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The Oil and the Glory

The Weekly Wrap — Aug. 5, 2011

A new middle class – the other commodities story: Share prices have surged in recent years for agriculture, metals and energy companies, and traders betting long on the commodities sold by these companies have been rewarded richly as well. Now the Wall Street Journal finds a far more dramatic impact across borders — Eric Bellman ...

AFP / Getty Images
AFP / Getty Images

A new middle class – the other commodities story: Share prices have surged in recent years for agriculture, metals and energy companies, and traders betting long on the commodities sold by these companies have been rewarded richly as well. Now the Wall Street Journal finds a far more dramatic impact across borders — Eric Bellman reports that the boom in palm oil (seeds pictured above), cocoa, rubber, coal and more has created a new or larger middle class in countries like Brazil, Indonesia, Malaysia and Thailand. In Indonesia, writes Bellman, "rubber tappers, cocoa pickers, coal miners and other rural laborers have in some cases seen their incomes more than triple in the last three years, making the workers’ wealthier than some city residents and putting them on the radar of such multinational consumer-goods makers as Honda Motor Co. and Unilever."  Of course, if you are not engaged in palm-oil farming or other commodities businesses, you are probably hurting with high prices. The palm oil boom has also caused deforestation in Indonesia. But Bellman quotes figures from the Asian Development Bank that from 1999 to 2009, Indonesia’s middle class doubled to 93 million people, or 40 percent of the population of 229 million people.

 

The trouble in Greenland: Shell has gotten provisional approval to drill for oil offshore from Alaska’s North Slope in the Arctic Ocean. After five years and $4 billion in spending, Shell is pretty thrilled. Oil booms can be exciting, but there is something other-worldly about the hoopla surrounding the Arctic, which every large oil company on the planet, not to mention the leaders of a few states such as Russia, appears unabashedly eager to develop as the next big frontier. The ice-melting impact of global warming is opening up the Arctic Circle, the location of 25 percent of the world’s remaining oil and gas reserves, according to the U.S. Geological Survey. But earlier this week, we got a reminder that the arrival of a sloshy ice pack doesn’t make this forbidding region easy to work in. Cairn Energy, which had already faced creatively angry activists from Greenpeace, says it is abandoning a dry hole it has drilled on Greenland’s west coast, one of four wells costing $600 million that the British company plans in the country. The company says it’s going ahead with the other wells. ExxonMobil, Chevron and Encana Corp. also hold drilling licenses there. As for Shell and Alaska, this is just the first major hurdle.

Read on for more of the Wrap

 

The big payout: So much bile is spewed against Big Oil that sometimes one wonders if it’s just too much. Obviously these companies cannot uniformly be the greedy, heartless and dirty scalawags that is depicted in books that regularly cross my desk. Then we get reports such as this one by Theo Francis at footnoted.org, and we wonder whether the companies invite such harsh treatment.

In the first half of next year, ConocoPhillips will have completed its division into two companies — an exploration and production company, and a refining and marketing company. At that moment, CEO Jim Mulva will be entitled to more than half a billion dollars in various forms of compensation, according to Francis’s calculations after digging through company regulatory filings and calculating his rewards against the company’s current share valuation. Francis gets to the figure $567 million in compensation due to Mulva by adding up stock options, unvested restricted stock, a $62 million company pension, plus deferred compensation of $45.6 million. If all proceeds according to Francis’ calculations, Mulva’s package would exceed the much-criticized 2006 retirement compensation of $398 million received by outgoing ExxonMobil CEO Rex Tillerson. Mulva accumulated all that wealth in addition to his normal salary and bonuses after working at the company in its current and previous forms since 1994.

 

Annals of bizarre oil states — Venezuela edition: If you are Saudi Arabian, you are permitted to be king and really sick at the same time without worry of ouster. But good health is an oil tyrant job requirement almost everywhere elsewhere in the world. Hence we get videos of Hugo Chavez, the cancer-stricken president of Venezuela, exercising with his cabinet and joking around about his shaven head, J. David Goodman reports at the New York Times. But if one was not previously worried, one’s suspicions are now piqued — though the videos are both said to have been shot last week, Chavez has a full head of hair in the first one.

 

 

Annals of bizarre oil states — Turkmenistan edition: Turkmen President Gurbanguly Berdymukhamedov has had a long, steep climb to credibility. A former dentist, Berdymukhamedov succeeded tinpot dictator Saparmurat Niyazov in 2006. Among his first acts as head of this gas-rich state were dismantling some of the kooky pillars of the cult of personality that surrounded Niyazov, such as statues, and a rule requiring every young Turkmen to read the Ruhnama, Niyazov’s history of the country and rules for healthy spirituality and living. But, as Catherine Fitzpatrick writes at Eurasianet, successful Turkmen students are not quite rid of this self-styled Red Book. Study of the Ruhnama remains a requirement for college students including future geologists, physicists and computer scientists applying to Turkmen Polytechnical Institute.

 

The Kremlin Contest: Don’t forget to test your geopolitical wiles by entering the Kremlin Contest, the wagering on whether the conventional wisdom is right and Vladimir Putin will return to the Kremlin as president. Read the super-easy rules here, and email me your best guess along with your reasoning. Tweets welcome at @stevelevine. The deadline is Sept. 1.

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