Thursday, January 15, 2015

Fwd: Oil Wars -Dramatic Collapse of oil Prices, Ruble and Euro; Little Indian Thought on the Windfall

Oil Wars -Dramatic Collapse of oil Prices, Ruble and Euro; Little Indian Thought on the Windfall


In the world wide Casino, where Washington ,with over 3 trillion US dollars STIMULUS but without  effective gold backing ,in league with its oil pumps in the Gulf , has played havoc with stock exchanges around the world and with the prices of commodities including oil .But as sometimes in the past , the oil worm might turn to teach a lesson to the West and disrupt US dream of being a big swing producer of oil and gas from the shale fracking , which apart from long term very harmful environmental and health effects ,is not profitable below 60 $ per barrel , thus undermining even the recent manipulated lift in US economy .


Modi govt has done well in facing up to a bad monsoon in keeping prices in check, unlike previous regimes where well known corrupt ministers in league with hoarders and others would have made a killing and self banked drought relief funds.


But doubts, rightly, have been expressed about its use of the oil price tumble .Apart from building a fund to counter volatility, reduced energy prices should have led to demand side uplift of the economy by sharing oil prices fall.


Now that we have a separate M/Defence, an able engineer politician, unlike the Kumbhkaran Antony, who after smacking his forehead when told about corruption, did pretty little .What a galaxy of incompetent home Ministers we had. The present one, Rajnath Singh, is no better and Smriti Irani is crying shame.


I am first reproducing a recent article on oil wars and massive price drop by F. William Engdahl | US-German author and analyst of geopolitical and economic issues. His newest book is Myths, Lies and Oil Wars.


Incidentally , Washington had used the Marshall Plan after WWII, to enforce use of oil by Europe in place of coal , since Anglo-Saxon Powers controlled oil wells in the Middle East.

Then at the end a piece by Amb.Bhdrakumar on the subject preceded by a short note written by another dabang 1961, IAS service officer , Sh. T.N.R. Rao, former Secretary, MoP&NG and Chairman, Energy Think Tank  and other such bodies .

K .Gajendra Singh , 15 Jan. 2015.Delhi


The recent headlines talk of a dramatic collapse of the Russian Ruble against the dollar and euro. World oil prices today hover around $57 dollars a barrel. Late August they were over $100. OPEC ministers refuse to act to stabilize prices. The Russian rouble is forced to halt trading in mid-December. Then the US Congress votes yet a new round of economic sanctions against Russia which await President Obama's signature. When we examine all of this more closely it reveals the strategic great confusion of western elites, especially American Oligarchs frantically trying to find ways to hold their grip on global power.


I sometimes use the very descriptive adjective "stupid" to speak about the actions of people we are accustomed to think of as anything but stupid. Malevolent, evil, satanic even, you say, but not stupid. Yet more and more I find the description stupid the most appropriate. It is in fact their stupidity in being incapable, in their addiction to power, of seeing the larger global consequences of their tactics or strategies.


If we define intelligence as the ability to grasp the interconnectedness of everything in our universe, then we can call stupid those who, despite their vast resources and access to the best minds, are incapable of considering anything outside their tunnel vision narrow world.


Cold War worked from 1946-1990 to stabilize their imperial grip on global power over Western Europe, the Third World, Japan and Asia. The end of that Cold War has seen the dramatic erosion of our power as new upstarts like China and Russia and even Iran assert their sovereign rights in the world, we can imagine their thinking: "Well, then let's go back to what worked then. Let's start a new Cold War or even, step by step, a new unconventional global war to retain our American Century, our Project for a New American Century," as Dick Cheney and friends call it.

They now try a rerun of their 1986 Saudi oil price collapse strategy to topple Putin, Maduro in Venezuela and Iran according to informed reports from reliable Washington researcher Wayne Madsen.


In 1986, Vice President George H.W. Bush, father of George W., together with Secretary of State George Schultz and others convinced Riyadh, as John Kerry did in his September 2014 meeting with Saudi King Abdullah, to run a "reverse oil shock" that had the effect of toppling the over-stretched Soviet Union. It worked in 1986, why not in 2014? Is the thinking of some in Washington.


