Random Notes  

Tropical storm Katrina has people concerned about more supply disruptions in the Gulf of Mexico.

Oil production interruptions seem to be a common occurrence lately - some fields beginning to come back online this week include those in Southern Iraq, Nigeria and Ecuador.

Pat Robertson may be gagging to get Hugo Chavez and his "deep pools of oil" into his gunsights (be sure to check out Monkeygrinder's discussion with Robertson's alter-ego, the Bearded Lord of Evil, along with Jeff Vail's speculation that this may be Act I of a manufacturing consent process for Chavez's downfall) but Hugo is no doubt winning a few friends in Ecuador, after Venezuela responded positively to a request by the Ecuadorian authorities to provide oil to enable it to honour its export contracts. Especially with Chavez saying that the oil will be lent to Ecuador for free. I guess this is one example of how oil exporting countries will be gaining power and influence as supply shortages grow.

Chavez's response to the whole brouhaha was both funny and quite clever, saying he'd never heard of Robertson and expressing a "deep concern" about "increasing poverty rates" in the US and a desire to sell cut rate fuel direct to the poor there. Will this be the trigger that turns cashflow poor red-state SUV drivers into fervent communists, thereby bringing a new meaning to the term "red state" ?

Over in the parahistory world, Jeff Wells also takes a look at Robertson's checkered history.

I remember watching Pat Robertson, in the mid-1980s, solicit funds and prayers for his "Brother," Rios Montt, the fundamentalist monster of Guatemala. I don't recall hearing one word of censure towards his partner in gold profiteering, the former despot of Liberia, Charles Taylor.

America, in case you haven't noticed, has become a place of strange perversity. A place in which Robertson can fantasize aloud, before an impressionable audience of millions, about smuggling a nuclear device into the US Department of State, without fear of disappearing into the gulag from which Jose Padilla may never emerge. (And what was it he did, again?)

Back to more oil focused news, the Ecuadorian protesters who caused the production disruption there are now threatening to go on a hunger strike unless they are granted immunity from prosecution.

Another report from Nigeria notes that production interruptions aren't the only problem there, with around 20 million barrels of crude oil out of 3.6 billion barrels that was produced in 2004 stolen by oil thieves in the Niger Delta region.

Nigeria's oil minister has noted that OPEC quotas are just academic nowadays.

Meanwhile, some of the recent unscheduled stoppages, including those in Ecuador, were starting to clear, but not without leaving their mark on prices last week. Mr Norrish said: “The major lesson of the Ecuadorian situation is that even a relatively small stoppage – one that would normally be well below the radar of market consciousness – can be a price driver in a system exhibiting no slack.”

This sentiment was echoed by Nigeria’s oil minister who said Opec quotas were “academic”, when asked about the possibility of the cartel raising official production quotas at its meeting in September. He added: “I think for now, Opec will be happy for any member who has the capacity to produce [at current quotas].”

The surging oil price has helped BHP along to their (and the Australian market's) largest profit ever. As this windfall is also due to the high prices for the mineral commodities driven by the boom in China, observers are warning the good times won't last forever. This view isn't shared by everyone, with other analysts claiming that supply/demand imbalances in oil as well as some minerals could result in prices continuing to rise. Personally I tend to think oil prices will keep rising for quite a while and they'll kill off industrial growth and hence mineral commodity prices - which makes BHP a bit of a pain from an investment point of view - if they'd split off the energy (uranium, oil, gas and coal) divisions into a separate company that part would be a much less risky investment proposition (and it would be even better if it included a renewable energy division, though that doesn't seem to figure in their thinking, even though they would seem to have enough excess cash to put together a pretty decent one if it crossed their minds).

Elsewhere in the Herald, Paul McGeogh (who seems to be persona non grata in Iraq after his reports on former US favourite Iyad Allawi shooting prisoners) is now in Kabul and has a look at Afghanistan and the continuing game being played over pipelines through the country. This might explain why I saw a British army officer in Afghanistan on TV earlier this week saying that it would take 30 years to win the new "war on drugs" they are waging against opium growers there (though I seem to recall the Taliban wiping out the opium/heroin trade, along with those wondrous giant Buddha statues at Bamiyan and women's civil rights, in just a few short years when they were in charge). McGeogh also notes how unfortunate it would have been if Unocal had built this pipeline under Chinese ownership.

