It would be a parting legacy from outgoing CEO Tony Hayward if his efforts earlier this month to court the funds in Abu Dhabi and other oil-producing countries were to bear fruit.

It may seem counter-intuitive at first blush that funds set up to diversify assets for oil exporters would want to invest in a major oil company. But BP, originally known as British Petroleum, has made good on its motto of recent years to go “beyond petroleum” – and it could do the same for oil producers.

BP Was in Acquiring Mode

BP has energetically acquired assets in natural gas and renewable energy that could translate into useful technology transfer for the well-heeled sovereign funds.

As Victoria Barbary, a senior analyst at the Monitor advisory group, recently told Reuters: “SWFs over the last two years have been actively investing into technology transfer from an economic diversification point of view. From this perspective, BP actually have an attractive portfolio.”

Leaving the U.S. as persona non grata in the wake of the oil spill, Hayward embarked on a whirlwind tour at the beginning of July to court SWFs as shareholders, in large part to bolster the company’s defense against a takeover.

Among others, he met with Abu Dhabi’s crown prince, Mohammed bin Zayed al-Nahyan, urging him to have the emirate’s sovereign wealth fund, considered to be the largest in the world, acquire up to 10% of BP, according to news reports.

Libya’s Consideration

Libya reportedly was also considering an investment through its sovereign wealth fund, though Kuwait, which already owns BP stock, ruled out any further acquisition for the time being.

Along with its decision to replace Hayward as chief executive, the BP board this week also agreed to sell off $30 billion in company assets to offset its expenditures in connection with the oil spill. The sale, representing a good 10% of BP’s assets, would offer an opportunity for oil producers to acquire non-oil assets directly.

Source: http://oilprice.com/Energy/Energy-General/Middle-East-Oil-Producers-Might-Consider-BP-Investment-–-to-Diversify.html

Middle East Oil Producers Might Diversify by Investing in BP is a post from the TradingMetro blog, Energy and Metals Blog. Get a blog like this for free by joining our trading community today. TradingMetro is the forex trading system and forex trading software marketplace for self-directed traders.

Prices of crude oil futures slumped below $79 a barrel on Friday despite a stock market rally and the rise of Tropical Storm Bonnie in the Gulf of Mexico.

The downward turn on Friday followed a sharp gain Thursday amid positive corporate earnings reports that some saw as a signal of economic recovery and the brewing tropical storm.

Oil Meeting Resistance

Technical analysts noted that oil prices have encountered resistance as they approach the $80 a barrel threshold. There appears to be little momentum for breaking through that barrier, they said. Other analysts said that market fundamentals were failing to provide any “guidance” for prices.

The reaction of markets Friday to the report from European regulators that only seven out of 91 banks subjected to a “stress test” would need to add capital, and only a modest amount slightly under $5 billion, was mixed. Some participants expressed relief that the exercise was over while others were skeptical that the tests had been stressful enough to be meaningful.

EURO Regains on Dollar

The euro regained ground against the dollar after a slight dip when the stress test results came out.

The benchmark West Texas Intermediate contract settled at $78.98 a barrel on Friday, after surging to $79.30 on Thursday. It finished last week at $76.01 a barrel.

Oil prices had been tracking the stock market fairly consistently the past few weeks, so analysts were surprised that oil futures parted ways with stocks. The Dow Jones Industrial Average closed up 102 points Friday, at 10,424.62 points, gaining 3.2% on the week.

The threat of disruption of production in the Gulf of Mexico from the advent of a new tropical storm, which should have been bullish for oil prices, also failed to halt the decline on Friday. Weather forecasters predicted Bonnie would not reach hurricane force before making landfall on Sunday.

Happenings Earlier in the Week

Earlier in the week, an unexpected increase in oil inventories and a gloomy economic forecast from Federal Reserve chairman Ben Bernanke cut short an incipient rally, with prices surging above $78 a barrel on Wednesday before closing below $77.

“The economic outlook remains unusually uncertain,” Bernanke said in congressional testimony. The Fed is ready to jump either way, he indicated, depending on whether the economy shows signs of a more robust recovery or a renewed slide into negative growth.

Source: http://oilprice.com/Energy/Oil-Prices/Oil-Prices-Show-Little-Momentum-for-Breaking-Through-$80-Barrier.html

Little Momentum for Oil Prices Breaking Through $80 Barrier is a post from the TradingMetro blog, Energy and Metals Blog. Get a blog like this for free by joining our trading community today. TradingMetro is the forex trading system and forex trading software marketplace for self-directed traders.

Somali militant group al-Shabab claimed responsibility for explosions that tore through the capital Kampala July 11 and killed more than 70 people.

Al-Shabab Pledges Further Terror

Infuriated over Uganda’s participation in the African Union Mission in Somalia – which may grow if Ugandan President Yoweri Museveni gets his way – al-Qaeda-linked al-Shabab has pledged more terror.

