The One Hundred Most Important Economic Events of the Century; the One Thousand Most Influential Peo...
The One Hundred Most Important Economic Events of the Century; the One Thousand Most Influential People of the Millennium. Added to the usual crop reviews and outlooks this year is a rash of Big Predictions - trends to shape our lives in the 21st century. Riveting stuff, of course, except that most investors struggle to deal with the here and now. Will China be the new world power? Maybe, but in the meantime we have to deal with a wobbly euro, a US market running out of steam and a split domestic economy in the UK.
Where does one read of The 100 Greatest Risks to Your Wealth in 2000? Who will alert you to the immediate hazard from silly mid off? If the history books show anything, it is that jolly Yuletide is almost always disrupted by some unpleasant event that someone had forgotten to pencil into the Divine diary. This year the diversion is being provided by Russia and the price of oil. Are the two by any chance related?
Russia is the country most vulnerable to collapse due to the millennium bug. Moscow appears unusually determined to subdue the southern Islamic State of Chechnya and Western governments are clearly reluctant to get nasty over the issue. The conflict, now laced with references to nuclear capability, is making the markets nervous again.
Oil prices have doubled in the last year, but they leapt sharply when Iraq announced on 24 November that it would refuse to export its 2.3m barrels per day export quota in protest at a United Nations sanctions resolution. Two weeks ago Brent crude, the oil benchmark, reached $26/barrel, the highest price since the US bailed out Saudi Arabia in the Gulf War nine years ago.
Oil is not as vital to modern economies as it was during the 1970s oil crisis but it is a critical factor for any international investor. The latest price spike has prompted a warning from the US that it is prepared to tap its strategic reserves. US monetary authorities are keeping a sharp eye on rising import prices, which have heightened the risk of inflation. Fears about disruption to oil supplies caused by Y2K problems are also growing just as the Northern hemisphere winter closes in.
For Opec leader Saudi Arabia, it's payback time. Whenever oil breaks out of its traditional $15-$25 range, non-Opec countries start gaining market share, scaring the usual providers back on stream. Saudi ministers were bidden to Washington last week and the 'consultations' have had a remarkable effect. Brent crude is already back in its trading range.
So we can all roast our chestnuts again and pass the festive port. Iraq, clearly outmanoeuvred, now says it will resume exporting oil. The volatility upsets the markets but until the Mars mission is more productive, the world has few alternatives to oil. What will we do when the Middle East's black gold runs out, or we simply need more of the stuff? Why, there is a useful 300 billion barrels (or equivalent) lying under the Caspian Sea. The only problem is how to get it out.
The best brains in the business are on the case. BP Amoco has spent $75m on it this year alone. But there are some hard choices coming up. A pipeline could go west, via Azerbaijan and Armenia, neither particularly stable, or friendly. Not appealing? Well then, the route could lie south, via Iran. This poses a problem for the US oil giants. Okay, here's the final option - and it's also the cheapest - bang through the middle of Chechnya. Anyone offering Grozny oil futures?
Paul Bruns and Elaine Parkes
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