Article: THERE are deep roots to Myanmar’s current unrest, pitting its repressive regime against Buddhist monks, but the immediate spark was the junta’s unexpected decision in August to double fuel prices. Overnight, diesel prices skyrocketed, and compressed natural gas rose fivefold.

In this respect, Myanmar is not an isolated case. Rising oil prices in recent years have created all kinds of headaches as they have rippled across the world. Many governments, especially in the developing world, have had to choose between raising domestic subsidies to offset the increases or letting the people bear the brunt.

Neither choice — higher government spending or the risk of popular discontent — has great appeal.

In oil-rich Iran, civil unrest spread through Tehran this summer after the government rationed gasoline in an effort to curb the country’s addiction to cheap fuel; gasoline in Iran, imported because the country lacks refining capacity, is heavily subsidized and cost about 40 cents a gallon at the time. After two days of upheaval, the Islamic theocracy restored order and kept the policy.

In Nigeria, the outcome was different. Striking oil workers in June threatened to shut down the country’s oil production if fuel subsidies were dropped. Faced with the threat of losing its biggest source of revenue, the government quickly backed down.

Fuel prices go to the heart of people’s ability to move, stay warm or feed themselves. So it is no surprise that governments around the world have tried to blunt the effects of oil prices that have tripled in the past four years...

1b/ The hardship that sparked Burma's unrest (BBC News, Tue 02 Oct)

http://news.bbc.co.uk/1/hi/world/asia-pacific/7023548.stm

Comment: The BBC looks in some detail at what sparked the recent demonstrations in Burma/Myanmar. Increasing food and fuel prices.

Article: On 22nd February, a small group of around 25 people attracted little attention at first in the crowded Rangoon market. Then they brought out home-made posters, and began shouting.

Their complaints seemed innocuous enough. "Down with consumer prices," read one poster. "We want 24-hour electricity," read another. They pointedly avoided saying anything critical about Burma's military government.

That did not spare them. Nine were rounded up and jailed, accused of acting "totally against the law". They were later released, but they had touched a very raw nerve.

Though small, these were the first street protests seen in Rangoon for at least a decade.

... UN figures show that one in three children is chronically malnourished, government spending on health and education is among the lowest anywhere in the world, and average income is below $300 a year. LIFE IN BURMA

Diseases like tuberculosis and HIV/Aids are increasing at frightening rates.

... Towards the end of last year, prices of basic commodities began rising sharply in Burma. Rice, eggs, and cooking oil all went up by around 30-40%.

For a population that on average spends 70% of its income on food, this was very difficult to absorb. It is not clear why this happened, but the inherent distortions and rigidities in the military's economic management can easily lead to sudden bottlenecks in the supply and prices of basic necessities.

Then came the rise in fuel prices on 15 August. There was no warning. Gas prices rose by 500%, and diesel - which more or less powers everything in Burma, from transport to the essential generators - doubled in price.

The impact was immediate. People could not afford to go to work, and the increased cost of transport started pushing food prices even higher.

Within days activists were out on the streets in protest. When they were arrested, the monks - who can accurately measure economic distress by the food put into their begging bowls every morning - took their place.

... Living in a privileged, parallel world, Burma's armed forces are virtually a state within a state, subject to none of the chronic economic insecurity that afflicts the rest of the country.

Many of the generals have become immensely rich - the video of the wedding of senior general Than Shwe's daughter, dripping in diamonds worth many millions of dollars, is testimony to that.

Secluded in their luxury villas in Naypyidaw, cut off from the squalor of Rangoon and other towns, Burma's military rulers probably had no idea that their clumsy decision would cause such immediate economic pain - that thousands would override their fear of the soldiers, and come out to join the monks on the streets.

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2a/ Russian gas: Will there be enough investment? (Energy Publisher, Tue 25 Sep)

http://www.energypublisher.com/article.asp?id=11200

Comment: Lengthy but useful article, it is written by two members of the IEA: “Daniel Simmons is the lead author of the recently published IEA Gas Market Review 2007. Isabel Murray is the Russia Desk Officer in the Office of Global Energy Dialogue at the International Energy Agency.”

Article: [Introduction]

In the following piece we outline some of the major challenges facing the gas sector in Russia and focus on where some of the potential upsides are to be found. While we remain concerned about the overall level of investment in Russian upstream and transportation, the potential of the independent gas producers to rise to the challenge seems strong given the right supporting policy measures.