The oil industry has not been singled out as a target, but “one would naturally assume that it would be one of the areas that terrorists would look at,” warned Peter Pham, senior vice president of the National Committee on American Foreign Policy, a New York-based think tank. The bombings underscore that the Ugandan government and its regional and international partners, both public and private, need to “perhaps devote more thought and resources to protecting the infrastructure that has been or is in the process of being built,” he said. He was referring to a reverse-flow pipeline between Uganda and Kenya and other construction underway.

The Uganda People’s Defence Force is an “experienced, well-armed, and largely well-trained body,” but the country needs to secure its economic future through a force that can protect the infrastructure that is the “country’s lifeline” rather than a “battle-ready army,” added Pham.

Threats Against Pipelines

If al-Shabab can travel over boundaries and carry off “pretty sophisticated double bombs,” it can also venture to remote regions of the country where oil exploration is centered, said Philippe de Pontet, an Africa analyst in Eurasia Group’s Washington office. There is a valid argument that once the oil infrastructure is all in place, in particular a 2,000-kilometer pipeline, it may become a target, he said. However, de Pontet contended, pipelines everywhere in the world are a concern, so this particular terrorist attack does not heighten that risk in a “material way.” He said the pipeline is several years away from being built.

The World Cup-related bombings “might be enough to spook” Investors who know little about Uganda and the region, de Pontet told OilPrice.com. In this sense a country’s image counts, particularly in regard to incoming investment, he noted. The violence may deter an international oil company that is “perhaps dipping its feet in the waters but concerned about being sort of stuck, so to speak, right in the middle of Africa, a landlocked country,” he said. But the potential for such a reaction is not significantly high, he conceded.

Additional Security

The Ugandan government deployed troops permanently about four years ago to the Lake Albertine Graben area, the center of oil exploration about 250 kilometers from Kampala, Lawrence Bategeka, a senior research fellow at the Economic Policy Research Center in Kampala, told OilPrice.com in an e-mail. Albertine Graben is located on the borders of the Democratic Republic of Congo (DRC) and southern Sudan, Bategeka said.

Bategeka believes the government is taking the necessary steps to safeguard the industry. The UPDF works with foreign partner companies to ensure the security of oil exploration and production infrastructure on the ground, Bategeka noted. The organization most likely to disrupt exploration activities are anti-Ugandan rebel groups based in DRC, which is why the government has provided enough protection, he said.

Uganda’s oil industry is still at the exploration phase, he said. The drilled wells and the drilling equipment, as well as a small hydropower station being constructed in the Albertine Graben, also account for the assets the Ugandan security forces are guarding, he noted.

For the most part, analysts say the bombing is most likely a one-off attack by al-Shabab.

“It’s possible there could be others but frankly they’ve already made their point,” and this kind of attack is not easy to pull off by this group at such a distance, Eurasia Group’s de Pontet said.

While the bombings in Kampala are an outrage that deserve condemnation, in and of themselves they should have “very limited impact” on Uganda’s economy, said Pham, the New York think-tank executive. The country’s economy has been growing at a “significant rate” in recent years, spurred on by investments in the oil sector — which expects to generate more than $2 billion per year — as well as the “business-friendly policies” embraced by Museveni’s government, Pham said.

“These underlying fundamentals will not change because of a terrorist incident,” he argued. “In fact, we have yet to see even minimal market jitters from investors eager to be a part of the Ugandan economy and, through Uganda, the nascent East Africa Community.”

Ugandan Oil Reserves

The oil reserves discovered in Uganda are estimated at more than 2 billion barrels (with less than 40 percent of the Albertine Graben explored), Bategeka said. Once production starts, daily oil production will range from 200,000 barrels to 300,000 barrels or even higher, making Uganda one of the top five oil-producing countries in Africa, he said. Uganda is interested in adding value to its oil rather than simply exporting it in crude form and, to this end, his research center is working on a study to advise the government about the economic implications of such a decision, according to Bategeka.

Uganda is also working on an oil law that will likely pass over the next few months. The anticipated oil revenues will help the government improve access to higher education and strengthen road networks and air travel services, said Ezra Suruma, a distinguished visiting fellow at the Brookings Institution in Washington.

The African nation’s dependence on donor aid, now roughly 25 percent of the budget, will probably drop to “10 percent or less,” said Suruma, a former minister of finance, planning and economic development in Uganda.

He is now the country’s senior presidential adviser on finance and planning.

Source: http://oilprice.com/Energy/Energy-General/Securing-Ugandas-Oil-Industry-Urged-But-Repeat-Terrorist-Attacks-Seen-As-Slim.html

Securing Uganda’s Oil Industry Urged, Although Further Terrorist Attacks Not Likely is a post from the TradingMetro blog, Energy and Metals Blog. Get a blog like this for free by joining our trading community today. TradingMetro is the forex trading system and forex trading software marketplace for self-directed traders.

A New Plant in Michigan

President Barack Obama flew to Holland, Mich., on Thursday to attend groundbreaking ceremonies for a new lithium-ion battery plant, which the White House advertised as an example of federal stimulus grants at work and a gateway to a clean-energy future.

Great stuff — if you don’t look too hard.

Indeed, the Holland plant, effusively hailed by Michigan Gov. Jennifer Granholm as creating 300 jobs, and 62,000 “green” jobs down the road, will produce batteries in America.

