Daily Sources 7/28

1. MAYER AND WOOD ARGUE THAT CHINA'S ENTRANCE INTO THE WORLD ECONOMY HAS NOT SIGNIFICANTLY DE-INDUSTRIALIZED REST OF DEVELOPING WORLD

Jörg Mayer and Adrian Wood at Vox EU argue that China's integration into the world's economy has not had the effect of substantially de-industrializing other developing nations.

"The biggest possible effect would be for a country which initially produced or exported equal amounts of manufactures and of primary products, where a 15% fall in the ratio would reduce the share of manufactures by 3.5 percentage points.

These estimates are imprecise and subject to error; the true answer may lie outside their range. But there is no plausible modification of the calculations that could make the true answer much larger. This is mainly because, despite its size, China’s opening had only a modest effect on world average endowments. The upper-limit estimates, obtained by simply adding China’s endowments to the rest of the world’s, are a 9% rise (from 0.43 to 0.47) in the share of the global workforce with a complete primary or secondary education, and a 17% fall in the average land/labour ratio, from 2.9 to 2.4 square kilometres of land per 100 workers ... . The average effect on the structure of output and trade in other countries is unlikely to have been larger than these world average endowment changes and was probably smaller.

The significance of the China effect varied widely among developing countries. This is partly because its size varied with the composition of each country’s manufacturing and primary production – how closely its industrial products competed with Chinese exports, and how much demand there was from China for its primary exports (more, say, for copper than for coffee). It is also because there were many other forces acting on sectoral structures--including changes in countries’ own trade policies--whose effects often outweighed those of China."

Worth reading in full.

2. NEPAL HARASSING TIBETAN REFUGEES

Gopal Sharma at Reuters reports that Nepal is responding to pressure from Beijing by cracking down on Tibetan refugees in the country.

"Nepali authorities have regularly broken up protests by Tibetan exiles and arrested them for protesting against China's crackdown on demonstrations in Tibet.

The Washington-based [International Campaign for Tibet] said Tibetan refugees were 'increasingly demoralized' as Nepal 'relinquishes its historic and sovereign interests in response to incentivized political pressure from Beijing and its sympathizers.'

ICT said 'pre-emptive arrests of Tibetans, ID checks and house searches' by authorities were contributing to a 'widespread sense of fear and insecurity' among the exiles.

'Nepal's political leadership is betting that the internal benefits of assuaging China in the cause of oppressing Tibetans will be greater... than the traditional legal and historical concepts,' Mary Beth Markey, Vice President at ICT said."

3. INDIA TO ANNOUNCE SOLAR POWER TARGETS OF 1/8TH TOTAL ELECTRICITY DEMAND, CENTRAL BANK LEAVES INTEREST RATE UNCHANGED ON INFLATION CONCERNS

Krittivas Mukherjee and David Fogarty at Reuters reports that India will announce its targets for solar power generation in September. The plan promises to

"boost output from near zero to 20 gigawatts (GW) by 2020 as it firms up its national plan to fight global warming, draft documents show.

The target, which would help India close the gap on solar front-runners like China, is part of an ambitious $19 billion, 30-year scheme that could could increase India's leverage in international talks for a new UN climate pact in December, one of several measures meant to help cut emissions.

If fully implemented, solar power would be equivalent to one-eighth of India's current installed power base, helping the world's fourth-largest emitter of planet-warming greenhouse gas emissions limit its heavy reliance on dirty coal and assuaging the nagging power deficit that has crimped its growth.

The 'National Solar Mission', yet to be formally adopted by Prime Minister Manmohan Singh's special panel on climate, envisages the creation of a statutory solar authority that would make it mandatory for states to buy some solar power, according to a draft of the plan, which provided detailed proposals for the first time, obtained by Reuters ... ."

Meanwhile, Cherian Thomas at Bloomberg reports that India's central bank decided today to leave its benchmark interest rate unchanged at 3.25%.

"The central bank raised its inflation forecast for the year to March 31 to 'around 5%' from an April estimate of 4%, citing 'elevated' food and commodity prices."

4. EU TO TRAIN SOMALI SECURITY FORCES TO POLICE PIRACY

BBC News reports that the EU has announced plans to train Somali security forces to tackle the piracy plaguing their coasts.

"It will send a planning team to the region next month. The training will take place in neighboring Djibouti, which has French and US military bases."