The Russian government seems to be moving in the right direction with regard to domestic pricing policy and third party access to the pipeline system, yet reliance on imported gas from Central Asia is likely to increase the risks to security over the medium term. Our concerns on investment need to be seen within the context of our overall concern about global levels of investment, in upstream gas, pipelines and other infrastructure and even in the burgeoning liquefied natural gas (LNG) industry.

...

Conclusion

Russia is the world’s largest gas producer and exporter and the biggest reserve holder. In the current tight market circumstances, it has never been more important to create the correct economic conditions within the Russian gas market. If conditions for independents can be improved, then Russian gas production will surely rise. If policymakers continue to gradually reform gas pricing, then efficiency will improve as companies start to see the positive economics of investing in new plant and equipment.

Nevertheless we remain worried about the overall level of investment in Russia which seems insufficient to guarantee security of supply and hence will affect security of demand. We therefore repeat our call for greater transparency in the sector, particularly with regard to investment in future production. It is clear that there has to be a steep change in Russian gas investment, given the costs and technical challenges for the next big gas provinces.

2b/ A massive wrench thrown in Putin's works (Asia Times, Sat 29 Sep)

http://www.atimes.com/atimes/Central_Asia/II29Ag01.html

Comment: Another lengthy article, detailing the shenanigans behind potential Turkmenistan natural gas exports. Includes Russia, Europe, USA, Azerbaijan, Iran, Turkey, China, and the now-infamous Nabucco gas pipeline. A good summary of the last few months, reads a bit like a good detective novel.

Article: September 1 was the cutoff date that the Kremlin penciled in for the signing of agreements relating to the Russian-Kazakh-Turkmen gas deal that Putin had wrapped up during his sensational Central Asia summit on May 12. But September is drawing to a close, and not only have the agreements not been signed, the main protagonist, Turkmen President Gurbanguly Berdimukhamedov, is unavailable in Ashgabat. He has proceeded on an extended visit to the United States, accompanied by bigwigs in the Turkmen oil and gas industry. It suddenly dawns that in one big throw of the dice, the US and the European Union are desperately playing themselves back into the game, which Moscow thought it had all but secured.

On May 12, at the tripartite Central Asia summit in the city of Turkmenbashi, Turkmenistan, Putin, Berdimukhamedov and Kazakh President Nurusultan Nazarbayev announced their intent to upgrade and expand gas-transportation pipelines from Turkmenistan and Kazakhstan along the eastern shore of the Caspian Sea, directly to Russia. Simultaneously, it was announced that the Turkmenistan-Uzbekistan-Kazakhstan-Russia pipeline of the Soviet era would also be modernized.

The intention was to overhaul the Soviet-era pipeline system known as Central Asia-Center, ensuring it would have a capacity of 90 billion to 100 billion cubic meters (bcm) at the Russian border by 2010 so that it could handle the production of the vast Turkmen and Uzbek gas fields. Moscow wanted the relevant inter-government agreements to be signed by September 1 so that the corporate agreements could be concluded by the end of the year, and consortiums could be formed by early 2008. Moscow expected actual construction to commence by the middle of next year.

The entire project is predicated on the belief that Russia will have almost exclusive access to Turkmenistan's vast gas reserves and will hold a near-monopoly on Turkmen gas exports.

... It would open up Iran's gas reserves for Western markets, thereby reducing Europe's dependence on Russian supplies. The proposal involved 20bcm of gas reaching Turkey annually from Iran and 10bcm from Turkmenistan via Iran. The entire volume (30bcm) would be added to the Azerbaijani gas already reaching the Nabucco pipeline heading to Europe, which would assure the project's viability. The Iranians threw in a big carrot for Turkey, offering to the Turkish Petroleum Corp the right to develop the South Pars blocks 22, 23 and 24 without any tendering and on a buy-back arrangement.

At one stroke, the Turkish-Iranian proposal strove to undercut Putin's gains through May-June in establishing monopoly on Turkmen gas. It underscored how Europe could exploit Iran's ambitions as an energy exporter if only the Iran nuclear issue didn't get in the way. In fact, but for the standoff with Iran, the Turkish initiative fitted admirably well with Washington's own energy strategy toward the Caspian.