But Compact Power Inc., which received $151 million from a federal stimulus program to open the $303 million plant, isn’t American and neither is its technology: It’s a subsidiary of the giant South Korean conglomerate LG Chem, and its technology is Asian.

Electric Car Bugaboo

Also that age-old bugaboo for electric cars — range and battery life — is still a work in progress. General Motors says its Chevy Volt will go up to 40 miles on a single charge and will have a range-extending, gasoline-assist feature. Nissan’s fully electric car, the Leaf, will have a 100-mile range. Ditto Ford’s electric Focus. Much depends on driving conditions.

Lithium-ion batteries are way ahead of traditional lead-acid batteries in power and weight, but they aren’t perfect. As yet, the best battery is far from being a competitor for a tank of gasoline.

There’s a back story here. The most obvious narrative is the need to create jobs in Michigan, and the hope is that electric vehicles will bolster car production there.

More obscure is the administration’s belief that a brave, new clean-energy America can produce jobs and reduce the output of greenhouse gases. In Obamaland, windmills will turn silently through the night, while millions of fully electric cars get their batteries topped up in driveways and garages.

A green and pleasant land is just a few million batteries away and, by Jove, the Department of Energy is on the job. It has $2.4 million to spend on electric car infrastructure. The department is helping to bring on nine battery plants, including the one in Holland. It’s also promoting charging stations.

Just Some Facts

Some small facts: These batteries are still so expensive (about $16,000 apiece) that any fully electric car, or near so, requires subsidies down the line to get the price down to where ordinary people will buy them in quantity. The only fully electric vehicle on the market today, the Tesla, is a sports car that costs over $100,000 and is aimed at the well-heeled greens of Hollywood.

While official retail prices for the Ford, Nissan and GM models haven’t been announced, estimates are in the range of $30,000 to $35,000. Federal tax credits are likely to trim several thousand dollars for many buyers.

Batteries have stood in the way of electric cars for more than a century. In the early days of motoring, electric cars covered short distances and held promise. But while internal combustion engines revved ahead, batteries languished.

But the dream of an electric car never died, though the batteries frequently did. In the 1970s, the U.S. government spent lavishly on battery research, including lithium and aluminum air batteries. There are dozens of ways to make batteries, but all have their disadvantages: weight, disposability, life, rate of discharge and market indifference.

Getting Everything You Want in a Car

If you want everything you get today on a car — electric windows, air conditioning, electric seats, multiple lights, highly variable loads and easy refueling and, maybe, towing capacity — you need a hell of a battery

We have, so to speak, been shocked by presidential energy enthusiasm before. Jimmy Carter believed in liquids from coal and launched the ill-fated Synthetic Fuels Corp., and George W. Bush went hog wild over ethanol — and those expectations are being trimmed daily.

I’ll buy a hybrid and wait, if it’s OK with Obama.

Source: http://oilprice.com/Alternative-Energy/Renewable-Energy/Batteries-Are-the-Shocking-Truth-about-Electric-Cars.html

The Shocking Truth about Electric Cars – Batteries is a post from the TradingMetro blog, Energy and Metals Blog. Get a blog like this for free by joining our trading community today. TradingMetro is the forex trading system and forex trading software marketplace for self-directed traders.

An unexpectedly sharp drop in a key consumer confidence index sent stocks plummeting on Friday and drove down prices for crude oil futures so that the benchmark contract finished the week virtually unchanged from last Friday.

The near-month contract for West Texas Intermediate settled at $76.01 a barrel on Friday, compared with $76.09 a week ago.

Dropping Consumer Index

The University of Michigan/Reuters consumer index dropped to 66.5 in July from 76 in June, a much sharper decline than was expected. The bad news, which cast renewed doubt on the strength of the economic recovery, sent the Dow Jones Industrial Average tumbling 261 points to close the week perilously close to the 10,000 mark once again at 10,098.

Persistent doubts about the economy have kept oil prices trading in a narrow range for months. News from the Federal Reserve on Thursday that manufacturing growth in several regions had slowed down in the latest reporting period dampened oil prices.

The index for the Philadelphia region, for instance, slipped to 5.1 in July, down from 8 in June, compared with 10 forecast by economists. The positive index indicated that the sector is still growing, but less robustly than hoped. The Philadelphia index was 21.4 in May.

Oil prices rose earlier in the week, tracking the stock market’s gain on positive earnings news from Alcoa, kicking off the quarterly earnings report season. Oil futures settled above $77 a barrel on Tuesday.

Market Turns Bearish

But the market turned bearish, despite a bigger-than-expected decline in oil inventories on the week, and a weakening dollar in foreign exchange markets, which usually translates into higher oil prices. Stockpiles for gasoline and oil distillates like heating oil and diesel rose in a sign of continued weak demand.

The Fed on Wednesday released a summary of its meeting last month indicating concern about the economy growing more sluggish and this outweighed the positive news.

Some traders took heart in the narrowing discount between the August and September contracts, indicating that short-term supplies might be tightening. But analysts said it would take some significant news to break oil prices out of the $70 to $80 trading range of the past few months.