(h/t Joshua Keating at FP's Morning Brief.)

5. IMF AND LATVIA REACH ACCORD, MAY OPEN UP NEW FUNDING

Aaron Eglitis and Timothy R Homan at Bloomberg report that the IMF and Latvia have reached an accord paving the way for the country to receive its first financial assistance from the organization since December.

"The review may unlock about 195 million euros ($285 million), which the IMF withheld in March after the Baltic country failed to commit to budget cuts, the fund said in an e- mailed statement.

Latvia turned to a group led by the European Commission and the IMF for a 7.5 billion-euro stabilization loan in December after its second-biggest bank needed a state rescue. The IMF announcement followed a 1.2 billion-euro transfer by the European Commission yesterday, helping quell concern about a lats devaluation that may have destabilized currencies across the region."

6. MOUSAVI CALLS FOR NEW STREET PROTESTS NEXT WEEK IN IRAN

Borzou Daragahi at the LA Times reports that opposition candidate Mir-Hossein Mousavi has called for more street protests during religious festivals next week.

7. KENYA TO BUILD AFRICA'S LARGEST WIND FARM

Xan Rice at the UK Guardian reports that Kenya plans to build the largest wind farm in Africa.

"Some 365 giant wind turbines are to be installed in desert around Lake Turkana in northern Kenya – used as a backdrop for the film The Constant Gardener--creating the biggest wind farm on the continent. When complete in 2012, the £533m (~ $758.8 million) project will have a capacity of 300MW, a quarter of Kenya's current installed power and one of the highest proportions of wind energy to be fed in a national grid anywhere in the world."

8. FUEL OIL APPROACHING COST OF CRUDE, HURTS SHIPPING, CHINESE FUEL OIL IMPORTS ROCKET UPWARD (FROM LOW BASE), VIETNAMESE MAIDEN REFINERY TO TAKE SPOT GASOLINE DEMAND OFF MARKET, WALL OF ASIAN PACIFIC REFINING YET TO PLAY OUT

Christian Schmollinger and Alaric Nightingale at Bloomberg report that the price of fuel oil--bunker fuel, the bottom of the barrel, which is used to power ships in great part because it is cheap, generally trading at a considerable discount to crude, is approaching the price of light crude and may surpass it.

"Fuel oil may surpass crude 'for quite some time, six months is possible,' JPMorgan Chase & Co. vice president of energy strategy Vima Jayabalan said in a phone interview from Singapore."

This means that the effect of rising crude prices is having a more pronounced affect upon the cost of shipping than it did during the 2003-2008 run up in the price of crude.

"'It’s really hurting' ship owners, said Parul Bhambri, a Singapore-based analyst at Drewry.

Maersk said May 12 that falling demand for freight hobbled its ability to pass on fuel costs to customers in the first quarter, when its shipping line lost $559 million after taxes, compared with an $80 million profit a year earlier. The shares are down 40% in the past year in Copenhagen trading."

As the price of fuel oil rises, however, many simple refineries, which do not have the equipment to maximize gasoline and diesel output, can become profitable again, which may undergird a recovery in overall crude demand. That said, it still doesn't look like there's much demand for gasoline and diesel out there, which could push down the crack spread and thus the price of crude. Winnie Lee at Platts reports that Chinese fuel oil imports in June were up 6.26% from May and 45.94% from June 2008 to 13.7 kb/d. It's largest supplier was Venezuela. In that vein, Irene Tang at Platt's the Barrel blog reports that the commissioning of Vietnam's first refinery at Dung Quat is poised to erase about 30% of the country's product import demand, which will in turn erase its demand for spot gasoline purchases. The wall of new refining capacity in Asia has yet to fully be appreciated,

"China has now joined India in becoming a major swing exporter of gasoline. Apart from greenfield refineries coming onstream in the country, Beijing's decision to adopt a new products pricing formula for the domestic market and the resulting price revisions in tandem with the global benchmarks has encouraged more speculative buying at the wholesale level, causing wide fluctuations in refiner inventories.

This, in turn, has made Chinese gasoline export volumes unpredictable. The latest customs figures show gasoline exports hit a two-year high of 560,000 mt in June, a 273% surge from the corresponding month of last year. The previous high was in April 2007, at 590,000 mt.

