Power And Dollar

The Common Interests of BP and Georgia, And Your Money

Ever since the Russia-Georgia conflict became the hot news item, the share prices of British Petro moves as CNN news stories are read.  BP almost became the barometer of this crisis.  Why BP?  They got their pipelines there.  BP is also having a power struggle from Russian government which wishes to take more control of BP’s operation in Russia.  Therefore, if Russia will occupy the land where BP’s pipelines are, it will carry more political risk to BP.   


Therefore, any news of resolution will help BP’s price.  The closing price of BP on 08.08 F is US$60.86 at LSX.  The closing price on Monday is 58.7701 down 3.4%.  The good news on Tuesday brought up the price to $59.32.  Just now, Bush’s announcement helped bring up the price to US$59.60.


BP is not traded in the US.


However, all US oil companies are going up, exactly because they are away from the conflict area, consistent with the argument from Friday’s post: political risk of this conflict was already being priced in the currency market.


So in the short run, Chevron, Exxon, Petro Canada, Marathon and ConocoPhillips are all going up.  Of these 5 companies, 4 are US and 1 is Canada.  The other oil company that is falling is of course Shell which is much closer to the conflict area.


Is the cease fire going hold?  First of all, here is the six point agreement:

1)       Negotiate the status of the 2 separatists provinces

2)       Non violence

3)       Ultimately stops military actions

4)       No interruption against humanitarian aids

5)       Georgian forces returned to permanent positions

6)       Russia returns to pre conflict positions


Now, Russia’s intent is on regime change because the sitting Georgian president is pro West and took Georgia to NATO.  Nothing here actually addresses the core issue.  If there is more information to what is public available, then a cease fire will actually take place.  Else, this is to buy time.  Aljazeera confirms (in addition to US/UK media) Russian troops are still moving.  Therefore, EU or France actually got a worse deal than staying silent.  A broken deal just proves than EU/France is an irrelevant and ineffective broker.  


August 13, 2008 - Posted by | Current Events, 石油, 美國, economics, Investment, market, middle east, opinion, politics, stock

1 Comment »

  1. I was surprised that oil did not appreciate more than it did. I think the market has a lot of faith in Putin’s intelligence – that the Georgian conflict would not be escalated beyond a calculated insult to the US into something that damaged them strategically. The markets deem this political theatre with a military orchestra.

    The medium term outlook for Russia is starting to look more like a bigger Venezuela – for egotistical demagogues ignoring them is the best punishment and the US would be wise to do this.

    Comment by idealpragmatist | August 14, 2008 | Reply

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