Source: http://oilprice.com/Energy/Oil-Prices/Stock-Prices-Economic-Data-Buffet-Crude-Oil-Futures-in-Lackluster-Trading.html

Lackluster Stock Trading and Economic Data Send Crude Oil Futures Prices Down is a post from the TradingMetro blog, Energy and Metals Blog. Get a blog like this for free by joining our trading community today. TradingMetro is the forex trading system and forex trading software marketplace for self-directed traders.

In the last several months, Noble Energy Inc., based in Houston, Tex., and Israeli companies have announced two offshore gas discoveries known as Tamar and Leviathan that they say may hold about 24 trillion cubic feet of gas.

Too Early to Say How Much

Yet, it is “really too early to say” which country has the valid claim over the underwater resources in dispute, as they “may well extend into Lebanese waters,” Catherine Hunter, a senior analyst on the energy team at IHS Global Insight in London, told OilPrice.com. Without further surveys and drilling, the situation is still unclear, she said.

There is a chance of a “really large-scale discovery,” Hunter said, but the blocks are located within recognized Israeli waters and exploration would not have occurred outside of this area. “It will take a few years to figure out where exactly it is,” and until then “it’s all quite speculative,” she argued.

Leviathan is located 130 km from the city of Haifa in the north of Israel, while Tamar is based around 90 km from the city, Hunter later wrote in a research note. She said Leviathan is also located toward Cypriot territorial waters. Israel is reportedly in touch with the Cypriot authorities, who have not made claims to the find, although maritime borders still have to be officially delineated between Israel and Cyprus,as well as Israel and Lebanon, she wrote.

Size of Finds Unknown

Details on the size of the finds have also been uncertain, she argued. Leviathan, the larger discovery at 16 trillion cubic feet, has undergone seismic surveys but has not been proven via the drilling of actual wells and testing in the sea bed, Hunter said during an interview, adding this will take place later this year. The Tamar reserve base, estimated at about 8.4 trillion cubic feet, is “more understood” because of the

different wells that have been drilled, but it will “take ages” to fully assess as reserves have been upgraded at least twice so far, Hunter added.

War of Words

The apparent natural gas windfall has ignited a war of words involving Hezbollah, Tel Aviv and Beirut.

Hezbollah warned that it will not allow Israel to steal Lebanese gas resources. The Lebanese parliament, now struggling with a hefty debt of about $52 billion, is racing to ratify a law allowing oil and gas exploration before Israel begins to move into its territory.

In turn, Israel’s Minister of Infrastructure Uzi Landau cautioned that Israel will not think twice about using force to safeguard investments in the gas fields.

For Israel, the Tamar field alone can cover most of its needs for the foreseeable future, probably as distant as 2025, noted Hunter. The Leviathan prospect, however, will extend the country’s energy independence beyond this and potentially pave the way for gas exports to Cyprus through a new pipeline or liquefied natural gas shipments to more distant markets, she added.

The U.S. Geological Survey took note of the contentious area in an April assessment. It estimates that the Levant Basin Province, based in the Eastern Mediterranean region, is rich with about 122 trillion cubic feet of undiscovered, technically recoverable natural gas.

Consultant Perspective

Fred Zeidman, a principal at financial advisory firm XRoads Solutions Group who has spearheaded the global energy practice, sees no legitimacy in the Lebanese claim to natural gas deposits recently uncovered off Israel.

“I have been in Israel,” Zeidman, based in Houston, told OilPrice.com. “I have seen the maps.” About a month ago, Zeidman said he asked government officials there about whether they anticipated competing claims from regional neighbors over territorial waters. “And they said, ‘Absolutely not,’” he noted.

Israel has been licensing for some time, but its Middle East neighbors have been slow to carve out their own gas domains.

Lebanon completed offshore surveys from 2006 to 2007 with the help of Norwegian firm Petroleum Geo-Services and had planned to launch a licensing round, which has been delayed, said Hunter, of IHS Global Insight. “You would have thought that the Tamar find that was made in early 2009 . . . would have prompted some kind of action,” she noted. “But it’s not been a legislative priority so far.”

Political Divisions

The political divisions in post-2005 Lebanon have put any real movement on qualifying and quantifying potential resources — along with most other socio-economic development and reform initiatives — on the backburner, explained Aram Nerguizian, a resident scholar at the Center for Strategic and International Studies in Washington who is focused on security politics in the Levant and the Persian Gulf. As a result, calls from within both the Lebanese public and private sectors for a comprehensive geological survey of the Mediterranean coastal shelf off Lebanon have been “slow to materialize into action,” he noted.

Cyprus, meanwhile, has moved ahead with one round in its nearby territorial waters, while Syria has failed to carry out offshore exploration, according to Hunter’s research note. Syria called its first licensing round for four offshore areas in 2008, but received only one bid, which was then rejected, she wrote. A second attempt by Syria is planned for this year, although it has not yet been launched, she added.

Most experts doubt the conflict between Israel and Lebanon will spiral out of control into a full-fledged war, as the media have speculated.