The figures point to Chinese 'apparent' gasoline demand in June being just 1.8% higher than the same month a year ago, a contrast with on-year growth rates of 20.2% in May and 13% in April. The anomaly of the June figure, in the backdrop of staggering double-digit growth rates of automobile sales in China and a 7.7% on-year average gasoline demand growth in the first half of the year, can only be explained by wild swings in stock builds and draws."

"The full impact of the start-up of Reliance Industries' new 580,000 b/d refinery in Jamnagar should be apparent as early as August, as the company's older 660,000 b/d refinery is now restarting from a partial shutdown. Monthly gasoline exports from RIL are expected to more than double to well above 600,000 mt."

9. NIGERIAN REBELS IN SOUTH TARGET OIL MINISTER'S COMPANY, NORTHERN ISLAMISTS CONTINUE UNREST

Platts reports that the Nigerian Joint Revolutionary Council has issued a warning to UK-based independent producer Afren Resources to stop operating in the Niger Delta or risk attacks on its equipment and personnel.

"The Joint Revolutionary Council, which styles itself as a coalition of militant groups based in southern Rivers and Bayelsa states, said in a statement that its ultimatum to Afren was aimed at expressing the group's opposition to the policies of Nigeria's Oil Minister Rilwanu Lukman--policies the group sees as skewed against the Niger Delta region in the country's south.

Lukman was a co-founder of Afren and stepped down from his position as chairman of the company's board of directors once he was appointed oil minister for Nigeria in late 2008. His shares in the company were to be held in a blind trust, the company said in a statement at the time."

Lukman wants to site an oil university in his home state in the north--Kaduna. Meanwhile, Ibrahim Mshelizza at Reuters reports on the increasing Islamist inspired unrest in northern Nigeria.

"The violence was triggered when some members of the group called Boko Haram, which wants a wider adoption of Islamic sharia law across Africa's most populous nation, were arrested Sunday in Bauchi state.

Unrest spread to the northern states of Kano, Yobe and Borno, whose capital Maiduguri is home to the group's leader, Mohammed Yusuf, and has seen the worst violence.


'The situation has been contained in Bauchi and Yobe. The bad situation we have now is in Borno where the leader of the group is residing ... We are going to launch an operation, a main operation to flush them out,' [Nigerian President Umaru] Yar'Adua told reporters after meeting security chiefs and state governors."

10. PRESSURE TO CHANGE DRUG WAR STRATEGY BUILDING IN MEXICO, MEXICAN CRUDE PRODUCTION WAY DOWN

William Booth and Steve Fainaru at the Washington Post report on the growing pressure on Mexican President to change Mexico's "surge" strategy in dealing with its drug cartels.

"Dan Lund, president of the MUND Group polling organization, said public support for Calderón's strategy appears to be weakest in the places where the federal government needs it most. 'In a series of national surveys, polls consistently have found a reasonable but cautious level of support for using the military in the front lines against the cartels,' he said. 'But in all the states where the military is actually deployed, the support goes down, sometimes dramatically.'

The situation has been exacerbated by the global economic crisis, which has cast millions of Mexicans into poverty. José Luis Piñeyro, a Mexican military analyst who maintains close ties with the armed forces, said rising unemployment and poverty 'is creating what I call an "army in reserve,"' for the traffickers.

In Michoacan, La Familia has used the media to try to align itself with the disenfranchised. After the recent attacks, one of its leaders, Servando Gómez, called a local television station and told viewers: 'I want to say to all Michoacanans, we love them and respect them.'"

Meanwhile, there was plenty of stories on the decline in Mexican production last week. John Kingston at the Barrel notes:

"But here's the more stunning figure: what's happened in two years. In July 2007, Pemex reported crude output of 3.165 million b/d. That's a 20.4% decline in 23 months."

11. VATICAN AIMS AT FREE MARKETEERS, SAYING MARKETS WITHOUT ETHICS DESTROY WEALTH AND CREATE POVERTY

Flavia Krause-Jackson at Bloomberg reports that the Vatican has attacked free markets, saying that they have legitimized greed. On June 7, the pope published an encyclical which examined the financial crisis and means out of it, saying that once profit becomes the exclusive goal of business, it destroys wealth and creates poverty.

"Last November, Italian Finance Minister Giulio Tremonti said the pope had pronounced a 'prophecy' in a paper Benedict wrote when he was a cardinal.

In 1985, then-Cardinal Joseph Ratzinger presented a paper titled 'Market Economy and Ethics' at a Rome event on the Catholic Church and the economy. He said a decline in ethics 'can actually cause the laws of the market to collapse.'"

