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Oil Markets On Edge As Tensions Mount In The Middle East

Oil prices got a slight 2% boost Friday when Iranians claimed that someone aimed suspected missiles at one of its oil tankers as it traversed the Red Sea, some 60 miles from Saudi Arabia, causing mild damage to the tanker itself and oil to spill into the Red Sea. There was no fire following the two explosions, the oil spill was brief, and the vessels are stable. The nature of the attack remains entirely unclear, as does its would-be motivations given that the attack appears to have been minimal in scope and scale. The entire region is experiencing a massive upheaval with the latest upset being a Turkish invasion of northern Syria after the US withdrew from the area and allowed Turkey to overpower its Kurdish allies in the region, much to Israel’s dismay.

Overall, oil is wallowing due to poor fundamentals, with OPEC cutting its oil demand growth forecast this week for the third consecutive month. Iraq may be on the brink of civil war and a possible staging ground for a US-Iran conflict, but oil prices simply don’t seem to care.

Why Investors Should Be Very Worried About Ecuador

Clients are always asking us to evaluate the vulnerabilities of foreign companies in certain emerging market industries, particularly the extractives. Few are willing to recognize the power of indigenous populations to rock these very lucrative boats. In Argentina, an indigenous movement is the most powerful threat to the mining and oil and gas industry; much more so than who wins presidential elections.

If anyone has any doubts, please watch what’s going on right now in Ecuador, where indigenous protesters have forced the government to flee the capital, halted operations at three oil facilities and blocked a pipeline. And everyone in any oil venue anywhere who has something to protest is watching.

On Wednesday, in the second day of violent rioting, protesters went head-to-head with security forces over a fuel price hike after subsidies were removed when the country agreed to $4.2 billion in IMF loans (which should prompt someone to question the IMF’s loan agreements, as the organization is not paid to think beyond the immediate financial outlook).

Indigenous groups have now been joined by farmers, students and labor unions and together they have forced the shutdown of one of the country’s two oil pipelines. That means two-thirds of Ecuador’s oil is offline for distribution. That means force majeure for state-owned Petroecuador. The pipeline shut down comes after protesters took control of three oil facilities in the Amazon earlier in the week. To date, the protests have cost Ecuador $12.8 million in lost production.

What’s happening in Ecuador will happen elsewhere. That’s the power of digitally globalized protests.

Tesla, Panasonic and … Hilbar?

Tesla and Panasonic aren’t exactly a match made in heaven, other than the fact that Tesla desperately needs batteries and Panasonic makes them. The culture clash between Musk and the Japanese tech giant is such that there are bound to be more than a few hiccups along the way. Some of them have to do with pot and a certain Silicon Valley brazenness, but some also have to do with price. Tesla wants Panasonic to slash prices because the EV giant is trying to build a massively expensive factory in China. Panasonic isn’t keen to do that. It also isn’t that keen to enter China with Musk.

For Panasonic, this relationship may not be worth it. Shareholders aren’t happy and the stock has lost half its value this year. Earlier signs this relationship wasn’t going well came in April, when Tesla and Panasonic halted plans to expand the capacity of the Nevada gigafactory. Now, with production falling behind, and Panasonic in the battery red, Tesla is clearly making moves to produce its own batteries.

Tesla has rather quietly acquired Canadian high-speed battery manufacturer Hibar Systems. A Tesla October 2 regulatory filing lists Hibar as a Tesla subsidiary, and that’s all the indication that there was that Tesla acquired the company. Hibar was not listed as a subsidiary in July regulatory filings.

Hibar has manufacturing facilities in many countries, including in China, where Tesla is attempting to make headway with the production of Teslas expected by the end of 2019. Tesla and Hibar are still being extra tight-lipped about the deal, and Hibar’s website has gone dark. But batteries might not be the only thing Tesla is interested in. Hibar also manufactures automated industrial equipment and has extensive experience doing business in China - just what Tesla needs as it embarks on its first manufacturing experience in China.

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