“The defense of potential national resources in a poorly demarcated border region is a rallying cry and source of domestic legitimacy at the rhetorical level both in Israel and Lebanon,” CSIS’ Neguizian said. While the gas issue is a source of “political mobilization,” for now it will not escalate into a military matter because the reserves are “little more than an unknown” until detailed geological surveys are conducted by concerned parties, he added.

Natural Resource Battles

Battles have been waged over natural resources in the past, but no fighting has ever taken place near the Dead Sea where both Jordan and Israel own bromide deposits, said XRoads’ Zeidman.

And regardless of the “depth and breadth” of animosity between Israel and Lebanon, they have tended to have a “mutual respect” over natural resources, added Zeidman.

Even now, Israel has not experienced a cessation in either its coal supply from Turkey or fuel from Egypt, but the Tamar and Leviathan finds would be a saving grace should these political relationships grow sour, he maintained.

Cyprus and Lebanon should encourage exploration in their own waters and “come to an agreement with Israel if there is any crossover in the reservoir,” Hunter told OilPrice.com.

Maritime boundaries, however, also need to be clarified with “some urgency,” she said later in her research note. Failure to agree on onshore boundaries — notably the Shebaa Farms and Israel’s occupation of the Golan Heights — does not instill a “strong degree of confidence” that any international ruling will be taken up, she warned.

Source: http://oilprice.com/Energy/Energy-General/Ownership-of-Offshore-Israel-Gas-Deposits-Speculative-Without-Further-Drilling.html

Offshore Drilling: Ownership of Israel Gas Deposits Up in Air is a post from the TradingMetro blog, Energy and Metals Blog. Get a blog like this for free by joining our trading community today. TradingMetro is the forex trading system and forex trading software marketplace for self-directed traders.

Crude oil futures finished the week on a positive note, tracking stocks upward after hitting the low for a month earlier in the week.

The benchmark West Texas intermediate contract settled Friday at $76.09 a barrel, up 65 cents on the day. On Tuesday, the contract declined for the sixth session in a row, closing at $71.98, its first dip below $72 in a month.

Crude oil finished last week at $72.14 a barrel after falling 8.5% in the course of the week.

The Dow Jones Industrial Average surged above the 10,000-point level again this week, indicating a brighter economic outlook and buoying oil prices. The Dow climbed 511.55 points on the week, or 5.3%, to close Friday at 10,198.03, its strongest weekly increase in a year.

Decline in Oil Inventories

A substantial decline in oil inventories, reported on Thursday in a holiday-shortened week, pushed oil prices up nearly 2% on the day. The U.S. Energy Information Administration reported crude inventories down by 5 million barrels, compared with consensus forecasts of a 1.8 million-barrel decline. A string of weekly increases in oil stocks had been weighing on prices.

The International Monetary Fund on Thursday revised its forecast for global growth this year upwards, to 4.6% from 4.2%, lending further support to oil prices. The rosier forecast came in spite of the fiscal crisis in Greece that has rocked the euro area and unsettled markets.

The IMF said the revision came after “stronger activity” in the first half. The multilateral lending agency left is growth forecast for 2011 unchanged at 4.3%.

Still, analysts were waiting for clearer signals about the future direction of the economy, and are looking now to the beginning of corporate earnings season next week.

Impact of Hurricane Alex

The oil inventory decline was attributed in part to delays in imports because of Hurricane Alex, so some analysts predicted an increase in oil stocks next week as the delayed oil is delivered.

Also, a new tropical depression in the Gulf of Mexico that might have nudged oil prices higher with the threat of further disruption to production and shipping failed to develop into tropical storm Bonnie and hit the coast at the Mexican-Texas border, bypassing offshore platforms.

Source: http://oilprice.com/Energy/Oil-Prices/Crude-Oil-Tracks-Stocks-Upwards-to-Close-Week-Above-$76-a-Barrel.html

$76 a Barrel: Crude Oil Hits Positive Note to Finish Week is a post from the TradingMetro blog, Energy and Metals Blog. Get a blog like this for free by joining our trading community today. TradingMetro is the forex trading system and forex trading software marketplace for self-directed traders.

Almost all of the strategic restructuring of states is occurring in large part as a result of an accumulation of wealth; an accumulation and value of which is seen as permanent. This has resulted in the hubris — expressed by those who did not earn it — of triumph in the Cold War. This is a Western phenomenon because the widespread growth of wealth, the creation of freedoms classically associated with democracy, resulted — as it must inevitably result — in complacencies which in turn led to a “vote too far”: the extension of the democratic franchise to those who do not help in the creation of wealth. 

Once the voting franchise of the West reached the point where those who sought benefits outweighed those who created benefits, the tipping point was reached. The situation of de facto “class warfare” thus emerges automatically under such circumstances, and the envy of those who take against those who provide erupts into “rights” and “entitlement”.  By deifying “democracy” above justice, the enfranchised non-producers could always outvote the producers.  We are at this point.  The result can only be collapse, or restructuring around a Cæsar or a Bonaparte until, eventually, a productive hierarchy reappears, usually after considerable pain. 