... If the Turkmen-Chinese energy deals go through, the West stands to lose heavily. There simply might not be sufficient surplus gas left for export to Europe. In comparison, Russia is better placed to absorb the entry of the Chinese competitor on the Turkmen gas scene. As for Tehran, its overriding priority is that the "Great Satan" (US) is kept away from Turkmen energy reserves at any cost. Iran welcomes China's presence in Central Asia. Besides, a Turkmenistan-China gas pipeline system could easily be connected to Iran at a future date, giving Tehran direct access to the Chinese energy market.

... The blasts of the new cold war have begun blowing across the oil and gas fields of the Caspian region. History is repeating itself. It was over control of the fabulous Baku oilfields that a concerted Western military intervention took place at the time of the Bolshevik Revolution of 1917. The "Baku Commissars" of the Red Army, who resisted, became the stuff of Soviet folklore. And in World War II Adolf Hitler committed his Panzer divisions in a desperate drive to seize control of the Baku fields...

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3/ Ethanol’s Boom Stalling as Glut Depresses Price (NY Times, Mon 24 Sep)

http://www.nytimes.com/2007/09/30/business/30ethanol.html?ex=1348891200&en=5e99b6d3cd8e200f&ei=5088&partner=rssnyt&emc=rss

Article: The ethanol boom of recent years — which spurred a frenzy of distillery construction, record corn prices, rising food prices and hopes of a new future for rural America — may be fading.

Only last year, farmers here spoke of a biofuel gold rush, and they rejoiced as prices for ethanol and the corn used to produce it set records.

But companies and farm cooperatives have built so many distilleries so quickly that the ethanol market is suddenly plagued by a glut, in part because the means to distribute it have not kept pace. The average national ethanol price on the spot market has plunged 30 percent since May, with the decline escalating sharply in the last few weeks...

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4/ Slow, Steady Liquidation of the World Oil Industry: David Pauly (Bloomberg / peakoil.com, Mon 01 Oct)

http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_pauly&sid=akIQ2arQB4Qs

Comment: The original Bloomberg article is no longer available, the link is to the same article on a Peak Oil website. This is the sort of article that would usually come from a Peak oil source, except that this article was an opinion piece on Bloomberg. The story is not new, at least not to Peak Oilers. Big Oil is buying back its shares, and its production is about to go into decline.

Article: Buybacks are the rage in the cash-laden oil industry. Exxon Mobil is buying back about $30 billion of its shares each year. If that continues, Exxon will have repurchased all its stock by about 2024.

This isn't as absurd as it seems. Oil companies aren't merely catering to a Wall Street enthralled with buybacks. While such repurchases increase the amount of earnings and assets behind the remaining shares in a company, the party for shareholders would end if assets and profits begin to fall.

And investor-owned oil companies -- along with government- owned producers outside the Organization of Petroleum Exporting Countries -- are only a few years away from going into decline.

By 2011 or so, these companies, including Royal Dutch Shell Plc and BP Plc in the U.K., France's Total SA and ConocoPhillips in the U.S., will no longer be able to increase their production, says Charles Maxwell, an analyst at Weeden & Co. in Greenwich, Connecticut.

By 2014, their output will begin a long decline, says Maxwell, who has been involved in the industry for 50 years, mostly as an analyst. ``They'll be in liquidation,'' he says…

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5a/ Newcastle Coal Rises a Third Week on Quota Reduction (Update2) (Bloomberg, Mon 01 Oct)

http://www.bloomberg.com/apps/news?pid=20601072&sid=atPYrIpx.B.I&refer=energy

Comment: Newcastle, Australia. Coal prices rising due to shortages.

Article: Power-station coal prices at Newcastle rose for a third week after authorities at the Australian port deepened cuts in loading quotas, worsening a shortage of the fuel in Asia.

Coal for immediate delivery at the world's largest export- harbor for the fuel rose $2.78, or 4.1 percent, to $70.20 a metric ton in the week ended Sept. 28, according to the globalCOAL NEWC Index. Producers including Xstrata Plc will have loading allocations reduced by 2.2 million tons in the fourth quarter to reduce vessel lines, a terminal official said.

Insufficient port and rail facilities at Newcastle in New South Wales state have prevented Xstrata, Rio Tinto Plc and BHP Billiton from keeping pace with increased demand in Asia. Japanese and South Korean buyers are turning to Australia, Indonesia and South Africa to compensate for reduced shipments from China, which first became a net importer in January...

