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Oil's well that ends the well
Thursday, June 08, 2006   [My Theories]

Part of my weekly reading habits are reading Time, Fortune and The Economist magazines - the things I really look forward to, as in India we are quite sheltered from what happens in the world outside.

Time gives an overall view of whats happening in the world. Fortune gives an overall view of whats happening in the business world. And The Economist gives an in-depth analysis of whats happening in the world.

Therefore, it caught me off guard when I read an in-depth, out of the box wonderfully written article on the Oil industry in Fortune called Slick Operators . It is a long read but I highly recommend it.

As everyone has seen, the price per barrel of oil has gone from about $25 per barrel in 2002 to upwards of $75 per barrel in 2006.

The price of standard crude oil on NYMEX was under $25/barrel in September 2003. By August 11, 2005, the price had been above $60/barrel for over a week and a half. A record price of $75.35 per barrel was reached, due in part to Iran's nuclear crisis, on April 21, 2006 (Source: Wikipedia).

What I found interesting in the Fortunte article " Slick Operators" is that everyone in oil is passing on the buck on why oil has become so expensive. The Big Oil majors blame it on the fund operators and commodity indexs, these people in turn blame it on events such as Iran holding the US hostage on oil prices, or Hurricane Katrina or China's demand for energy and so the list of blame goes on.

In the end, no one's blamed, and the fund operators are minting money, Big Oil is declaring record profits, and the consumer's are getting screwed.

So should we as consumers, law makers and nation builders do something to stop this? Should we put a ban on essential commodities trading thereby potentially arresting the rise of oil prices?

I say no.

While this might be a party for all these slick operators now, they won't be laughing soon when global dependence on oil will reduce - with nuclear, solar and wind power making a larger presence in power generation, and electric and hybrid cars becoming more affordable and useable. Oil's rise is a price to pay now but without it, we will always keep relying on oil as the primary energy source. As long as the price of oil continues to increase, it will only bring close its tipping point.

It can already be seen.

Last year, world biofuel production surpassed 670,000 barrels per day, the equivalent of about 1 percent of the global transport fuel market. Although oil still accounts for more than 96 percent of transport fuel use, biofuel production has doubled since 2001 and is poised for even stronger growth as the industry responds to higher fuel prices and supportive government policies. "Coordinated action to expand biofuel markets and advance new technologies could relieve pressure on oil prices while strengthening agricultural economies and reducing climate-altering emissions," says Worldwatch Institute President Christopher Flavin. (Source: REPORT: Biofuels to displace Oil, Worldwatch Institute)

Earlier, when people started looking for alternatives to oil, OPEC or Big Oil would lower oil prices thereby destroying any chance for a new technology to be oil-competitive. But now OPEC and Big Oil are one of many players and the ability to control oil is out of its hands. Therefore for the first time biofuels have a chance of working. There is some amount of obscurity in the amount of carbon replacement of biofuels vs oil. This means that the amount of energy used and carbon put into the atmosphere by growing crops for biofuels is similar to that of oil. But as I said - its still obscure. The key right now is to reduce our dependence on oil and find newer sources of energy, which until now we have not had a strong incentive to. Hopefully, its around the corner.

See you at the Electric Charge Station soon!

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Michael Schumacher - F1's saviour
Tuesday, September 13, 2005   [My Theories]

I used to be a decent F1 (Formula 1 racing) fan a few years ago. I would also like to cheer on the underdogs (ie, any other than Michael Schumacher), but that changed as I really started to like the guy as not only a great driver (a legend actually!) but also a nice family guy according to what I had read. Inspite of being a millionaire many times over, he doesn't live the racy life as does David Coulthard. He's got a lovely wife and two kids who are on strict pocket money

Schumacher, whose annual earnings are estimated at $80 million, gives his eight-year-old daughter Gina-Maria and his son Mic two euros ($2.64) a week each!
"They have to learn wealth isn't automatic," the German Ferrari driver told Stern magazine in an interview.

"They get, just like other children, two euros allowance per week. They can either save it or buy something they really want with it."

See, now that's cool! On top of which he races like Michael Jordan playing basketball, or Tiger Woods plays golf, or.. more closer - Pete Sampras playing Tennis.

Now for those of you who remember Pete Sampras, he was unbeatable. He was just the best at his game. Just like Schumacher. However, he did make the game of tennis boring to watch. Gone were the days of Borg vs McEnroe, Becker vs Edberg.

Therefore, you know what I'm talking about when I say that Schumacher made F1 boring. He and Ferrari just won so easily and effortlessly that the question was who'd come in second, not first!

So what I think is this - Quite simple actually. F1 was dying as Michael Schumacher and Ferrari just dominated F1 so much that there was nothing exciting about F1 racing. Fans got bored. So what does one do? Rather, this is what I think Bernie Ecclestone did. He has a chat with Michael to play it cool for a year - let some of the others come up and win.. and come the new season in 2006, Michael Schumacher will be back with a bang! So watch out for the Red machine and Michael to own F1 all over again!

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