I think it is plain that markets cannot sustain themselves without a modicum of trust, engendered by ethics held in common.

12. CFTC MAY OR MAY NOT REVISE LAST YEAR'S REPORT EXONERATING SPECULATION IN PRICE VOLATILITY, LONDON'S FSA EXONERATES SPECULATORS

Ianthe Jeanne Dugan and Alistair MacDonald at the Wall Street Journal report that the CFTC

"plans to issue a report next month suggesting speculators played a significant role in driving wild swings in oil prices--a reversal of an earlier CFTC position that augurs intensifying scrutiny on investors."

However, I understand that the Chair of the CFTC indicated today that the story in the WSJ that the report will be redone and altered are premature and inaccurate. From the WSJ story,

"In the US, the CFTC begins public hearings Tuesday to determine whether to limit speculative investments in commodities. Congress also is weighing whether to give the CFTC the authority, under a broader proposal to revamp financial regulation, to regulate commodities investments that occur off traditional exchanges. Byron Dorgan, a North Dakota Democrat, has called on the CFTC to curb 'oil speculators looking for a quick buck at the expense of American consumers.'"

I suspect that the direction of these accusations is misdirected, given that commercials may choose to purchase futures to profit on price just as much as to hedge their obligations.



Positions net long and short for the week ended July 21 only comprised 1% of the market. Note that from 2008 open interest--or the total number of contracts--has been steadily falling for both futures and options--though the trend for options was up through February.



If you include options, the number of positions held by traders net long or short represent 3.17% of the market--not an especially large share. Meanwhile, Alistair MacDonald and Carolyn Cui at the Wall Street Journal report that the Financial Services Authority in London has found no evidence that speculators are behind the wild swings in oil price seen from 2008.

"One person familiar with the matter said the FSA had seen no evidence to suggest that speculators are driving up the price of oil.

'More than they ever were before, [investors] are looking to the global economic climate and nobody is sure on that, and that is perhaps driving the volatility,' he said.

Given that view, the FSA doesn't believe that limiting the size of trading positions would be 'beneficial' for the market, said a person familiar with the matter. Still, the FSA acknowledges it doesn't have a 'full explanation' as to why the market has moved the way it has, said a person familiar with the matter.

The FSA's conclusion contradicts British Prime Minister Gordon Brown, who has linked the recent rises in oil to speculation.
...
Politicians around the world are worried about the effect of rising oil prices on the recovery potential of their recession-hit economies. World leaders from French President Nicolas Sarkozy to the leaders of Asia's biggest oil-consuming nations have tied these rises to oil speculators."

"Speculation," of course, is sufficiently vague to represent a politically useful bogeyman, and it seems likely that someone will call financial protectionism. That said, I do think it is in the global economic interest to make the cost of energy--and in particular transportation fuels--more stable and predictable, I just don't think that attacking "speculation" is a particularly productive way of doing so.

13. TRUCKING VOLUMES IN US DOWN 13.6% IN JUNE YOY

The American Truckers Association yesterday announced that their

"advance seasonally adjusted (SA) For-Hire Truck Tonnage Index fell 2.4% in June. In May, SA tonnage jumped 3.2%. June’s decrease, which lowered the SA index to 99.8 (2000=100), wasn’t large enough to completely offset the robust gain in the previous month."

Over June 2008, tonnage fell 13.6%, which exceeded the year over year drop of 11%.



The ATA release warns:

"The sample includes an array of trucking companies, ranging from small fleets to multi-billion dollar carriers. When a company in the sample fails, we include its final month of operation and zero it out for the following month, with the assumption that the remaining carriers pick up that freight. As a result, it is close to a net wash and does not end up in a false increase. Nevertheless, some carriers are picking up freight from failures, and it may have boosted the index. Due to our correction mentioned above, however, it should be limited."

(h/t Barry Ritholtz at the Big Picture.)

14. HOME PRICE DECLINE SLOWING, CALIFORNIA FORECLOSURES DOUBLE NEW HOME SALES IN JUNE

Barry Ritholtz reports that home price declines are "slowly abating." Here is his graph:



Jake at Econopic picked up on the Big Picture's quote of the day of Mark M Hanson which notes that California foreclosures are more than double the national new home sales for June. His graph:



15. EPA MAY GIVE ALGAE BIG BOOST

Russell Gold at Environmental Capital notes that Blair Carter at the Renewable + Law Blog reports that "that the Environmental Protection Agency will count algae as an advanced biofuel under Renewable Fuel Standard rules being developed."

