The First Oil Shock

A research paper by Eyal Dvir of Boston College and Ken Rogoff of Harvard suggests some interesting parallels between the recent behavior of oil prices and what was observed at the very beginning of the industry. I’ve been doing some related research on the history of the oil industry that looks into the events behind historical oil price shocks.

Are Oil Prices About to Undermine the Recovery?

Calculated Risk directs us to an LA Times story identifying the possibility that rising gasoline prices will undermine the recovery. He also reminds us that James Hamilton recently wrote on the subject as well, concluding: 

I could certainly imagine that an abrupt move up in gasoline prices from here could hurt the struggling recovery of the domestic auto sector and dampen overall consumer spending. I do not think it would be enough to give us a second economic downturn, but it could easily be a factor reducing the growth rate.

Turkmenistan Signals Readiness for Nabucco

A recent series of statements and concrete actions by leaders from Ashgabat shows a clear willingness and desire to implement the “European direction” as a component of the country’s international gas export policy. Technical obstacles are mainly solved, and the only remaining political obstacle appears to be Europe’s difficulty in concentrating its attention to take the necessary steps from its own side. The last chance for this seemingly will begin to expire early next year.

Russo-Chinese Relations

When Russian President Dmitry Medvedev visited China the last week of September, pride of place in the diplomatic agenda was made manifest in a ceremony marking completion of the Skovorodino-Daqing oil pipeline between the two countries built in just 20 months. Comprising a 576-mile spur on the Chinese side of the border to the longtime energy-sector city of Daqing and a 45-mile connector on the Russian side to the East Siberia-Pacific Ocean (ESPO) oil pipeline, it will allow Russia to export 300,000 barrels per day to China over the course of two decades, representing roughly eight percent of current Chinese imports and four percent of current consumption. Pursuant to a February 2009 agreement, Russian para-statal energy companies received $25 billion in loans in order to construct this pipeline and as pre-payment for oil to be received.

Kazakhstan-Russia Summit Seeks Deeper Cooperation

Presidents Nursultan Nazarbayev of Kazakhstan and Dmitry Medvedev of Russia held a two-day summit in early September, at the two countries’ Seventh Forum on Interregional Cooperation in Oskemen (settled by order of Peter the Great in 1720, called Ust’-Kamenogorsk from the mid-nineteenth century until 1992), the capital of the East-Kazakhstan province. While some agreements to implement existing agreements for joint energy development of the Khvalynskoe and Imashevskoe deposits were reached, the summit was mainly notable for being less superficial than other such meetings in the recent past. 

Happy Belated Birthday OPEC?

Yesterday was OPEC’s 50th birthday.  The occasion is being met with celebration in Vienna, the host of the OPEC secretariat, and in OPEC capital cities (see FT beyond BRICS for more).  Production still remains well below the 2008 peak, or even the average of 2006-8 (despite oil averaging around US$75 per barrel for most of the last year), but was inching up until mid-year and is currently at a price level where all but OPEC’s overspenders can balance their budgets.  All in all, assume status quo of unchanged production at OPEC’s next meeting in October, as the prospects for oil demand growth cool along with the global economy. In the longer-term demand, particularly from EM Asia (and oil exporters themselves), should keep prices high.

The Final Lesson of BP

BP is starting over. It just named a new American president and its finances are looking up. BP’s second-quarter report showed surprisingly strong revenues of $75.9 billion, beating Wall Street’s estimates. (This includes a $32.2 billion writedown along with the $20 billion liability fund that the Obama Administration wanted.) The company has started to sell $30 billion of its assets to ensure it has all the money it needs to pay any liability claims. No wonder several Wall Street analysts are suggesting BP stock as a terrific buy.