Georgian Situation Continues the Quest for The Prize of Oil, Money and Power

Rod Adams — Mon, 18 Aug 2008 08:43:42 +0000

One of the more important things to understand about Georgia - the small country that recently engaged in a deadly struggle with Russia - is that it is one of the hosts of a relatively new, 1 million barrel per day capacity oil pipeline called Baku-Tblisi-Ceyhan (BTC). That pipeline was constructed with the active encouragement of the EU and the US starting in the late 1990s despite strenuous objections from Russia.

If you take a look at a map of the pipeline, you will begin to understand the geopolitical importance of the effort to provide a path out of the Caspian Sea region - home to a large oil and gas reservoir - that does not pass through Iran or Russia. Until the BTC was completed, there was no way to move Azeri oil out to the rest of the market without going through Russia.

(Aside: The map indicates that a path through Armenia could have been chosen instead of through Georgia, but apparently Armenia and Azerbaijan have a long-standing conflict over a region known as Mountainous Kharabakh.)

Unfortunately, western leaders underestimated the strength of Russia’s objection to losing control over Azerbaijan’s oil and gas resources. They also underestimated Russia’s ability to do something about its desire to reassert control. By biding its time and working in the way of the excellent chess players that they are, Russia has put itself in a position to control (stop?) the flow and there are few acceptable actions that can be taken to change the situation.

One of the few things that has a long term chance of success is a focused program of reducing the importance of oil and gas in the world economy.

My input on that front is to steadily increase the use of uranium and thorium fuels whose supply cannot be severed by an aggressor sitting astride a key delivery path. When electricity and ship propulsion is powered by heavy metal fission instead of natural gas or oil, the importance of owning the valves that supply heat and power gradually dims to insignificance.

Popping the Oil Price Bubble

Rod Adams — Mon, 09 Jun 2008 09:08:01 +0000

On Friday, the benchmark oil price increased by its largest single day total ever, nearly $11.00 per barrel to nearly $140.00. To put that into perspective, the trading price for a barrel of oil in 1998 - just ten years ago - was less than $11.00, Friday’s price change.

Though there are plenty of reasons to believe that oil will never again cost anything close to $11.00 per barrel, there is also a growing recognition that the current state of the oil market bears some resemblance to a number of other over excited markets like Dutch tulips, Internet stocks, and new home prices in Fort Myers or outside Las Vegas. The similarities include daily headlines, constant water cooler discussions, and fears of missing a big boat.

Unlike some of those other bubbles, however, the recent rapid increases in oil prices are painful for almost everyone but those involved in selling or transporting crude oil. Even though they bear the brunt of consumer anger, oil refineries producing gasoline and gasoline retailers are actually being squeezed as badly as most of the rest of us by high prices. The wide spread nature of the pain caused by rapid oil price increases was brought home to me on Sunday as I visited the Newseum in Washington, D. C. and saw that oil prices were front page news on at least half of the world’s Sunday newspapers.

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Georgian Situation Continues the Quest for The Prize of Oil, Money and Power

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Popping the Oil Price Bubble