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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerMoreover, this time the old friend, 'Middle East Tensions,' brought along his long/lost cousin, 'Enboldened Russia.'
Russia's re-appearance on the international stage takes the form of a major power, not a geopolitical power capable of projecting force globally as during the Soviet era, but the gradation is minor as it relates to the oil market, so says economist Richard Felson.
"Russia has the capacity to create a remarkable amount of distress in the oil markets. It can use oil exports and natural gas as a lever against Europe and the world, and its territorial threats to Central Asia and Eastern Europe are also cause for legitimate concern," Felson said.
Oil fell $3.03 to $118.15 per barrel Friday at mid-day after Turkey restored oil flows through the Caspian Sea pipeline, Bloomberg News reported Friday. The Baku-Tbilisi-Ceyhan pipeline moves oil from Azerbaijan through George to Turkey's Mediterranean coast. Oil flows were stopped earlier this month after Russia invaded Georgia.
The other, major energy commodities also fell sharply Friday at mid-day on the Baku pipeline news. Unleaded gasoline plunged 11 cents to $2.93 per gallon, heating oil declined about 10 cents to $3.19 per gallon, and natural gas declined 14 cents to $8.11 per million BTUs.
Russia: a threat to the west's oil?
Further, Felson said Russia's action "have caused the west to re-evaluate the global oil and energy equation" to account for the new - - and unexpected - - Russia wild card.
"Whereas before the prevailing view was incorporation of Russia into the oil and energy markets and as a net-plus for production and supplies, long-term, the new view is guarded," Felson said. "Not only are supplies from Russia now viewed as liabilities, but the west now has to ask, 'what other oil-rich areas might Russia might try to threaten?' And what about it's natural gas relationship with Germany?" [Russia supplies about 20% of Germany's natural gas.]
For the above reason, Felson said it's vital that the west maintain the Baku-Tbilisi-Ceyhan pipeline and companion pipelines, "not as a way to expand western influence in Ukraine and Poland and the former Central Asian Soviet republics, but to prevent Ukraine, Poland and Europe from being at the mercy of Russia's whims," he said. "This isn't a new Cold War but the new paradigm is one where new energy agreements are not likely to be signed with Russia and it must also be checked if it threatens any western energy source."
Oil Analysis: Russian's invasion of Georgia into and beyond the disputed regions of South Ossetia and Abkhazia underscore the need for the west to bolster NATO's resources to insure safe oil flows to Europe, and to be prepared to protect all Asia-Europe pipelines and causeways. Further, Russia's oil market-jarring actions during a time of already sky-high oil prices should telegraph to the west Russia's willingness to disregard global economic concerns to achieve national political goals. In short, dependence on Russia for any energy form is not in the west's interest.
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Reader Comments (Page 1 of 1)
8-22-2008 @ 4:27PM
william said...
Where the hell is Patton, McArthur,Rambo when we need them.Russia will continue to rattle it's saber's until someone calls it's bluff.Bubba and I have got a 12 pack of bud and some pr. cooked brisket..we are ready to go.