"Why do EPA’s steps towards including algae matter? Because when Congress created its mandate to blend advanced biofuel into the fuel pool, it created a big market for these fuels. By 2012, the law mandates that two billion gallons of these advanced biofuels be blended, a figure that rises by tenfold by 2022. It’s all in Section 202 of the Energy Independence and Security Act of 2007.

... For algae to be included, the law says it needs to have no more than 50% of the 'lifecycle greenhouse gas emissions' of gasoline and diesel. This could be tricky, says David Woodburn, an alternative energy analyst with ThinkEquity. 'The hard part for me is understanding how the EPA plans to calculate the GHG emissions of algae fuels, based on the variety of feedstocks (sugar, CO2, other), processes (open ponds, photobioreactors), and algae varieties being explored--especially before November,' he says, noting when the rules are supposed to be finished."

Blair Carter's post can be found here.

16. TEXAS DROUGHT GETS WORSE

Tom Benning at the Wall Street Jounral reports on the drought in Texas.

"Nearly 80 of Texas' 254 counties are in 'extreme' or 'exceptional' drought, the worst possible levels on the US Department of Agriculture's index. Though other states are experiencing drought, no counties in the continental U.S. outside Texas currently register worse than 'severe.' In late April, the USDA designated 70 Texas counties as primary natural-disaster areas because of drought, above-normal temperatures and associated wildfires."

The Journal carries an interactive graphic:

Daily Sources 3/9

1. Edmund L. Andrews at the New York Times reports that the World Bank released a new report Sunday which forecasts that the global economy and the volume of global trade will shrink in 2009 for the first time since World War II.

"The bank’s assessment for 2009 was grimmer than those of most private forecasters. It did not provide a specific estimate, but bank officials said its economists would be publishing one in the next several weeks."

2. Sean O'Grady at the UK Telegraph reports that the latest data from the Bank of England shows that there has been a $1 trillion decline in the accounts held by foreigners in the UK.

"Some $597.5 billion was lost to the banks in the last quarter of last year alone, after a modest positive inflow in the summer, but a massive $682.5 billion hemorrhaged in the second quarter of 2008–-a record. About 15% of the monies held by foreigners in the UK were withdrawn over the period, leaving about $6 trillion."

One reason behind the outflow is the decline in sterling--most financial instruments held in the UK are priced in sterling, as it falls losses are increased for foreign accounts with currencies rising relative to it.

3. The Associated Press reports that Chinese ships shadowed and harassed a UN Navy vessel--the USNS Impeccable--with a civilian crew conducting surveys in international waters of the South China sea.

"The [Pentagon] statement said the Navy sprayed one ship with water from fire hoses to force it away and the Chinese crew members stripped to their underwear and continued closing within 25 feet."

The Obama Administration has made an official protest about the incident. (h/t Galrahn at Information Dissemination.)

4. Kumar Malhotra at the BBC reports that the Indian defense establishment has become concerned about strengthening ties between Nepal and China. The Hindu nationalist party, Bharatiya Janata Party, raised the issue in parliament last month. Beijing is likely strengthening ties with the Maoist government in Kathmandu as the 50th anniversary of the exile of the Dalai Lama approaches in an attempt to tamp down protests by Tibetians in Nepal this year.

5. Geoff King at Platts reports that OPEC secretary general Abdalla el-Badri said today that cartel compliance with the December 17 production allocations was at 85%. He indicated OPEC will encourage further compliance given fears of new price slides on the back of large stocks of crude and products on land and at sea. "'This price [$40/b] is not suitable for any future investments,' Badri said, referring to what he said was the International Energy Agency's preferred price level."


6. Edward Luce and Chrystia Freeland of the Financial Times report that in an interview, Larry Summers made the case for coordinated stimulus globally:

"'The old global imbalances agenda was more demand in China, less demand in America. Nobody thinks that is the right agenda now,' said Mr Summers.

'There’s no place that should be reducing its contribution to global demand right now. It is really the universal demand agenda.'

While the US and other western nations should return to living within their means in the medium term, everyone should raise spending sharply now.

'The right macro-economic focus for the G20 is on global demand and the world needs more global demand,' said Mr Summers."