CIA role and oil price suicide

According to Madsen, who is a former NSA employee with good connections in different factions of Washington intelligence community, it was CIA chief John Brennan and CIA operatives inside the Saudi Aramco state oil company who devised a diabolical strategy of getting the Saudis, along with Kuwait, to flood the world markets with crude and let Wall Street banks like Goldman Sachs, JPMorgan Chase and Citigroup do the rest of the dirty work with leveraged derivative short futures on crude.


While I cannot confirm Madsen's assertion that the Saudi flooding perforce will necessarily last another five years after which Saudi production will collapse because the US CIA convinced Aramco against the advice of oil engineers at Schlumberger and other foreign oil services companies not to use salt water injection, that Brennan, who by some who know him has been described as a "knuckle dragger," was poised to implement the Saudi strategy as an anti-Putin move is entirely plausible.


Only one problem. The brilliant strategy is ultimately stupid because it is collapsing the US domestic oil industry and hundreds of billions of dollars of planned energy investment globally along with lowering Russian oil dollar revenues and the ruble.


F. William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine "New Eastern Outlook"
First appeared:


Stabilisation Fund to moderate the volatility in oil prices


The Expenditure Finance Commission constituted by the previous NDA for which I wrote the chapter on Petroleum had recommended the creation of a Stabilisation Fund to moderate the volatility in oil prices. This is an once in a lifetime opportunity to create such a fund effortlessly and the war chest could be of the order of 50k to 100k crores,


This will be a public account and buoys up the CAD and fiscal deficit of the budget. Govt is not showing any policy response to take advantage of this and prepare for a rainy day ahead. Floating storage was examined earlier ( in the late 80s when prices fell below $10) and found not feasible in a govt's environment, as no one knows how prices behave. We don't have china's flexibility in dealing with prices. Anyway, the world is awash with oil and will continue to be so.


Sh. T.N.R. Rao, former Secretary, MoP & NG and Chairman, Energy Think Tank


India fails to exploit oil price slump


By M K Bhadrakumar  January 8, 2015

As an energy-deficient country whose import bill for oil in the last financial year stood at $150 billion, the sharp fall in oil prices is a moment to celebrate. There are two ways to celebrate. One could be to open the champagne bottle and enjoy the good things in life. Then, there is a second way – the Chinese way – which is to seize the happy hour to plan for the future.


The Indian government is sipping champagne. The budget deficit significantly narrows and that is good news for the upcoming annual budget. A Morgan Stanley report in September calculated that a mere 10 percent drop in oil price could bring down the current account deficit by 0.6 percent of India's GDP – no small matter.


However, how is the government taking advantage of the unexpected windfall? Plainly put, the benefit has not been passed on to the consumer. Whereas in the US, the average gasoline prices have reached their lowest level in the past four-year period, there is no such luck for the Indian consumer. Worse still, the government's price fixation method is so opaque that a suspicion forms that private oil companies are being enabled to make huge profits.


Meanwhile, there is also a larger question involving energy security. Two news items concerning China draw attention to this aspect. One, Reuters reported on Wednesday that China has seized the moment to spring into a "buying spree" leading to record crude imports. China appears to have doubled the oil put aside for strategic reserves in 2014 compared to the previous year. In sum, China appears to have fast-forwarded its plan to fill up its strategic oil reserves. China's strategic reserves are currently estimated at more than 30 days' worth of crude imports, but it plans to increase it to ninety days of imports. It stands to reason that China is exploiting the opportunity of low cost crude.


Secondly, Associated Press reported earlier in the week that China has extended a $20 billion lifeline to the beleaguered Venezuelan economy (shaken by the big drop in income from oil exports). Part of the deal is that China's state-run oil company will expand its activity in Venezuela's oil-rich Orinoco belt. Now, replace Venezuela with Russia and it is clear India's lotus eating attitude is self-defeating.


Apart from a brief period when Mani Shankar Aiyar was petroleum minister in the early part of the last decade, India never really cared about evolving a long-term strategy on energy security. Our political masters seem to be relishing the prospect of dealing with the spot market rather than get into long-term arrangements in the national interest.

Ironically, Jim O'Neill who famously coined the acronym BRICS just took note that India's growth rate has begun accelerating and "With the election of Narendra Modi as prime minister and the large drop in oil prices, India still has an outside chance of meeting my expectations for the full decade. It could even grow more than China in the second half [of the decade]."


According to O'Neill, India is the only BRICS economy other than China's, which is likely to average a 7.5 percent growth for the full decade ending 2020.