The Energy Report for Monday, June 30, 2008
Energy Report
by Phil Flynn
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2008-06-30
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As oil soars again on a weak dollar, the rumors of another attack on an oil facility in Nigeria and increasing tensions between Iran and Israel. There are larger issues of what oil producers can and cannot do or what they may choose to do in the future.
Some assume that if you can control the oil, you can control the world. Take for example some of the comments made over the weekend in the Financial Times by Alexei Miller the head of Russia's state run oil company, Gazprom. Mr. Miller said that in the coming years Gazprom will be not just a major company in the world, but the most influential in the energy business. Mr. Miller seemed to mock OPEC saying that they had lost control of the oil market and said that not a single decision has been passed of late that would really influence the global oil market. So if OPEC is not the biggest power in the world of energy, then I guess all the power goes to Russia. Mr. Miller called for international energy companies to invest in Russia only along state-controlled companies if they want to succeed. Based on Gazprom's track record sounds like a thinly veiled threat. Of course when you control the oil and you have the power you can make threats.
Did they or did they not? Reports that Nigerian rebels claimed an attack on a Shell oil facility over the weekend. Yet Shell has not confirmed an attack and the area that was supposed to be attacked seems to be operating normally. Maybe it just hasn't happened yet.
With the stock market on track for the worst June performance since the great depression and with the dollar still weak it looks like oil is going to soar. The Fed is between a rock and a hard place and the dollar isn't helping. The lack of confidence in the dollar and the US economy and the market's perception that the Fed can't do anything about it, is driving this latest commodity surge. Oil is going to drive higher until it breaks us or the Fed breaks the banks by raising rates.
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Phil Flynn
Phil is one of the world’s leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets.
Energy Report has contributed 165 issues.Our users give the newsletter an average rank of 8.4/10 (24 votes)
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