Monday Thoughts (Tuesday again!) – Russia et al Benefit from HIGHER Oil Prices


My friend Al has been harping on the fact that something will happen in the near term regarding Iran’s nuclear program and its effect on Israeli policy toward Iran and American Middle East Policy.

Al seems fairly well convinced that Israel will take unilateral action against Iran since Obama has been easing off too much pressure on Iran and since Iran has said numerous times in the past that they wish to wipe Israel off the map.

Al got me thinking – there are a number of countries in this world that  could BENEFIT from conflict because they really NEED oil to be $100/barrel. For example, I have written numerous times on Hugo Chavez and his policies in Venezuela – and since he will likely bankrupt his country if oil doesn’t go up, we can be assured that, simply in order to preserve his own political power (not a minor impulse as we all know), he will take whatever actions are needed to push oil prices higher.

Russia is a much BIGGER example of a country who needs higher oil prices. Russia is full of natural resources but oil (and gas) is something that it has plenty of, that a lot of people need, and that they can move easily to the customer (and it’s an industry that the government controls, and profits from most directly). Would Russia benefit if the Iran situation heated up just a few degrees? Of course – perhaps if things got hot, but not too hot, Russia could get $100 oil and still make it look like they’re trying to broker peace in the Middle East.

And Iran itself – as tensions rise, so does Iran’s profits from oil. They could benefit also from an increase in the temperature a bit too – I don’t think they have lots to gain from overtly threatening Israel (a position that Russia could not support in public) but the tension can make them some money.

What to Take From This

I am not sure what each country’s position is on any of this stuff -and not sure what America’s response should be. But how this affects my readers is this – potentially higher oil prices as international tensions rise a few notches which affects your cost of heating, transportation, food, etc.

I think Ron Paul made a good summary of this situation when he said that we essentially created the Iran of today by meddling in their affairs 50 years ago. Perhaps President Obama recognizes this and wishes to interfere less and threaten Iran less (I hope though I think the MIC, or Military Industrial Complex would push him away from those thoughts, if he indeed thought that way). However, if Iran agitates and tries to test the limits of American non-interference, it may spark issues with Israel and other nations.

Bottom line – I have advised those of you with the right real estate to consider alternative energy for home heating, water heating and electricity. I can’t stress enough that the best way to control the effects of price increases (inflation) on your budget is to eliminate dependence on “the grid.” Also, consider changing your lifestyle to walk more or bike – perhaps you can lower your fuel bill and your weight too!

It may also mean that it could be time to explore diversifying your investments more to this area – oil and oil exploration.  We could have a case where higher oil prices cause stock markets to fall in general, but oil-related holdings to rise. If your investments are not currently exposed to this, consider talking to your investment advisor about this. Again as a note, I do not provide about investing in this column because that is a highly regulated area. I will give you ideas to run with from time to time and it’s your responsibility to draw your own conclusions.