Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Unswayed by Political Risks (by Oil Price)

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As multinational military forces have left Iraq, international petroleum companies have eagerly descended — seduced by the long-term potential of vast oil reserves off-limits to foreigners for decades. Yet lingering violence, legal questions and political uncertainty make doing business in this country a gamble.

In the first international oil auction held last June, widely seen as a failure, the Iraqi government awarded a firm contract to only a consortium of British Petroleum and the China National Petroleum Co. to further develop the Rumaila field over 20 years. Iraq recently forged an initial agreement with a group comprising Exxon Mobil and Royal Dutch Shell to develop the West Qurna field, and one with an ENI-led consortium of Occidental Petroleum and Korea Gas for the Zubair oil field.

Under ratified deals, firms stand to gain a mere $2 profit on each barrel added to production because the Iraqi government wants to convey “they're not going to let the oil companies take over,” said Robert Ebel, a senior adviser in the energy and national security program at the Center for Strategic and International Studies (CSIS), a Washington-based think tank.

The operator of each 20-year service contract, which may be extended for five years, “will still make a rate of return in the double digits,” said Ruba Husari, founder and editor of the Web site Iraqoilforum.com, via e-mail from Baghdad. The country’s proven oil reserves were last estimated at 115 billion barrels. These massive reservoirs, and the low costs linked to such an uncomplicated operation, essentially make it “easy oil” for firms, Husari said.

Iraq will boast some six million to 10 million barrels a day over the next several years, analysts tell Oilprice.com. This scenario illustrates why oil companies perhaps are now more willing than last summer to gain an initial foothold in the industry on the government’s strict terms and thus build a long-lasting relationship that may lead to a production-sharing contract “for some discovered-but-yet-undeveloped oil field,” Ebel said. “It’s a hopeful assumption; I don’t know how realistic it is.”

Yet as companies salivate over Iraq’s potential, legal and political issues are still problematic to doing business. The war-ravaged country's “weak and ill-defined legal structures,” and uncertain moves by the next government slated to be elected in January, may result in canceled service contracts, warned David Bender, an analyst in the Middle East practice of the Eurasia Group’s Washington office.

Through conversations with oil firms, Bender has gleaned that Iraq is probably not “quite at the point in which legal details are the most important aspect” and is focused instead on the larger political process. As a result, he said, members of a newly elected government, influenced by their own interest groups and “power politics,” may annul contracts despite the associated penalties.

Finalizing a long-awaited hydrocarbon law governing the oil industry will be a top priority of the next government, said Mishkat al-Moumin, an adjunct scholar at the Washington-based Middle East Institute and Iraq’s environment minister from 2004 to 2005. Ideally, the legislation will outline investing in new oil fields, establishing a council to manage petroleum issues and offering a mechanism allocating oil revenues, she added.

The absence of an agreement to share oil revenues with the northern Kurdistan Regional Government continues to plague Baghdad, which never recognized as legal the Kurds’ independent oil deals with smaller companies. “If you get an oil law in place, will the Kurds accept that oil law or will they say . . . ‘You’re not giving us enough share of the income that you get from our oil,” questioned Ebel, the CSIS analyst.

Although it is too early to measure the internal impact of opening up the oil industry, in five years oil money will likely flow down to ordinary Iraqis, al-Moumin predicted. The Iraqi government is now debating whether to distribute checks to citizens  allocating their fair share or to broadly invest in infrastructure and services, she said.

As the central government and international companies gear up for a second oil field auction pegged for Dec. 11 to 12, Eurasia Group’s Bender expects firms this time to be undeterred by initially meager profits, and increasingly tempted by what may become “the most lucrative, exciting oil market in the world.”

 

This article was written by Fawzia Sheikh of OilPrice.com who focus on Fossil Fuels, Alternative Energy, Metals, Oil Prices and Geopolitics. To find out more visit their website at:http://www.oilprice.com

Patriotism and Iconoclasm (by Fayssoux)

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There are many who question the direction the U.S. has taken
whose patriotism does not seem to be questioned.  Take Bill Gross in his November commentary:

The US and most G-7
countries have been significantly and artificially influenced by asset
appreciation for decades.  Stocks and
home prices went up – then consumers liquefied and spent the capital gains by borrowing
against them or selling outright.  Growth
in other words, was influenced by upside by leverage, securitization and the belief
that wealth creation was a function of asset appreciation as opposed to the production
of goods and services

Or watch this James McMurtry video – the message is similar,
just in a different format (note rail images, fitting for today)

Skepticism, a critical perspective and questioning the decisions
of “the powers that be” are certainly not inconsistent with patriotism.

