"Starting today, we must pick ourselves up, dust ourselves off and begin the work of remaking America."

The words of the 44th U.S. President Barack Obama echoed through the Washington Mall. The pixie dust has settled on the inauguration. The new President has settled into the Oval Office and the work has begun in earnest.

Some felt a little let down by Barack Obama’s acceptance speech. They say it lacked the flair of his election night victory speech. I think many missed the point. I did an informal poll of businessmen and policy wonks and they all agreed with my simple premise -- this was a speech given by the Chief Executive, not the Commander in Chief. It is not the time to rally the troops, but get down to business.

The 47-year-old leader has a steep hill to climb, but he has plenty of support behind him and a bank full of goodwill abroad. After a day of celebration basking in the bright winter skies of the nation’s capital, he hit the phones calling four leaders in the Middle East. It was a classy touch and a strong signal that the region will be high on his priority list.

The challenge for this President is that he is sailing right into the eye of a colossal storm. Financial markets are good lead indicators for the next nine to 12 months ahead. They are pointing to more trouble, not less.

Our animal instinct is to think the worst, but hope for the best. This week I sat down with veteran Jordanian central banker, Umayya Toukan, to size up the impact of this downturn on the Kingdom. He is confident that Jordan, a small but reform led economy, can still grow better than four percent this year, depending on "how quickly confidence can be restored."

Toukan referred back to that nasty autumn week when banks and markets collapsed in a sea of toxic assets. He described it as an investor "panic attack". Rational thinking went out the door and survival instincts kicked in. Putting to rest those "voices" of irrational thinking Toukan says, it will take time and a period of stability.

Financial markets are not giving President Obama a honeymoon period. It seems Congress will move swiftly to approve an $800 billion plus stimulus package. Add more than $1 trillion for bank and insurance fund bailouts, and one is talking about a sizable long term burden on the U.S. economy.

This massive spending package on infrastructure and green technologies will bring the major economies together like never before. No one wants to see the U.S. sputter for long (nor Europe for that matter), so China, Japan and the Gulf countries are likely to remain loyal buyers of U.S. and European government debt.

But right now, the grand assumption is that 2009 will be terrible and that 2010 will be a year of recovery for the United States. Laura Tyson, a transition adviser for President Obama and former chair of the National Economic Council in the Clinton Administration told me in London that, "The U.S. recovery is going to be slower, longer and subdued." She too believes that the last to fall in this downturn, the developing countries from the Middle East to Asia, will be the first to recover.

"We have had a crisis which has demonstrated that the world is highly inter-dependent," says the economist from University of California at Berkeley. Those countries, she added, with giant surpluses need to "continue to stimulate their own economies and serve as stabilizing investors in the global economy."

Tyson was referring to China which sits on an estimated $1.9 billion of total reserves, and the GCC countries with a collective stockpile of $1.4 billion. Tyson a year ago in Davos expressed concern that the sovereign wealth funds might institute a "Trojan horse" strategy. They have been passive investors to date, but no one really understood their long term aims. After the signing of the so-called Santiago principles sign last October, she was clearly less concerned. Tyson even expressed the need for Washington to be more transparent in this process of state capitalism by the U.S. Treasury department in the financial bailout.

On the sidelines at the World Economic Forum, leaders will continue their work on the new financial architecture. The Group of 20 will gather again at the end of April here in London and will try to define who will lead and how they will lead. No doubt, decision making will be more collective, but the U.S. will still be in the front of this pack, during this re-balancing of the global economy, the new, inspiring President/Chief Executive Barrack Obama will not want to go at it alone.

Labels: Abu National Energy Company, barack obama, Laura Tyson, middle east, World Economic Forum

The story of Goldilocks and the three bears has a little girl rummaging through a house uninvited to try all three bowls of porridge until she finds one that is not too hot and not too cold. The OPEC cartel -- producers of about 40 percent of the world’s oil -- is not living through a fairy tale, but in reality is finding it difficult to secure the right price for its crude as economies tumble into recession.