7. Michael Cooper at the New York Times reports that there was a 4% increase in ridership on public transportation systems nationally in 2008.

"Ridership was up on all modes of public transportation in 2008; it grew on subways by 3.5%, on buses by 3.9% and on commuter rail by 4.7%. Light-rail use increased by 8.3%, spurred in part by a new system in Charlotte, N.C., and growth in New Orleans, which is still recovering from Hurricane Katrina."

Analysts do not expect ridership to continue to increase in 2009, as states will be forced to raise fares and cut back on service in order to compensate for declining tax revenues.

Daily Sources 8/28

1. As per Yves Smith at Naked Capitalism, Credit Suisse recently released a report on the Chinese slowdown concluding that it is mostly not due to the Olympics. (Which is the big question in the oil markets, too.)

2. Kunda Dixit of the Nepali Times writes in the Wall Street Journal that the new Mao-ist government of Nepal is looking to Beijing for ideas on how to approach their economy. Interesting. Likely somewhat troubling to New Delhi.

3. The Wall Street Journal Editorial Board says that the government offensive against Tamil Tiger held areas in Sri Lanka appears to be succeeding, but that the Tamils will likely just fade into the jungle. It offers some good advice as to how the government might proceed with the hopes of bringing the 25 year conflict to an end.

4. Emily Wax at the Washington Post writes that heavy handed responses to peaceful protests in Kashmir is creating more problems than it is solving, and that the independence movement there is gaining substantial momentum.

5. AFP reports that Muqtada al Sadr has suspended the activities of the 60,000 strong militia, the Mahdi Army, in a statement from Najaf. Sadr has set a cultural agenda for the members of the militia and promises that those who don't abide by its precepts will be expelled from the organization.

6. CNPC and the Iraqi Government have renewed their deal on developing the Ahdab oil field, reportedly at $3 billion, as per Elaine Kurtenbach of the AP.

7. Blaine Harden at the Washington Post writes that North Korea is threatening to resume its nuclear program after not being removed from the state sponsor of terrorism list.

8. David Pallister at the Guardian reports that following the withdrawal of the Muslim League from the government coalition, lawyers have renewed their protests calling for the reinstatement of Supreme Court Justice Chaudhry and the conflict in the northern region with extremists continues to spin out of control. The Muslim League withdrew from the coalition because, they argue, the Pakistan People's Party is dragging its feet on the reinstatement of Chaudhry because its leader, Nawaz Sharif, is afraid that charges against him will be resurrected should he do so.

9. Mansoor Ahmad of Pakistan's The International News reports that power generation outages have increased this year, mostly due to inefficiency and lack of fuel. The Pakistan Electric Power Company cannot pass through increased feedstock costs to its customers--its thermal generators run on furnace oil and natural gas.

10. Jim Lobe, of the IPS, in the Asia Times gives a better analysis of how Iran might react to the Georgia crisis than most of what I've seen. However, I think Lobe understates, by a long shot, Iran's view of Russia in its backyard, especially as a supporter of secessionist regions. To begin with, Iran has a long history of trying to push back Russian aggression ... indeed, many of the countries in the Caucasus were part of Persia prior to Russian interference. Iran's biggest oil producing region--Khuzestan--is majority Arab, not Persian aka Aryan, the main ethnic group of Iran. A very large portion of north-western Iran by the Caspian is majority Azeri--indeed two neighboring provinces are known as East Azarbaijan and West Azarbaijan. And there are a large number of Kurds in the western portion of the country. For Iran to lend legitimacy to self-determination efforts by secessionist-minded minorities is a difficult choice for them to make. Farideh Farhi, who Lobe quotes, is especially interesting/useful/credible, on Iranian parliamentary politics.

11. Silly intro analysis from Judy Dempsey at the International Herald Tribune regarding the prospects of the so-called Nabucco pipeline--a proposed gas pipeline which would deliver gas from Azerbaijan and / or Iran to the heart of Europe via Turkey. Russia's move in Georgia hardly kills the project, but has the likely effect of making it more attractive. Iranian gas becomes a more attractive feedstock choice, but the real problem with Iranian gas for Europe has always been that Iran itself can't quite seem to figure out what it wants to do with its gas. (Pipe it to India and Pakistan? Pipe it to Turkey and Europe? Reinject it into oil fields? Ship it as LNG? Use it to fuel fleet of CNG cars? Power generation? So much gas ... so expensive to develop ... so difficult to figure out how to maximize the bang for your buck. Of course, if Iran made a solid commitment to Europe on the gas then it would have a lot of clout in terms of the IAEA/NPT negotiations. But then Russia is building their nuclear plants, and that would surely upset Moscow.) If Georgia enters NATO, which it might have a better chance of doing now, then Nabucco would surely be pushed, and pushed hard, by the US ... even though this would obviously be extremely provocative from the Russian perspective. (This last assumes that old Sovietologist thinking will remain par for course in the US.)

