CRUDE OIL - A SHRINKING RESOURCE

CRUDE OIL, ENERGY, SHIPPING

Wednesday, March 29, 2017

Coal Ahoy!

Pres. Trump has trumped another of Obama's high cards. After Obama Care Mr Trump has rolled back Obama climate action plan. The core idea is to reinstate cheap coal as the main source of energy. Save and create jobs for the coal miners. Obviously, coal lobby was at work during elections. Mr. Trump is a businessman and he, like anyone of his clan, believes money could buy everything, even immortality.

Unfortunately, Mr. Trump's act is spontaneous, prejudiced and political.

Until recently, USA has been leading the fight against Global warming, which is more of a proven fact than a myth. A step back by USA may unleash China & India, the two leading aggressors and violators. However, the renewable energy technology has now gathered enough momentum and has become potential competitor of the fossil fuels by virtue of low prices. Slacking of regulations on the production and use of dirty sources of energy would put downward pressure on their prices thus making them less profitable and the mine workers less prosperous.

Moreover, it wont be a smooth drive to furnace for Mr. Trump and the lobbyists. Environmentalists will be major road block and the diggers will have to go through lengthy law suits before they could get permission to smoke the world.

Nevertheless, in short run, its a good news for dry bulk shipping markets, a sector which turned lifeless after Obama climate action plan came in force. Now we will see more coal on water and the dry bulkers cranking to life once again.

On the macro screen, the movie would continue as scripted after a minor glitch because only the technology holds the trump card to future. 

Wednesday, February 03, 2016

An Oil Autumn

Oil has been shedding its price for quite a while now. Oil producers are having a tough time while the consumers are making merry.

However, falling prices should be a great cause of concern for the consumer nations. It was not the British or the Americans who forced defeat on Germany during WW II. In fact, it was the Russian retreat which trapped and left Nazi forces to languish in harsh Russian winter and ultimately to defeat.

A gross consumer nation like India has unlimited potential for growth of oil demand and we are already witnessing its demand for oil products multiplying dangerously over recent past. The current retreat in oil prices is certainly poised to make the new government, which is hard pressed to fuel development and the economy of the country, complacent to the over-usage of petro-products and its perils. It is no brainer, sun will shine over the oil industry once again and then the consumers will be caught with their pants down to the oil blitzkrieg.

As the prudence calls, each and every penny saved out of blood of oil industry, must be fed NOT into building roads or cars or other oil resuscitating industries BUT into alternate renewable energy sector. The government must come up with a road map for the entire national development basis conservation and recycling of the resources. Blindly accepting and following the western road maps will be a one way ticket to doom for the entire developing masses.

Monday, January 25, 2016

Year of Monkey Business

New year 2016 has dawned but the world economy wears a fatigued looks and businesses are yawning...

21st Century started with boom and bust of information technology. Boom or bust, the information technology was to become the order of the day. The world was swept over by IT at the speed of light. It transformed human behaviour and life style.  In bid to survive the metamorphosis brought about by the information technology, it was imperative for each and every element and structure of the human society to undergo a rigorous evolution process. Obviously, there are some tough nuts in every walk of life. Every change is resisted by inertia or status quo.  The purpose of this inertia is to hold the continuum thru the entire animation. But this change has to be rather quick and abrupt. Hence a majority failed to accept and evolve. And this majority has now turned rebellious (ISIS). We see the war clouds hanging over the centre stage. Nature too has been increasingly hostile due to prolonging of the previous act (industrialisation).

We are going through a difficult phase of change-over before we settle down to the new dawn.  

IT era means, 80% of the world population languishing in poverty, ignorance and destitute to fall in to the global main stream. To absorb this huge influx into the existing mainstream would mean an incredible stress on natural resources. Hence, the only logical solution would be :
1. a substantial natural resource friendly change in human lifestyle and processes 
2. a substantial shrinking of human population.

The speed of the transition would have to be faster and thus it may be a painful interlude before the paradise is regained. 

Friday, August 07, 2015

Trumping Oil

I am hot! I am so hot!! Check me out, I am hot!

You bet, you indeed are the hottest. For billions of years the sun has been burning bright and sustaining life on earth. But machines were less fortunate until late, as they could not enjoy a sun-bath.  In stead, they devoured on organic agents of sun viz wood, coal or hydro-carbons and farted smoky CO2. In bid to humanize machines, man has now electrified them and for icing over the cake, this electricity is being generated using solar energy.

The day is not far when sun will totally eclipse the conventional sources of energy. Seeking solace in this fact and sensing the sinister rise of Russia in Europe (and Republicans in USA), the USA government lifted the economic sanctions on Iran bringing the prices of oil tumbling down. Republicans cried foul, as they have deep rooted interest in Oil and Oil fields. President Obama has made it clear in his speech that he considered Russia as a bigger threat to USA than Iran (...and Republicans to the Democrats!!). To contain Russia, getting hard to handle Saudis and rising Republicans, Pres. Obama has played his trump card by lifting sanctions over Iran and thus flooding the oil market with Persian barrels.

There will be little respite for oil prices till next presidential elections in US in Nov, 2016, when the Republican will finally be able to play their Trump card.

Monday, July 06, 2015

Greco-Persian Effect

Hovering at 60 for sometime, oil is diving to 50. Greece for all the wrong and Iran for all the right reasons are putting downward pressure on the oil prices. All in all not good for the tanker market in short-medium term.

Tuesday, March 24, 2015

Oil Story - the cliff-hanger moment

1. Strong dollar
2. Ukraine truce
3. Soft and compromising Iran 
 ...are the three looming situations which may pull oil further down to the lowest levels in a decade. 

1. Fed
2. Russian & Ukrainian oligarchs
3. Israel
 ...are the three actors who's play will determine the fate of oil in short to medium term.

PS. Oil uses Yemen as a surprise prop.

Thursday, November 27, 2014

The cats fight for the larger share, monkeys make merry

OPEC has decided to maintain its pumping rate in response to the cut-calls to stem the slide in oil prices. OPEC are a bunch of countries having access to the easy oil. In recent years we saw the rise of tight (Shale) oil after the peak oil lead to a steep hike in oil prices.

OPEC's latest move to ignore the fall in oil prices is viewed as a price war between the conservative and the new oil producers. The new oil is vulnerable due to a very high production cost as compared to the conservative oil. Hence, as the prices fall, the shrinking profits margins would soon put its producers in dock and the benefit will go to the OPEC. Therefore, expecting production cuts from OPEC could be ruled out till they really see shale production hampered. For now OPEC has blissfully passed on the handle to control prices to the new recruits of the oil production market.  

If the 'cap oil' decides to be resilient and test the market price levels at current production rate, experts feel the prices could touch as low as $50-60 pb. However, low profitability may choke them before reaching those levels. It seems, only a big leap in world economy or a forced blockage (an act of God) in OPEC's flow may buoy the fresher in future. Also, it means, Iran will remain untouchable or an outcast for a longer period.

For the time being, oil importing countries are enjoying the low prices. But this turn in events would push their domestic consumption for goods and oil more than their exports.  

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