USA

Virtually every conscious step of the Administration of Pres. Barack Obama and the overwhelming Democratic Party majority in Congress has been to increase the size and role of government in the economy and society, and to decrease, limit, and control the position of private enterprise and capital formation.  Given that this progressively contracts and ultimately eliminates production, and reduces the inherent asset base of the country — its raw materials and productive intellect — to a null value, the tradable value of the US currency will inevitably decline. We cannot be swayed by the enormous wealth of the North American continent.  Almost all areas have an inherent wealth of some kind, but assets left idle in the ground or infertile in the brain define countries which fail, or are not victorious in their quest for unbridled sovereignty. 

Thus, a decline in currency value is exacerbated, or accelerated, by the increasing supply of money, inextricably depreciating its value, particularly at a time of decreasing productivity in vital perishable and non-perishable output. 

The US Obama Administration has focused entirely on an agenda of expanding government — the seizure of the envied (and often ephemeral) “wealth” of the producers — without addressing the process of facilitating the production of essential commodities and goods.  Even the USSR and the People’s Republic of China, during their communist periods, focused — albeit badly — on the production of goods and services, when they realized that the “wealth” to be “redistributed” existed only as the result of production and innovation.  The US, meanwhile, heavily as a result of policies of the former Clinton Administration, has “outsourced” production, and the State — that is, the Government — cannot easily, in the US, become the producer. 

Pres. Obama has addressed the US’ economic crisis by expanding government, and government-related, employment in non-productive sectors, while at the same time blaming and punishing the private sector for all of the US’ ills.  Empowered by the extended franchise, this was the politics of envy now becoming enabled. 

Moreover, the populist, short-term response to the major oil-spill in the Gulf of Mexico was clearly geared toward (a) transforming a crisis into an opportunity to pursue a green energy agenda by highlighting the evils of the fossil fuels on which the US remains dependent; (b) ensuring that the President was not blamed for the poor crisis response; and (c) ensuring that the Democratic Party did not suffer from the crisis in the November 2010 mid-term Congressional elections. 

The result of all the Obama initiatives has been to expand government and reduce or absolutely control and tax the private sector, even though, without the private sector, the US has no viable export or self-sustaining capability. The net effect has been to mirror — and overtake — the situation in which, for example, Germany found itself a decade ago: without the ability to retain capital investment or attract new capital investment.

And in order to restrain capital flight from the US, the Obama Administration seeks to further control worldwide earnings of US corporations and citizens. For other reasons, the US, believing that it still dominates the technology arena, has imposed greater and greater restrictions on international exports of technology through its ITAR (International Traffic in Arms Regulations) and the Foreign Corrupt Practices Act. 

All of this conspires to limit investment in US manufacturing and restrict foreign interest in US exports because the regulations are being enforced merely for political punitive reasons. The US is making itself increasingly unappealing to foreign investors and has, as this writer has noted, made the appeal of the US dollar as the global reserve currency evaporate, saved, for the moment, only by the lack of a ready alternative. That situation will change within a very few years. 

Thus, the US has, in the space of a couple of years: (i) so dramatically inflated money supply that the value of the dollar is only shored up by the lack of international alternative currencies to act as reserve trading currencies; (ii) so dramatically inflated public debt, without stimulating economic growth, that US economic performance will continue to decline on a national and a per capita basis while competitive economies, such as the PRC and Russia, will grow, reducing strategic differentials; (iii) severely punished the private sector, thereby reducing the opportunities and incentives for strategic capital formation, and in particular punishing the industrial production and energy sectors, almost ensuring major dislocation to the delivery of US basic needs in the near-term; and (iv) so blatantly reduced its strategic capabilities through all of these actions and in its diplomatic and military posture as to guarantee a reduction in US strategic credibility. Concurrent with all of this is an increasingly punitive taxation framework. 

The near-term impact will include rising domestic energy prices, possibly even before the November 2010 mid-term Congressional elections, which could result in the Democratic Party losing its substantial majority in both Houses.  Even on this matter, Democratic Party ideologues have attempted to suggest that this is exactly what the country needs: expensive energy in order to facilitate change to “green” solutions. This defies the historical reality that pre-eminent powers must always have vast energy surpluses and use. 

So much damage has been done to the US strategic posture in just two years (although building on a base of inefficiencies which have been growing since the end of the Cold War), in many respects equal to the 1917 Russian Revolution (but without the bloodshed), that it is difficult to forecast whether — because of a changing global environment — the US can, within a decade or two, recover its strategic authority and leadership.

Domestically, the massively statist and interventionist approaches of the Obama Administration have polarized the country, and the response will be reactive rather than innovative, inducing a period of isolation and nationalism, but with grave difficulty in rebuilding confidence from the international investment community. 

European Union

Artificial, wealth-induced complacency following the end of the Cold War led to fury when economic collapse inevitably occurred in 2010, leading to draconian restraint in public spending in many societies, but particularly Greece and Spain. It is said that tourists are warned not to feed bears in Yellowstone National Park (in the US) because the bears do not understand when the tourists have run out of food. State-fed populations in Europe, the US, and Australia (see below) equally do not understand when the free ride is over, and work must recommence. 

