Tuesday, May 27, 2008

This Bubble is a Balloon

Its not like any Tom, Dick or Harry, armed with a drill machine, screwing earth and jet of warm black liquid hitting on the face. Present Oil rush is different from the 70's rush, which ended in an oil glut, on the following counts:
  1. Demand has potential to accelerate at much higher pace.
  2. Thinning probability of hitting bull's eye. (Finding new wells)
  3. Limited E&P players, who know the geology better and thus the limitations.
  4. Extra-ordinary high E&P cost.
In the face of snarling demand and dwindling supplies, days of cheap and easy oil are over(yawn...). Commodities as whole have broken loose from the shackles of slavery and exploitation are now venting their ire in the market place. Well, some call it a bubble, but this bubble is well protected by the demand and supply pressures. Also protecting and supporting this balloon is environmental worries.

However, the current spike in oil prices can be attributed to the coming hurricane season in the US gulf. NOAA has yet again predicted an above nornmal season with 2-5 major hurricanes during the season. We are seeing USA hauling up more crude and gearing up for the rainy days and speculators are pumping in money to reap rich reward on account of disaster. During the last few days, some of the over-reaction has recoiled, just to be unleashed at the slightest provocation at later stage.

Our needs are growing into addiction and 'WE and our needs' is the fastest expanding bubble. We ought to adapt to nature and find comfort out there. On the contrary we are building a fragile cocoon around us which does support our whims and fancies at the moment but the day it shatters, we may not be able to face the fury of nature.

Thursday, May 22, 2008

Gas in Can only

Diving rupee and shooting crude prices - A double whammy for Indian Oil PSUs. Left with no way out, BPCL in a Persian act has rationed supplies at domestic gas stations. The move would lead to black marketing of the products.

In wake of the coming elections, Indian Government has been turning a blind eye to the rising crude oil prices and lending a deaf ear to the Oil PSU's SOS calls to raise gas prices, for quite some time now. Government already wary of ever rising inflation (7.83%), has been avoiding the inevitable since stepping on gas at this moment would mean accelerating inflation into double digits and facing the music at ballot boxes.

The government, under pressure has lowered import duties on a series of items, and curbed some exports to keep domestic prices down by ensuring supplies adequate. Both actions are leading to fall in rupee value, which in turn is adding to the inflationary pressure. Yet Montek Singh of planning commission, feels that inflation would fall within a few months.

In 'wake up now or never' situation, the government is meeting tomorrow to discuss the hike in gas prices. 'Lekin Aam ke mausam mein khaas baat shayad hi ho'. 'Long live THE common man' will be the agenda for now.

Wednesday, May 14, 2008

Vanity Kills

What a run oil had last week. Somebody sneezed at Goldman Sachs and blew it all up. Led by Moses, big money soon started chasing oil and experts are at it once again explaining price dynamics - high demand, low supply, weakening dollar blah blah...

President Bush has blamed China and India for letting loose the tiger in woods. During the last few years demand from these countries has risen in linear progression despite crude oil prices getting locked in a geometric progression. The demand for black gold from these two countries is not expected to get into lower or reverse gear any time this year. Both countries are committed onto front foot for the mega events later this year viz the Olympics in China and the general elections in India. Oil salvo would probably test the limits to which these countries may rise (on their toes) before finally ducking. Till that time these countries would pay a hefty toll for their vanity.

Vanity kills, it kills.

Thursday, May 01, 2008

The Last Cut

Dr. Bernanke has made the seventh incision, taken off his gloves and washed his hands off, finally leaving it on inshallah for subprime wounds to heal. So is the indication.

Economists believe, the indication should stop further dollar slide and this renewed faith in dollar would stabilize the frenzied world markets.

Whereas GDP growth data is positive, houses and malls remain haunted. But water does take time to seep down to the lower roots and once it does, there is cheers all around. So they believe and wish.

Lets not pause and ponder over 'pause' and 'stop' before raising a toast for this last cut.


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