The Geopolitics of Energy

–Egypt is a long way away from St. Kilda. And as your editor knows nothing about what’s going on there, we don’t have much insight into it, in geopolitical terms. Well, maybe one insight. It’s probably going to be good, in the very long term, for unconventional energy sources.

–Heck, it may even be very good for unconventional energy in the short term. In Sinai, an Egyptian natural gas pipeline to Jordan was attacked over the weekend. A parallel pipeline supplies Egyptian natural gas to Israel, which Israel uses to generate electricity. Egypt supplies 40% of Israel’s natural gas.

–Of course Israel has its own strategic issues in the region. But energy is one of them. AFP reports that Israel is already looking to import more liquefied natural gas. The Los Angeles Times also has a story updating Israel’s efforts to convert oil shale into usable energy. A pilot project in the Judean hills is running to demonstrate the technology.

–Any time there’s a spike in the price of oil, the discussion about unconventional alternatives picks up. It’s as if people are suddenly reminded that OPEC controls 80% of proven crude oil reserves. And even though not all OPEC nations are in the Middle East, some of the big ones with the largest reserves ARE there…and it’s not the most stable place in the world.

–This geopolitical back-story is one reason why Australia’s LNG industry is projected to become the world’s largest exporter. Aussie gas might be more expensive (in terms of production costs) than product from the Middle East. But of power plants in Japan, Korea, and China, the relative proximity and stability of the Aussie LNG industry might be worth a bit of a premium.

–You know this story well already if you subscribe to Kris Sayce’s Australian Small-Cap Investigator. He began looking into it over two years ago and captured a lot of the first re-ratings of Queensland’s coal-seam-gas aspirants. But now may be a very good time to look beyond LNG to other unconventional energy sources.

–That’s all we’re going to say about the subject until we finally publish our latest issue of Australian Wealth Gameplan. It’s due out today and in it we’re covering the energy story from a currency angle. That is, we’re looking at energy as a kind of geopolitical capital and making one specific recommendation out of it. Until then…

Dan Denning
From Markets and Money Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.

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