The Rude Awakening
Edinburgh, Scotland
Thursday, May 10, 2007 ------------------------- - The precarious perch on which "cheap" oil resides,
- Caught in the crossfire in Nigeria,
- The world's most impolite baker and plenty more…
------------------------- A short drive from the North Sea, Joel Bowman reports… If your local baker called you the devil, you would probably consider purchasing your bread elsewhere. If you had 300 million hungry mouths to feed and he was the only baker on the block, you might not enjoy the luxury of choice. You may have to bite you're your tongue and "suck it up." Such is the ignominious position suffered by the U.S.A. Each and every pay day, the American public pony up to Venezuelan President, Hugo Chavez, pouring millions of dollars into the rogue's petrodollar coffers. Mr. Chavez has what we want…so, it seems, we have little choice. Fortunately, Mr. Chavez is not the only baker on the block…unfortunately, the others are not much more hospitable. Consider Russia's iron-handed Putin and Iranian strongman, Mahmud Ahmadinejad. Relations with the two henchmen are strained, at best. There is, of course, the perpetually troublesome continent of Africa to barter with. Between the Middle East and Africa, America garners a whopping 49% of its total oil imports. It is, therefore, imperative that at least one of these regions offers some semblance of calm if we are to enjoy a relatively reliable supply of oil at relatively reliable prices. Much has been made about the turmoil in the Middle East of late, so what about Africa? Let's take a look at Nigeria, Africa's largest oil producer and leading supplier to the United States. This from the Associated Press, just hours ag "Gunmen seized four American workers in Nigeria's southern oil region, and an Italian oil company said Wednesday that daily crude production had been cut by nearly 100,000 barrels a day by the worst bombing to hit the petroleum industry in months." Almost 100 hostages have been abducted this year with 32 foreigners in the last ten days alone. As violence escalates, militants of The Movement for the Emancipation of the Niger Delta, the largest militia operating in the nation, warned that more attacks would precede the upcoming presidential election on May 29. In the column below, Dave Galland of the Casey Research Group, takes a closer look at the troubled African continent and what turmoil there means for you at the pump. --- Energy Report Special ---
Urgent Investment Special Coverage:
The Full-on Oil War of 2007: Bloody New "Backlash" Set to Rocket Oil Past $150… and Send Gas Soaring to Over $6 per Gallon… Learn how the four horsemen of the oil apocalypse are about to drive prices through the roof and, more importantly, how you can be laughing all the way to the bank when they do. My Latest report is yours right here: Outstanding Investments: Special Energy Report ------------------------------ Blood Oil
By David Galland Last year marked the first time ever that U.S. imports of African crude oil surpassed imports of oil from the Middle East. This trend is accelerating in 2007. So far, three African countries (Nigeria, Angola, Algeria) account for 26% of crude oil imports, while three Middle Eastern countries (Saudi Arabia, Iraq, Kuwait) account for just 23%. Our drift toward dependence on African oil goes hand in hand with dwindling production in Mexico, the U.S.' number-two foreign source…and with the continuing ugly business in Iraq, where oil production is still off about 27% from its pre-war high. Of course, as perpetually troubled as the Middle East is, Africa is no slouch in the chaos derby. That Africa is now a leading source of oil imports for the U.S. has far-ranging implications, above and beyond providing regular content for the nightly mayhem shows… I mean, news. On that front, you may have noted-but probably only in passing-just a few of the back-page items related to Africa over the past few weeks. For instance… Nigeria - which tops the list of Africa oil producers with its 2.1 million barrels per day - is in the process of transferring power through a "democratic" election. Meanwhile CNN et al. relate the tales of murder and corruption that customarily accompany third-world voting. In the case of Nigeria, the key to reliable production now lies in the ability of the newly elected president, Umaru Yar'Adua, to gain sufficient political control to strong-arm his militant opponents. Unfortunately, while the prospects for law and order in Nigeria are dim, the prospects for just plain order aren't much brighter. So it's no wonder that oil prices jumped on the news of the election outcome - a bookie's odds, if you will, on the likelihood of a coup or widespread unrest, either of which would bring work stoppages and sabotage in the foreseeable future. Therefore, as goes the fate of Africa's largest oil-producing nation, so goes the cost of your daily commute. Elsewhere in Africa, we recently learned that the Ogaden National Liberation Front (OGNF) attacked a Chinese-operated oil field in Ethiopia, leaving 74 dead and taking as many as 5 Chinese hostages. The OGNF is a separatist rebel movement operating along the border of Ethiopia and Somalia. Although a representative of the group claimed the Chinese dead had been "caught in the crossfire," the fact that guns were ablazing in the oil field - not to mention the hostage taking - casts those claims in a suspicious light. And in Algeria, the group formerly known as the Salafist Group for Preaching and Combat (they like to do both at the same time), now renamed as the more serious sounding "al-Qaeda in the Maghreb," recently set off a couple of bombs, killing 17 people who may have been expecting a gentler sermon. The bombs suggest a return to the bad old days in Algeria and a decided acceleration in violence aimed at anyone the Islamists find offensive by their extreme religio-political ideology. Invariably, the targets include all infidel dogs… aka foreign oil executives and workers. Regardless, now that Africa's importance to meeting U.S. energy needs has risen to lofty levels, strife on that perennially troubled continent will continue to trigger price spikes in crude oil and, between spikes, produce a solid floor under prices. 
With the busy summer driving season looming and U.S. gasoline supplies dropping for 12 straight weeks, turmoil in either Africa or the Middle East will likely lead to much higher gasoline prices coming to a pump near you soon. In fact, talk on the street is now for consumers to pay over $3.50 a gallon - and maybe as high as $4.00 - once the summer driving season kicks in…or the Nigerian post-election terrorism season kicks in. And, that, of course, adds further pressure on a U.S. economy being squeezed by the deflating housing bubble. The good news, of course, is that it also provides a steady wind to the sails of our favorite energy companies, especially those that are developing oil discoveries in geopolitically safe locales. Joel's Note: David Galland is the Managing Director of Casey Research, LLC., publishers of Casey Energy Speculator, a monthly newsletter dedicated to unbiased reporting on rational speculations in the shares of small-cap companies targeting oil, gas, uranium and other energy sources. If you are interested in learning more about these exciting market opportunities, click here: Casey Energy Speculator ---------------------------- Are you geopolitics guru? A macroeconomics maestro? A basement blogger with a penchant for wordy musings on the world's energy crisis'? If so, we'd love to hear from you. Please send any thoughts you may have to us here at aussiejoel@the-rude-awakening.com . A selection of reader mail usually finds its way into our letters to the editor issue each Monday. Cheers, Joel Bowman
Managing Editor
Rude Awakening | 
