Oil Qaeda

Why did the CEOs of Exxon-Mobil and Royal Dutch Shell both say, just last month, that US$70 oil is not supported by industry fundamnetals?

This was reported by Ng Weng Hoong, editor of www.energyasia.com, in The Straits Times, Friday October 19 2007, on why: "High oil prices are here to stay."

http://www.straitstimes.com/Free/Story/STIStory_168332.html

I'm going to assume that the two CEOs are well-informed on the oil industry's fundamentals, so today's US$88 oil prices must include a risk premium to cover uncertainties. To summarise, although the article is worth reading, Ng says that these uncertainties are

1. Supply/demand imbalances; especially predicting demand from China, India and Brazil.
   
2. Politics that prevents oil-producers from responding rapidly to higher prices.

The article does not expand on the second point and I'll take a stab at it here. American foreign policies, dominated by the "war on terror" makes it difficult for the American oil industry to participate in exploration and production-sharing opportunities arising from higher prices. This applies not just to purchasing concessions but the nitty-gritty engineering of exploration and production where American know-how and equipment is excellent.

The uncertainties are real but the premiums charged depend on perceptions of the power and influence of Al Qaeda, or, more accurately, Salafi Jihadists. Since power and influence are themselves perceptions, these premiums are perceptions of perceptions. No wonder I'm confused but at least I'm in good company.

Bottom line? Try to use less energy, especially when driving. It's boring but make lists of errends and shopping and try to combine them on each journey.

Being alive and staiying that way.

Hi All and welcome!

1. I'm a patriot but not political. There is a difference between the nation, its government and the ruling party. I'm loyal to the first, critical of the second and have no wish to be associated with the third or any political party.
2. We live in a dangerous neighbourhood. Indonesia is a failing or already failed state that cannot deliver good governance to its people. Malaysia is constitutionally divided and no nation can be built without unity. Consequently and regretfully, and despite our high diplomatic profile in international organisations, this means a muscular military.
3. Power is a matter of perception and wars mostly result from miscalculation. Hence, a proper display of both diplomatic and military power increases the chances of not using it and enhances security.
4. The converse is also true. Maintaining a respectful silence during Singapore-bashing in the regional media, as our neighbours mistakenly prefer, may lead to a deluded superiority and unnecessary aggression requiring a violent correction which no one wants.
5. Opinions are can be about physical events, what actually occurred and how we understand them. These can be debated when the events are stated.
6. Otherwise they become pure mental constructions like ideas, or worse, biases which cannot be debated. No evidence means no argument, only assertion.
7. Those preaching hatred should not be silenced but answered with rational arguments.
8. Deliberate mis-statements about events which did not take place are lies. Lies are not opinions and liars should be exposed whenever they disguise their lies as opinion..
9. Having seen a little of their effects at close hand, I fear and detest modern weapons; but, sadly, others do not.
10. Those inciting violence may change their views if they experience it directly.
11. I've no quarrel with those who wish to meet their God; but taking along anyone else is unacceptable. I support those who are arranging for these zealots to meet God; but by themselves.
12. An overwhelming majority of these sad and dangerous people are financed by oil revenues. High oil prices mean more money for hatred and violence. We must conserve energy and reduce our oil dependence. Saying: "Never mind, I can afford it." is a delusion; we can't afford suicide bombing.