up on international conventions of war).
Seems rather odd, even for the Israeli army.
And it didn't stop there. A recent big secretive shipment of weapons from US to Israel was outed by Reuters last week. Then came the news, that Israel IDF troops were posing as Hamas soldiers on the war zone. Then the psy-op leak that Israel recruits bloggers to start spreading zionist propaganda on the net.
Clearly something 'big' was happening. But what?
Well, the news is now out:
"A historic natural gas reservoir found offshore from Haifa is poised to meet Israel's natural gas demand for about 15 years and reduce the country's dependence on gas imports from Egypt and offshore from Gaza.Unfortunately for Israel, this posed a bit of a problem:
Preliminary estimates indicate that the Tamar field might contain over 88 billion cubic meters of gas."
"In 1999, after paying the Palestinian Authority an undisclosed sum, BG, along with its partner, Consolidated Contractors Corporations, acquired the concession to survey for natural gas in 1,000 square kilometers of the Gaza Marine area.
This posed a serious problem for both Israel, which obviously was not going to pay a portion of the money to Hamas, and to BG, which was banned by its government from negotiating with Hamas. The Post reported that had Israel and BG reached an agreement on the sale price of the gas, they would have found an alternative arrangement for the transfer of funds to ensure they did not end up funding terrorism.
Today, the estimated $4 billion worth of gas off the Gazan coast is still sitting, untapped, at the bottom of the Gaza Marine gas field. Hamas has not backed away from it claim that it is the rightful owner of the gas, even saying it deserves more than the 10% of the royalties from the sale of the gas, as originally negotiated between BG and the PA.
Removing Hamas from power in Gaza and reinstating Fatah will be almost impossible. However, according to newspaper reports, cabinet ministers have been told that some Hamas leaders in Gaza are desperate for a cease-fire and would be willing to settle on almost any terms stipulated by Israel.
Removing any claim that Hamas has to the money from the sale of the gas would allow Israel and BG to proceed on negotiations, which were relaunched in late 2008 between BG and government representatives, without the threat hanging over them from Hamas that the money belongs to it."
So, attack Gaza, keep on killing civilians until Hamas agrees to whatever terms Israel wants. Gas secured, money secured. Israel wins, while EU and esp. gas-starved UK remain conspicuously silent all through the ordeal.
Now, why wander off from our Peak Oil related path to bring you sad news like this?
So that you, dear reader, understand what runs the world, and how it is run.
It is not money. It is energy.
It is not run by rules and regulations shared by me and you. It is run by might makes right.
And the people running the show are willing to do ruthless and brutal deeds to get their hands on secure, locally accessible, fairly inexpensive and risk-free fossil fuels. In fact, they are willing to play really risky games to get it - at the cost of just as many lives as it takes.
So, if you think that a couple of thousand Palestinian civilians matter none when 88 billion cubic feet of natural gas are at stake, then do consider the situation when we will be fighting over the remaining barrels of oil.
The picture will not be pretty, that is guaranteed. We'll be looking at much worse images than the charred remains of UN run schools left behind by IDF 'smart weapons'.
Think about that the next time you ponder the 'righteous war' principles of United States in Afghanistan and Iraq, the historic Falkland war of UK, destruction of Chechnya by Russia, fighting in Somalia, insurgency in Nigeria, or the situation in Gaza.
Just pray they won't find any oil or gas near your borders, because if they do, you are fucked.
Posted by The Energy Standard team at 20:13