After choosing not to take action at an emergency meeting in Cairo, energy ministers have made their opinions known about what is the Goldilocks price for their product. Saudi Arabia’s Oil Minister, Ali al-Naimi, the swing producer of the group, surprised those who follow this business by declaring $75 a barrel as a “fair price” for crude today.

His Qatari counterpart Abdullah bin Hamad al-Attiyah was hot on his heels saying that colleagues were searching to stabilize prices of $70 to $80 because it is a level which will lead to investment in future production.

During the last quarter, oil has fallen more than $100 a barrel. Formal cuts of one and a half million barrels a day were announced in September and October, but it is taking a while to get those reductions implemented. In the meantime, the only thing related to oil that is going up is the amount of storage.

From his office tower overlooking the waterfront in Sharjah, Hamid Jafar, the polished Executive Chairman of Dana Gas, talks about the need for less volatility: “The worst thing for the industry and for investments is wide fluctuations, because it creates uncertainty,” says Jafar, “That’s not healthy because a lack of investment today will create a bigger spike for the medium term.”

From his headquarters in the United Arab Emirates, Jafar has fanned out in the region to develop fields in Egypt and the Kurdish Region of Iraq. Dana Gas and another company he owns, Crescent Petroleum have invested two-thirds of a billion dollars in the Kurdish gas project. Jafar is keen to see state-run oil companies accelerate their investments in partnerships with private sector firms like his. The trend in the business is the opposite. State run oil companies have been eager to control as much of their production as possible in an effort to maximize profits.

Oil industry insiders say Saudi Aramco is one of the exceptions. Neil Fleming of Platts put it bluntly on the sidelines of a London conference, “What tended to happen with other OPEC producers is they’ve milked what they had in terms of resources and revenue. The impetus to really invest in increased production was not there.”

With oil hovering around $50 a barrel, it is difficult to fully embrace the recent report from the International Energy Agency that predicts oil will average double the current amount between now and 2015. The Paris-based agency notes that a half billion dollars a year needs to be invested to compensate for the drop in production in countries like Mexico, Norway and Russia. Yes, the second largest exporter today, Russia, is seeing its fields drop by an estimated six to eight percent a year. The bulk of those investments need to go into Middle Eastern fields, where reserves are plentiful.

Kuwait Petroleum Company, for example, wants to expand production by one million barrels a day to 3.5 million in the next seven years. To do so, their Managing Director of Planning, Jamal Al Nouri said during an interview in Dubai that $60 to $70 would suffice in terms of his production pipeline.

“It is a complex combination of projects in terms of exploration, infrastructure, drilling and facilities for export and maybe securing markets outside,” Al Nouri said. KPC for example is a joint venture partner on a $6 billion dollar refinery in Vietnam.

Here is the rub. Despite their coffers overflowing when oil was over $100, the Middle East can have too much of a good thing. When prices are sustained above $90, it prompts owners of more expensive projects such as tar sands in Canada for example to go into production. That might be good for balancing supplies, but at the same time the trend reduces the influence of regional oil producers. Also, high prices push consumer nations to accelerate their investments into alternative sources of fuel.

Peter Barker-Homek is Chief Executive of Abu National Energy Company, better known as Taqa. His group owns oil and gas assets, plus clean burning power generation projects.

With a broader portfolio he is advocating that a higher price will prompt smarter investments: “I think the dialogue is moving from simply oil demand and supply balance to what is the whole global energy mix. And we have to change ourselves to a low carbon society, a low carbon planet. The only way to do that is to have relatively high pricing over the next five to ten years which will cause a migration from fossil fuel in transportation and cause us to switch to more efficient power-generation.”

So, while this blueprint for future energy is still being drawn up, OPEC finds itself only a quarter of the way through a story it was hoping not to be part of. It is called a deep correction in the West and falling demand for their number one asset. Oil producers are searching for Goldilocks, but like in the fairy tale, she remains elusive.

Labels: Abu National Energy Company, fossil fuels, oil prices, OPEC