Month: April 2011

What’s Really Up With This Business in Libya?

It seems like the world has turned upside down since the beginning of the year. I’m trying to make sense of it all, so I plan to spend a bit of time over the next few weeks discussing the big events; what may have led to them and what might be the outcome. First up….let’s talk about Libya.

When the West decided to intervene in Libya my first thought was, “Of course…Libya has oil”. After all, plenty of humanitarian crises are occurring in other parts of the world and yet they are left alone to sort their own problems out. Oil makes Libya a special case.

However, from politicians and talking heads on TV I was hearing that this was not about oil, because Libya only has about two per cent of the world’s oil production. They claim that they were going into Libya because they had learned their lesson in the 90’s and didn’t want another Kosovo on their hands. Two percent is supposedly nothing in the global oil supply….a mere blip, which the global economy could care less about.

And yet, Libya is a big deal. Why is it that a potential loss of only two per cent of the world’s oil production is cause for expending huge amounts of money launching air strikes against Col Gaddafi’s regime? (With warheads containing depleted uranium no less…. but that’s a whole other story)

When we look at the percentage of European oil imports that come from Libya, the story becomes a lot clearer. More than half a dozen European nations rely on Libyan oil for more than 10 per cent of their oil imports. This then is one obvious reason for the West’s intervention in Libya. Industrialised economies cannot afford to lose access to 10-23 per cent of their oil imports.

Source

But given the relatively small quantity of oil passing from Libya to North America, why is the US so heavily involved? Is it just a matter of the US helping out its NATO allies or is there more to this than meets the eye?

Dr. Paul Craig Roberts, former assistant secretary of US Treasury provides some insight on the revolution in Libya in a recent interview. He states:

In my opinion, what this is about is to eliminate China from the Mediterranean.  China has extensive energy investments and construction investments in Libya.  They are looking to Africa as a future energy source.

The US is countering this by organizing the United States African Command (USAC), which Qaddafi refused to join.

[…]

In my opinion, what is going on is comparable to what the US and Britain did to Japan in the 1930s. When they cut Japan off from oil, from rubber, from minerals like ore; that was the origin of World War II in the pacific. And now the Americans and the British are doing the same thing to China.

The geopolitics of oil is a very interesting subject and occurs very much outside of the spotlight of the mainstream media. It is my opinion that the great world powers are fully aware of the oil shortages upon our doorstep and are manoeuvering to control access to the remaining deposits of conventional oil. What concerns me is how this might play out. What we are now seeing in Libya could be the beginnings of the 21st century’s first great war.

The other interesting story surrounding Libyan oil is that Saudi Arabia pledged to raise production to offset the decline from Libya, and yet Saudi Arabian production remains flat. Could this be an indication that the kingdom actually no longer has the spare capacity to meet the global demand for oil? From the Daily Reckoning:

For better or worse, most of the “spare capacity” burden falls on Saudi Arabia. Saudi princes claim to be able to goose production from 9 million barrels a day to 12 at the drop of a hat.

Never mind that they’ve never done anything like that before, even when oil ran up from $25 to $147 a barrel between 2003-08. The official line – and, therefore, the oil market – still believes it’s true.

Bottom line: “Saudi Arabia can’t make the shortfall from Libyan supplies,” says commodities investing legend and Vancouver veteran Jim Rogers. “They’ve said in the past that they can increase production, but they can’t.”

To me, this is just one more indication that we are very close to, or past the peak in global oil production. If a loss of two per cent of the world’s oil supply cannot be made up by OPEC’s ‘swing producer’, and is cause for military posturing, then surely we are in a desperate place indeed.

What we hear from the media is that this latest run up in prices at the fuel pump is simply a result of speculators and freaked out investors, coupled with typical Easter long weekend price hikes. What they are missing is that the end of cheap oil is here. We have now entered a world of highly volatile liquid fuel prices, and just about anything could happen. Oil production can no longer keep pace with demand and desperate times call for desperate measures. Hold onto your hats, we could be in for a wild ride.

Reverse Culture Shock

It’s been a long time since I posted on this here blog, but it’s now time to get back into it.

I’ve now relocated and settled back in to Canberra, Australia after a wonderful three years living and working in Southern California. I’ll be honest and say that I did suffer quite a bit of reverse culture shock; the feeling that I no longer fit into my home country. We had been warned by fellow ex-pats to be prepared to experience reverse culture shock, but I guess you can’t fully prepare for how it really might feel.

Nobody Cares About Your Travels

OK…maybe I’m being a little harsh to say that nobody cares, but my experience is that most people will listen superficially for only a short time before losing interest. At first this was hard, but now we just keep our experiences to ourselves unless someone specifically asks. One of my saviours has been talking to people who have also been ex-pats. They understand what it feels like to return ‘home’ and are actually interested in the experiences we had overseas.

Normality Hits Hard

For the first couple of weeks back in Australia we were excited to see family and friends, eat all our favourite foods, sit in our favourite cafes and see kangaroos again. However after about two weeks the ‘normality’ of Australia began to hit us hard. When we moved to America, everyday tasks were interesting (although sometimes extremely frustrating) simply because they were different. Even though some things had changed in the three years we were away, Australian supermarkets still stocked all the same foods, the cars on the road were still familiar and the Aussie slang which was a shock when we arrived home began to sink back in. 

People Just Don’t Understand Us

Most noticeably, we came home with many new opinions about things. Our minds had been opened while away and we came back seeing Australia and the world in general, in a totally different way. Unfortunately for us, people back here still think the same way they always have, so we have had a difficult time trying to find common ground. For the last few months we have felt very isolated because we couldn’t fit our new beliefs and knowledge into our old lives. However we are now starting to find ways to mesh the two together and are starting to feel more comfortable.

It’s only in the last couple of weeks that I have started feeling comfortable with my life back in Australia. Our house is mostly unpacked, we have caught up with all of our immediate family members, I have settled into my new job and actually think I know what’s going on and have received a couple of exciting opportunities which I’ll tell you more about soon.

Despite the uncomfortable transition, it’s good to be home.

Image by: Garry