Afghanistan is at the centre of a high-stakes struggle for vital pipeline routes to tap vast oil wealth.

"We are talking about a very simple pipeline," is how a senior adviser to the Kabul Government describes the on-again, off-again $US3.8 billion ($5 billion) plan to pipe natural gas from Turkmenistan to Pakistan and India. But nothing is quite as simple as that. Like tangled spaghetti, the real and imagined pipeline routes of Central Asia see Washington, Moscow and Beijing pitted against each other in a much higher stakes, 21st-century version of the old Great Game.

In the 1800s tsarist Russia and the British Empire slugged it out for wealth until the distance between their borders - and for the empire that meant India - shrank from about 3000 kilometres to about 30 kilometres. As the old Soviet republics opened up after the Cold War, the trophy became the vast oil and gas wealth of the Caspian Sea basin and the contest was renamed the New Great Game. Now, in the era of the war on terrorism, the liberation of Afghanistan and great unease in the Middle East, it's been dubbed the New New Great Game.

The Afghan project is instructive - because nothing is quite as it seems as the majors and their proxies tug at spaghetti-ends, hoping to wrong-foot others or to lock in a deal for themselves. It was only al-Qaeda's bombing of the US embassies in Nairobi and Dar es Salaam in 1998 that ended Washington's courtship of the Taliban in what was seen as a bid to get a project go-ahead for the US oil firm Unocal.

In the 1990s Washington's interest in Afghanistan was widely seen as a leg-up for Unocal and the rise of three of the company's former Afghan fixers in the new Kabul administration keeps conspiracy theorists in overdrive. Apart from the Mines and Industries Minister, Mir Mohammad Sediq, the President, Hamid Karzai, who has made the pipeline his No. 1 priority, was a Unocal agent in the '90s; so too was Zalmay Khalilzad, Washington and Kabul strongman and recently departed US ambassador to Afghanistan.

As the Taliban locked Kabul in its ancient, fundamentalist vice in 1996, Khalilzad gave the fundamentalists an astonishing wrap in a passionate opinion piece in The Washington Post: "The Taliban does not practise the anti-US style of fundamentalism practised by Iran - it is closer to the Saudi model - [oil and gas] projects will only go forward if Afghanistan has a single authoritative government."

While the Chinese missed out on Unocal and its prospective pipeline from the Caspian, they appear to have had more success acquiring PetroKhazakhstan. In other Chinese news, Canada's "Globe and Mail" reports that China may have move quickly to replace coal fired power with natural gas due to a looming environmental disaster (hence their massive gas deals with Iran).

China's voracious energy appetite has already helped drive crude oil to record levels and now the country threatens to do the same to natural gas as it strives to replace dirty coal with the cleaner-burning fuel.

A senior Chinese energy researcher said this week that his country will accelerate its move away from coal because of rising prices and environmental concerns. The report from Zhou Dadi, director of the Energy Research Institute, did not set a specific target for reducing China's overwhelming dependence on coal for generating energy, with the comparatively dirty commodity accounting for nearly 70 per cent of overall production.

But with natural gas accounting for just 3 per cent of energy production, there is tremendous scope for growth in Chinese consumption, National Bank Financial says.

Environmental worries will push China toward natural gas, the bank said in a note, adding that sulphur dioxide emissions have soared so much that rain falling in parts of the country is nearly as acidic as vinegar. "The switch will need to come," assistant chief economist Stéfane Marion said in an interview.

Finally, signs that freight transport by rail is beginning its comeback are appearing in the UK. Time to sell those trucking company (and toll road) shares if you have any...

Rail freight services have returned to Ridham Dock in north Kent for the first time in more than three years. The rail freight line closed in 2002 but has been upgraded by operator EWS. EWS said the move would take 1,200 lorries off the roads in the next six months and there was enormous potential for more services to and from the dock.

The contract behind the move will see five services a week bringing building materials from Germany previously transported by road. EWS managers say the company is committed to increasing the amount of freight hauled on the rail network. The company has said the dock is part of an overall plan to bring 33m tons of freight to the British rail network.

Spokesman Graham Meiklejohn claimed their customer was making more use of rail transportation because of rising fuel costs. "All over Britain, hauliers and managers are trying to manage the effect of rising fuel prices by using a rail solution," he said.