5b/ Record coal prices hammer power generators (Reuters, Fri 28 Sep)

http://uk.reuters.com/article/oilRpt/idUKL2785392120070928

Comment: Coal prices rising in Europe too.

Article: Record high coal prices and tight supply are piling the pressure on electricity generators already hit by soaring oil markets and high gas prices, industry players say.

Coal fuels about 40 pct of global power generation. Physical coal prices for delivery into Europe have risen by over 50 percent this year.

High freight rates are tightening the screws on prices and utilities and cement producers, also big coal users, may be forced to scale down operations.

"The market is having to adapt to coal prices, to freights, which we've never seen before," a trader said.

"I do believe that before the end of the year it's possible that some generators in Asia will have to look at turning off their plants because they won't have enough coal," said a coal producer.

Physical coal prices on Thursday surged to a record $102.00 a tonne delivered into Europe, from $65.00 in the first quarter, because rampant demand in Asia has sucked in millions of tonnes originally destined for the Atlantic market.

Power generators, Europe's biggest coal consumers by far, buy most of their coal on rolling long-term contracts from producers but usually purchase a small proportion from the spot market.

Coal-fired generation is used most heavily during the winter months when it is usually the lowest-cost fuel.

... A large European industrial consumer of coal said his company had struggled recently to find enough coal of any acceptable origin and had no choice but to pay the price asked by the supplier.

"In Europe anyway, I think you will be able to find enough coal, but it won't be easy and you'll have to pay up," a further trader said...

5c/ China Raises Coal Prices for South Korea Above Japan (Update2) (Bloomberg, Wed 03 Oct)

http://www.bloomberg.com/apps/news?pid=20601072&sid=aCm29MS3bAm8&refer=energy

Article: Chinese coal producers offered supplies to South Korean utilities at 7.5 percent above prices concluded in May with Japanese rivals because shortages of the fuel have worsened, said buyers involved in the talks.

Sellers, including China National Coal Group, sought $73 a metric ton from buyers led by Korea Southern Power Co., said two Korean utility officials, who asked not to be named because of company rules. Korea, which turned down the opportunity in May to buy coal at $67.90, the same price Japan accepted, may have to agree to a 40 percent increase in the annual contract from the $52.10 a ton it paid last year.

China is increasing prices after the benchmark at Australia's Newcastle port reached a record $72.37 in August and Indonesian mines missed contracted shipments. Prices have doubled this year as China became a net importer for the first time in January and Japan increased purchases when an earthquake closed a nuclear plant in July.

``Market fundamentals and sentiment have changed a lot'' in the past few months, said Donovan Huang, a Hong Kong-based analyst at Nomura International Ltd. ``The situation favors the coal producers and I don't think consumers have much bargaining power.'' ...

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6a/ UBS job losses could be shape of things to come (The Telegraph, Tue 02 Oct)

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/10/02/ccom102.xml&DCMP=EMC-mcn_02102007

Article: Some of the ugly detail that we suspected was lurking on banks' balance sheets saw the light of day yesterday.Both Citigroup and UBS announced writedowns and profits hit by losses on US sub-prime home loans.

Anyone still labouring under the misapprehension that the Decade of Debt has been a local affair has got final proof that the UK is caught up, not only in its own consumer debt mire, but that of every other western economy.UBS, a Swiss bank, announced a £340m third-quarter loss caused by its American bad debts resulting in 1,500 job losses, the bulk of which will hit London. The risk to the UK economy is that this is the dark, triangular shape of things to come...

6b/ Humiliation of UBS (BBC News [Robert Peston], Mon 01 Oct)

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2007/10/humiliation_of_ubs.html

Comment: Robert Peston point s out that UBS took a loss on its “relatively small exposure of loans to private-equity buyouts”, whereas total exposure on other banks books is something like $300-400bn with implied losses of $20-40bn.

Article: … And there is an ill-augury for its competitors. It has taken a loss on its relatively small exposure of loans to private-equity buyouts. With somewhere between $300bn and $400bn of these loans sitting on other banks’ books, that implies its rivals may be sitting on losses of between $20bn and $40bn just on the private-equity or leveraged buyout debt they have been unable since July to place in the market.

