Monday, April 23, 2012

The Oil Business Will Never be the Same

   A new initiative known as the Extractive Industries Transparency Initiative (EITI - catchy!) caught my eye in today's Financial Times. EITI is a move to improve transparency in the trading of oil cargoes from their source, usually national oil companies, to their buyers - independent traders and oil majors. The wholly justifiable suspicion that there may be some industry shenanigans involved with doing business with producing countries such as Angola, Nigeria, Venezuela, Russia (I could go on...and on) gave me a fit of nostalgia for the good old days.
  The good old days were when a trader could take a sackful of cash on a private jet to secure the deal. He (and it was almost always a man) was a brave, resourceful McGyver-with-a-bodyguard kind of trader who often got shot at, or at least threatened with his life, in the name of getting the deal. The stories of oil trading as Wild West were what made working in the oil industry as a journalist so much fun. Not that we could ever publish them...
  EITI is mainly a good thing, no matter how much I will miss the stories. Money paid to corrupt government officials in the name of doing business was never a good thing. The money did not go to the people of these mostly poor, third world countries, it stayed in the pockets of the corrupt bureaucrats.
   There is a snag, however. Once the bribery is stopped the price of oil coming from a lot of places will rise to market levels, raising overall prices for oil. And trading companies will suffer because there will be little margin in doing such deals. If so, it is another case of 'be careful what you wish for.' On the other hand, a trader friend tells me not to worry, saying: "We'll find a way around it."

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