Germany, France, and the United Kingdom have begun the arduous path back to recovery, but the euro may, as a currency, have been irrevocably damaged, and the European Union itself may have spent the term of its virility. Clearly, the wealth-induced complacency, which had the compounding effect of allowing a decline in a sense of national survival and national identity among the European Union (EU) component states, has led now to a revived — but as yet unrealized — sense of nationalism.

This is beginning to lead to the recognition of the cohesive national efficiency required for survival and competitiveness. It can be said that the EU destroyed nationalism, without replacing it with any mechanism to create a new sense of social cohesion, thus removing Europe’s capability for economic competitiveness, self-defense, or ability to define a new culture (and identity) to replace the national identities. 

Had the British Labour Party Government of outgoing Prime Minister Gordon Brown persisted in office with his slavishly doctrinaire governance — and demonstrably unworkable socialism, led by a privileged élite of Labour mandarins wallowing at the trough — it is possible that an economic recovery in the UK would have been problematic. It may still be problematic. And in this, Brown was a prototype Obama, with his rank sense of entitlement.

Even now, the British political psyche is fractured along geographic lines, and, wealth-induced, considers itself effectively “post-industrial”, and therefore beyond the need for a manufacturing (or even agricultural base). Thus, even though the UK is now far more dependent on a maritime trade base than at any time in its history, it is incapable of defending or projecting that maritime base; neither does it have the wherewithal to trade. 

Australia

The Australian Government has — like the Obama Administration in the US and the Brown Administration in the UK — demonstrated its absolute lack of experience in management, economics, or real-life work skills. A decision by Prime Minister Kevin Rudd to impose a new “super tax” of some 40 percent on resource companies — miners, who produce most of Australia’s export wealth — suddenly highlighted the reality that the mining companies did not need to put their investment into Australian projects.

This “tax and spend” approach so damaged Prime Minister Rudd’s popularity in the run-up to a November 2010 election, that his deputy Prime Minister, Julia Gillard, an extreme left-wing feminist, mounted a rapid campaign within the ruling Labor Party to overthrow him.  But apart from some temporary back-peddling on the Resources Super Profits Tax until the next election is out of the way, don’t expect incoming Prime Minister Gillard — the first Australian female head-of-government and the most left-wing ever — to back off her punitive stance against the private sector.

The Australian Government’s punitive tax approach, initiated by Rudd but likely to continue for as long as Labor governs, also highlighted the fact that foreign investors did not need to invest in Australia, and that capital could move — as it always does — away from draconian tax regimes.  As Chilean Mines Minister Laurence Goldborne said in June 2010, “Just because you have resources doesn’t guarantee investment.” This is something which the governments of most African states know. 

In Australia, the realization of the over-reaching greed — and envy-inspired approach of the proposed new tax laws — in turn led much of the ruling Australian Labor Party (ALP) and the profoundly leftist Australian media to begin their drift away from Rudd, leaving him with the prospect that he could either be abandoned as party leader before the late-2010 general elections, or be faced with the prospect of becoming Australia’s first one-term Prime Minister.

Gillard’s unbridled ambition also saw to that. The question remains as to whether she will be able to win the November 2010 general election. A more important question remains, however, as to whether the markets will still be there when the ruin of trust in Australian export and investment reliability is addressed by a future government. The People’s Republic of China (PRC), Australia’s major export client state, and Russia are now developing vast iron ore reserves on their mutual border, possibly — in the near future — obviating the need for much of what Australia exports. 

In the meantime, both Kevin Rudd and the opposition Liberal Party have essentially embraced the move by Australia to see itself as a pseudo-post-industrial society, gradually eroding the independent and innovative manufacturing sector which had been a hallmark of Australian economic growth.  A pseudo-post-industrial society is one which believes that it can live solely on the intrinsic value of its currency, without the necessity to sustain a balanced agricultural and industrial base to preserve sovereign independence. A true post-industrial society — something thus far a utopian dream — can produce all of its food and goods with a minute fraction of its population, which would largely be left to address intellectual pursuits. 

Australia, thus, faces a major challenge to its comfort, wealth, and security when value perceptions, investment, and clients evaporate. We see, then, in the very deliberate acts of envy and entitlement politics, the seeds of national collapse in Australia, the US, and Western Europe. 

Final Words

Some of the Western powers have slumped before, and recovered. The United States has yet to demonstrate this resilience.  Other Western societies have slumped, and have yet been protected by a strong regional system so that their societies could prosper under foreign protection.  The Netherlands, Spain, and Portugal, for example, retained stable and individual prosperous societies and yet never recovered their strategic leadership, relying, instead, on the power of their region for economic and security protection.  States which remain dependent on others for their protection never fully regain their wealth and freedom. 

States such as New Zealand depend on their greater neighbors for protection.  But wither New Zealand if Australia fails?  Wither the Netherlands today if the European Union fails?  And wither the United States if its fortunes erode? Re-birth is, as Britain has found through history, as did Rome, more arduous than that first, pure flush of strategic victory. 

The West is at its watershed, not because of a threat from a less-productive society. The collapse of the West is not because Islam is at the gates. Islam is at the gates because of the collapse of the West.