UBS is big enough to more than weather this storm. For the year as a whole, it will make a substantial pre tax profit of somewhere around $8.5bn. But other banks likely to be damaged by the sub-prime fallout are not quite as big and robust…

6c/ Crunch triggers higher loan costs for businesses and homebuyers (The Times, Tue 02 Oct)

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article2570241.ece?EMC-Bltn

Comment: Such gloomy news would hint at a UK general election soon, before the economy heads south.

Article: The credit crunch in money markets is now triggering markedly dearer loan costs for new borrowers among both businesses and households, Bank of England figures have revealed.

In news that will add to fears that the squeeze from tightening credit conditions will sharply brake the economy, the figures show that average interest rates for the most common forms of commercial loans taken out by British companies have jumped by two full percentage points compared with last year.

Average interest rates charged on corporate loans fixed for up to a year, which account for more than three quarters of business borrowing, leapt by 0.4 points last month alone, and by a full percentage point in the past two months, according to analysis by Michael Saunders, of Citigroup.

Along with rates fixed for five years, the other most common form of corporate borrowing, these rates now average two points more than they did last year. Average rates on new five-year loans taken out by companies soared by 0.86 percentage points last month.

Citigroup’s study also found signs of tightening lending conditions for homebuyers.

The extra interest rate charged to borrowers wanting mortgages for a high proportion of a property’s value rose sharply during August, it found.

The gap between the average rate on a two-year fixed-rate mortgage for 95 per cent of a house’s value and a similar loan for only 75 per cent jumped to 0.45 percentage points in August, from only 0.29 points in the previous month.

Mr Saunders said that the data showed the “early signs of the pass-through from the financial market crisis to the real economy”.

“All this will exacerbate the slow-down in the economy, especially housing,” he said.

6d/ Sub-prime claims Spanish developer (The Telegraph, Wed 03 Oct)

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/10/03/cnspain103.xml&DCMP=EMC-mcn_03102007

Comment: Various commentators have suggested the sub-prime crisis would hit Spain badly, amongst other European countries.

Article: The Valencia property developer Llanera has become the first high-profile victim of the credit crunch in Spain, declaring insolvency yesterday after failing to meet payments on €748m of debt.

The fashionable builder, known for its links to Charlton Athletic Football Club, was unable to reach agreement with Lehman Brothers and other banks on a refinancing deal, a sign that foreign creditors are no longer willing to underwrite Spain's property market.

The rating agency Moody's said default rates in Spain could jump from 0.37pc to 5.5pc if the economy suffers a hard landing, with an outside risk that values could fall by 20pc.

Alberto Matellan, an economist at Inverseguros, said arrears would never reach US levels because of Spain's "solidarity" culture. "The extended family steps in to help meet the payments," he said. Defaults are very rare."

Moody's said property prices had risen 280pc since 1997. While most banks are well able to weather a downturn, the regional cajas, or savings banks, are vulnerable. Many of the cajas have leveraged their risk by launching their own property ventures, much to the horror of the Bank of Spain.

... Almost 800,000 homes were built in Spain last year, leaving a glut of 300,000 properties in the market.

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7/ Russia to Take Car Sales Lead in Europe by 2010 (FC Novosti, Mon 01 Oct)

http://www.fcinfo.ru/themes/basic/materials-rfcm-index.asp?folder=3352

Comment: It looks like the assumptions on Russian car sales (i.e. they were mostly used foreign cars in 2006) in a Comment in Monday’s newsletter were wrong.

Article: Russia will sell the largest number of cars in Europe by 2010, said Alexander Borisov, chairman of the consumer market committee at the Russian Chamber of Commerce and Industry.

..In 2007, 32% of cars sold in Russia will be Russian-made, 39.1% will be new foreign cars, 19.4% used foreign cars, and 18% foreign cars assembled in Russia...

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8/ UK Provides Hints Of Qatari Project Delays (Energy Intelligence [World Gas Intelligence], Wed 03 Oct)

No link, newsletter.

Article: Amid reassurances that Britain's supply situation should be relatively comfortable in any case, energy networks operator National Grid (NG) said last week that the South Hook LNG terminal being developed by state Qatar Petroleum (QP) probably won't be ready for regular imports before spring 2008, rather than over the winter. More than a sign of problems in the UK, sources in Qatar says this is a result of widespread delays in the mega-LNG trains under construction in Qatar.

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