12. NATO Ships in Black Sea Raise Alarms in Russia by Andrew E. Kramer at the New York Times.

13. Reuters FACTBOX: Russian oil and gas export interruptions. In 2006 a Swedish Defense Agency put together a report on Russian oil and gas export interruptions. This factbox lists a few of them (selectively, I would add.) It noted, at the end, that there have been half as many interruptions under Putin than there were under Yeltsin.

14. Yesterday Fabiola Sanchez of the Associated Press reported that Venezuelan lawmakers were ready that day to put a bill through their legislature which would give private fuel retailers 60 days to negotiate the sale of their businesses or face nationalization. PdVSA controls 51% of the retail market. BP has a 9% share; Exxon: 5%; Chevron 3%. I don't imagine that this is an especially lucrative business given that gasoline sells for $.15/gallon in Venezuela, but imagine it is distressing to the IOCs nonetheless.

15. Andrew Downie at the New York Times writes that Brazil has responded to high food prices internationally by providing a subsidy for further planting, while Argentina--the other major agricultural powerhouse in South America--has placed large tariffs on exports, thus ensuring cheap food at home.

16. Todd Benson at Reuters writes that Brazil is in the midst of a difficult political debate over how to approach the exploitation of the new find in the Santos Basin, which may have as much as 80 billion barrels of commercially extractable crude. The government has already suggested creating a new national oil company to handle the new find, which has been nicknamed Petrosal--or Petro Salt--as the oil lies under underwater salt beds.

17. Sam Fletcher of the Oil & Gas Journal writes that Guy Caruso predicted that crude prices will fall to below $100/b in the next 18 months. Caruso also reiterates that drawing from the Strategic Petroleum Reserve would be unproductive--which is counter to the, rather rudely put, advice given by Philip Verleger to the US Senate last December.

18. US GDP grew at 3.3% in the 2nd quarter according to the Commerce Department, rather more than the 1.9% original estimate, as per Michael M. Grynbaum at the New York Times.

19. Jenny Anderson at the New York Times writes that cities are beginning to accept private financing for various infrastructure projects. This financing is coming from large investment banks like Credit Suisse, Carlyle Group, Goldman Sachs and Morgan Stanley. I agree that infrastructure needs to be invested in. I agree that the government has done a poor job of this (outside of the fact that it built it in the first place--private industry thought it too expensive with too low a return.) But, my gut reaction to someone attached to the industry responsible for the current credit and housing crisis saying that infrastructure in ten to twenty years is gonna be bigger than real estate is ... do what we need to, but keep those guys the hell away from anything that strategically important to America.

20. Sabine Vollmer at the News Observer reports that Bayer in under increasing pressure from German authorities for putting a new type of insecticide--known as clothianidin--on the market. The EPA approved clothianidin in 2003 on the condition that Bayer provide additional data on the product, but the EPA has not made any further public statement on the insecticide, and it is not clear if Bayer even submitted the extra data. European environmental regulators suspect that insecticides like clothianidin are responsible for the colony collapse disorder that bee populations worldwide have seen in recent years. Over a third of the bee population in the United States has died off. Bees pollinate about a third of our foods. From a geopolitical standpoint, of course, mass starvation is not good.

21. A report by Konstantinos Giannakouris at EUROSTAT was just released with a set of population predictions for Europe through 2060 which surprisingly give a slight increase in population over that time. Nearly all the population growth will take place in the richer countries in Europe, with Cyprus, Ireland, and Luxembourg showing the most growth, percentage-wise. However, in 2060, for EU27 as a whole, there will be 50 million less people of working age than there are now in 2008. The report projects that, taken as a whole, births will not outnumber deaths from 2015 on, meaning that all population growth will come from immigration--and it looks like from 2035 on immigration will not be able to make up the difference either. Obviously, many things will change between now and then, but useful data nonetheless.