What Money Can’t Buy

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I keep reading in various blogs and newsletters how any weakness in the market will be answered by Uncle Ben and his Printing Press. In other words, now that the government has proved it can simply pour Monopoly money into the marketplace by way of Goldman Sachs and prop up the markets, it will just keep doing so in perpetuity. No more bear markets – ever!

There is one thing about which I am certain in this very uncertain world in which we live: at some point, this little game of creating trillions of dollars for the sole purpose of creating an artificial demand for financial instruments is going to fail. It might not fail tomorrow It might not fail next month. But one day, it will fail. And when it does fail, the Dot-Gov bubble is going to make the Dot-Com bubble and the Housing bubble look like pathetic jokes in comparison.

The reason capitalism – real capitalism – not fraud and artifice – has always appealed to me is because it most closely resembled the natural order of things; that is: the truth. And I've got a familiarity with the truth that some people find disquieting. I'm kind of a big fan of it.

And truthful capitalism is about things like quality products, satisfied customers, an inspired and creative workforce, and earnings growth. It is also, in turn, about a mindful board of directors, a satisfied (and yet vigilant) body of shareholders and an earnest track record of truthful accountancy and reporting.

I'm not interested in shorting AAPL or GOOG, not only because their charts simply aren't that opportune (even in the face of a severe leg down), but also because, by and large, these companies represent capitalism at its best. That's also probably why they charts don't look like good shorts.

But what's going on now with the market in general – superb companies like the above notwithstanding – is fakery. If you've got a dead tree………but you hire someone to spray paint the leaves green and trim off some of the more obvious diseased branches………you're going to convince most people for a given period of time that the tree is OK. But you've still got a dead tree. And one day when a storm blows the whole thing over, people are going to realize you've been lying to them for however long the charade has been going on.

My point is that government money, funneled through Goldman Sachs, can – and has – created artificial demand for equities that have sent them soaring. The government's printing presses are big enough to "buy" the market. But even the government can't fake widespread corporate prosperity, and for that reason, sooner or later, this game is going to reach its ugly conclusion.

Nation Speak with Forked Tongue

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My view of any authoritarian institution – be it a church, a government, or a person's office – is driven by how it regards the individual (more specifically – how it regards me). There seems to be a continuum by which another body might judge a person, ranging on one side as "child" and on another as "responsible adult."

When I was in my early 20s, I was a dedicated Libertarian because I felt that the government should view people as responsible adults. That was naive of me, I now realize, because a lot of adults aren't the least bit responsible. They want (or need) to be treated as children. Some of this comes from their nature; some of its comes from the way the government trains them to behave.

I find being treated as a child by an authoritarian figure to be undignified, which is why I bristle at most of them. The reason I'm thinking of this on this morning is because I was engaged in an email exchange with an individual I respect quite a bit about the Goldman Sachs report referenced in yesterday's comments section.

Even though Slopers are understandably cynical about Goldman Sachs, it's still interesting how GS's public face is part of the "green shoots" club, but their reports created for their own clients paints a picture of doom 'n' gloom that would find itself quite at-home here on Slope. My friend wrote to me, in part:

What’s
fascinating to me is the two-tier information flow—the flow that I see from
private equity, venture capital and high net worth money managers VERSUS what
the media (led by CNBC) outlets are telling investors.  As with this GS report,
all of my “insider” talks have essentially the same bearish/troubled data and
all of the public, media-generated stories (of course led by the President and
Washington “insiders”) are doublespeak and misleading spin.

I couldn't have said it better myself! Because everyone, from Obama on down, is going to treat the American public as children that need to be fed graham crackers, patted on the head, and told that the boo-boo is going to be made all better. A little Bernanke Bactine is all you need!

Whereas the elite – – those with money, those in the know (and those with the good sense to read quality blogs……..) – – will be told the truth. And it will set you free.