Source: http://oilprice.com/Geo-Politics/International/The-New-Civil-Wars-Within-the-West.html

Civil Wars of the Western World is a post from the TradingMetro blog, Energy and Metals Blog. Get a blog like this for free by joining our trading community today. TradingMetro is the forex trading system and forex trading software marketplace for self-directed traders.

The E2 Index

Research firm Market Strategies International said its E2 Index, which measures consumer perceptions of the energy industry’s economic contribution and environmental performance and credibility, showed the image of the industry has declined 25% in the past six months, from 40 in December to 30 in June.

“While the oil spill was unique to BP, it has caused consumers to question whether a similar incident could happen to other companies,” said Jack Lloyd, vice president of Market Strategies, which is based in the Detroit suburb of Livonia. “The entire industry will be under intense public scrutiny for the foreseeable future.”

The spill resulting from the accident at BP’s Deepwater Horizon will play a role in determining oil companies’ business strategies and their marketing messages, he said.

The E2 Index, which is based on a 100-point scale, registered the oil industry at 29 when it was first established in the first quarter of 2008, but had climbed to 40 by last December.

Categorizing Respondents into Five Categories

Market Strategies segments respondents into five categories depending on their overall attitudes to energy and the environment. The “Carbon is King” segment, which is the only category to favor increased reliance on fossil fuels, registered a drop from 59 in December to 40 in June in its perception of the oil industry.

The “No Nukes” segment, which had the second-highest rating for the oil industry in December at 40, also showed a big percentage drop, registering 25 in June.

The other three segments also showed a decline. “Ultra Green” – respondents who strongly favor renewable energy and conservation — declined from 16 to 13. “Anything Clean” – who support all clean energy options, including nuclear and clean coal – dropped from 32 to 28. “Atomic Efficiency” – who favor nuclear power as a clean energy solution – declined from 33 to 28.

“Much of the goodwill generated by the industry in the past two years has been wiped out by the Gulf oil spill,” said Lloyd.

The overall E2 Index – which takes in all sectors of the energy industry – fell more than 10% in the period, from 48 to 43, Market Strategies said.

The index is based on a total of 1,010 interviews conducted online with consumers selected to reflect key characteristics of the U.S. population.

Source: http://oilprice.com/Energy/Energy-General/Oil-Industry-Reputation-Hit-by-Gulf-Oil-Spill-Survey-Shows.html

Survey: Gulf Oil Spill Sinks Oil Industry Reputation is a post from the TradingMetro blog, Energy and Metals Blog. Get a blog like this for free by joining our trading community today. TradingMetro is the forex trading system and forex trading software marketplace for self-directed traders.

Crude oil prices surged ahead more than 3% on Friday as the first Atlantic tropical storm of the season began brewing in the Caribbean, raising concerns about disruption of production and refining in the Gulf region.

The benchmark West Texas Intermediate futures contract settled at $78.86 a barrel on Friday, the first close above $78 since early May. Friday’s gain put oil prices ahead just more than 2% for the week, after a closing price of $77.18 a week ago.

Bullish News

Further bullish news came in the forecast from AAA that 35 million U.S. drivers would hit the road over the July 4 holiday weekend, a gain of 17% over last year, though still short of the 38 million drivers during the 2008 holiday.

These short-term demand and supply factors overshadowed some of the negative economic trends that depressed prices earlier in the week.

Oil prices tumbled nearly 2% on Wednesday on the announcement that new-home sales plunged a record 33% in May following the expiration of federal homebuyers’ tax credit in April. The Federal Reserve also weighed in with a gloomy economic assessment after the meeting of the Federal Open Market Committee, which sees continued low interest rates in the face of a sluggish recovery.

Increase in Oil Inventories

Also on Wednesday, oil inventories registered an increase of 2 million barrels, contrary to a consensus forecast of a decline of 1.5 million barrels. Gasoline stocks declined by 800,000 barrels equivalent, but that was perceived as anemic for the season.

However, a weaker dollar gave oil prices some support throughout the week, and futures markets shrugged off Friday’s downward revision in first-quarter U.S. GDP, to a 2.7% annual rate from the initial forecast of 3.2% for the period.

The potential Caribbean storm could develop over the weekend, hurricane forecasters said, and would force evacuation of some production sites if it moved toward the U.S. Gulf coast. It could also interfere with efforts to contain the Deepwater Horizon oil spill.

The dollar was weaker across the board in the run-up to the G20 summit this weekend, including against the Chinese yuan, which gained half a percent against the U.S. currency this week after China announced it was loosening the yuan’s peg to the dollar. The Chinese move defused a possible issue at the summit, as U.S. lawmakers threatened legislative action if China did not act to increase the value of its currency.

Source: http://oilprice.com/Energy/Oil-Prices/Tropical-Storm-Threat-Propels-Oil-Prices-to-Gain-for-the-Week.html

Oil Prices Propelled by Tropical Storm Threat is a post from the TradingMetro blog, Energy and Metals Blog. Get a blog like this for free by joining our trading community today. TradingMetro is the forex trading system and forex trading software marketplace for self-directed traders.