Brahm

Geopolitical Energy: Centered on the Caspian Sea (Part 2 of 2)

Good analysis, but perhaps somewhat skewed in parts. You failed to mention that besides the oil/gas concessions in Iraq for BP, Exxon, Shell and Chevron, the current Iraqi govt has also given concessions to Chinese companies and others. Future Iraqi governments are unlikely to skew their energy policy, especially issues on exploration and production rights, solely in favour of Western companies. Other nations' (state companies) have not been aggressive bidders yet due to fluid and unsettled circumstances in Iraq currently.

As Europe's dependence on Russia and Central Asian energy increases with time, a divergence in approach to Central Asia and Iran will most likely increase between the US and the Europeans. One can see the nuances of this divergence even now.

Barron's Banks on $100 Oil

Oil bulls, or should I say radicals, should not forget that even an average size recession will topple consumption of oil substantially, if prices remain at current levels. I bet uncle Ben and others in Wall Street are fudging economic numbers and conditions to avoid the R tag. To all intents and purposes, the US economy is mosgt probably in mild recession at this time. If you exclude the increase in energy related spending of the typical consumer from the GDP numbers over that of '07, you may well find that the numbers representing i2nd quarter '08 GDP are probably about even or somewhat lower than those for 2nd quarter '07.

Last week,for example, the EIA reported that gasoline consumption was lower by 1.8% from last year (?). Nobody can make a rational case that the massive inceease in the price of energy has not or will not change behaviour of American consumers or drivers, especially those at the lower end of the middle class. I have seen changes in behaviour of drivers in the middle and upper middle class on the street I live on. SUV's. common on this street formerly, have been traded away or quite often are found to remain parked for very long periods. The formerly shunned and lowly small cars are becoming fashinable to drive!

So oil bulls, in my view Barrons has something to its argument for at least the immediate period for the short or intermediate term. A 2% drop in consumption over a couple of months in the US will do wonders for the price of oil. Long term though the price of oil is still going to be on uptrend.