Value Investing

While Chennai Petroleum and Mangalore Refinery exhibit robust integration and capacity advantages, Manali Petrochemical’s specialized focus might offer distinctive growth prospects, albeit with current financial headwinds. The strategic moves these companies make in response to industry dynamics and their operational efficiency will be crucial in shaping their future trajectory.

Value Investing

While BPCL, HPCL, and IOCL have core strengths in the oil and gas sector, their performance is more susceptible to sector-specific risks. In contrast, RIL’s diversified operations provide it with a more balanced growth outlook, making it a unique player among the four. Investors should consider these companies’ distinct business models, financial health, and strategic directions when comparing their stocks.


To manage high petrol prices without cutting taxes, India can adopt strategies like diversifying oil imports for better terms, enhancing refinery efficiency to lower production costs, promoting alternative fuels and EVs to reduce petrol demand, expanding strategic reserves for price stability, improving public transport, and monitoring markets to ensure fair pricing. Additionally, innovative approaches like promoting carpooling, using smart traffic systems, incentivizing fuel-efficient vehicles, developing a local biofuels industry, launching fuel conservation campaigns, and green urban planning can further reduce reliance on petrol, benefiting both the economy and the environment.

Strategy Journal

The ongoing conflict in the Middle East, particularly the escalation in Gaza and the broader regional involvement, is significantly impacting global markets in 2024. The conflict, which has intensified to involve neighboring regions and non-state actors like Hezbollah, Hamas, and the Iran-aligned Houthis, is contributing to a surge in global uncertainty​​.

Key Developments:

  1. Military Actions and Geopolitical Tensions: The United States and Britain have launched strikes against Houthi military targets in Yemen, responding to the movement’s attacks on ships in the Red Sea. This escalation is the first direct military action on Yemeni territory since 2016 and has increased tensions in the region, particularly in relation to the Israel-Hamas war that began in October​​​​.
  2. Impact on Global Trade and Shipping: The conflict has disrupted major shipping routes, including the Suez Canal, which handles about 12% of worldwide trade. This disruption has led to a decline in global trade and forced shipping companies to reroute around Africa’s Cape of Good Hope, significantly increasing costs​​​​.
  3. Economic and Market Repercussions: The situation has led to rising oil prices, with Brent futures up 9% since mid-December 2023. Investors are increasingly seeking safe-haven assets like gold and yen, reducing exposure to riskier markets. This trend towards risk aversion is likely to continue if the situation escalates further​​​​.
  4. Potential for Regional Destabilization: The resurgence of non-state actors in the region, such as Hezbollah and Hamas, is challenging Israeli and American policies, increasing the likelihood of prolonged conflict. The involvement of these groups has further complicated the geopolitical landscape and raised the stakes for international involvement​​.
  5. Implications for Oil Markets: The Middle East’s geopolitical instability could influence global oil supply dynamics. While there has been record domestic oil production in the United States, providing some buffer against rising gas prices, OPEC’s contemplation of further production cuts amid increasing demand may lead to higher oil prices in the near term​​.

Strategic Implications:

  1. Economic Volatility: Global markets are likely to remain volatile as investors react to developments in the Middle East. The focus on safe-haven assets may continue, potentially leading to fluctuations in gold and oil prices, as well as currency markets.
  2. Increased Cost of Global Trade: The disruptions in major shipping routes are expected to continue affecting global trade negatively. Companies may need to adjust their supply chain strategies and inventory management in response to increased shipping costs and longer transit times.
  3. Geopolitical Risk Assessment: Countries and businesses with interests in the Middle East will need to reassess their geopolitical risk strategies. The potential for a prolonged conflict suggests a need for contingency planning and reevaluation of regional investments.
  4. Policy Responses: The international community, particularly the United States and its allies, will face challenges in navigating the complex geopolitical environment. Diplomatic efforts to de-escalate tensions and address the humanitarian crisis in the region will be crucial.
  5. Long-term Regional Impacts: The current conflict may have lasting effects on the political and economic landscape of the Middle East. The resurgence of non-state actors and the potential for further destabilization could reshape regional power dynamics.

Conclusion: The escalation of conflict in the Middle East in 2024 has profound implications for global markets, trade, and geopolitics. The situation demands careful monitoring and strategic responses from governments, businesses, and investors to navigate the increasing uncertainty and volatility.

Strategy Journal

Recent activities by the Houthi rebels in Yemen have significantly impacted global shipping and the oil market. Since mid-November 2023, the Houthi rebels, who are backed by Iran, have launched numerous attacks on commercial ships in the Red Sea. These attacks have not only disrupted shipping routes but have also raised tensions in the region, leading to military responses from the United States and the United Kingdom.

Key points about the situation include:

1. Houthi Rebel Actions: The Houthis have been targeting commercial traffic in the Red Sea, including indiscriminate attacks on ships, regardless of their affiliation with Israel or any other nation. The United States and its allies have retaliated with air strikes against Houthi targets in Yemen. The Houthis, undeterred by these strikes, have vowed fierce retaliation, further escalating the situation.

2. Impact on Global Shipping and Trade: Due to the heightened risk of attacks, major shipping companies have decided to avoid the Red Sea, opting for alternative routes such as going around the southern coast of Africa. This change in shipping routes has increased transit times by about nine days and raised costs by at least 15 percent. The exodus of shipping companies from the region threatens to disrupt supply chains and increase consumer prices.

3. Effect on Oil Prices: The attacks have also impacted the oil market. Crude oil prices rose around 4% following news of the U.S. and U.K. air strikes against the Houthis. The Red Sea is a crucial route for global trade and energy shipments, and disruptions there have the potential to significantly affect oil and natural gas supply chains

4. International Response: The United States has called for urgent action by the U.N. Security Council against the Houthi rebels. The U.S. has also imposed sanctions on firms in Hong Kong and the United Arab Emirates for allegedly supporting the Houthis. There is a concern that continued Houthi attacks could lead to a broader regional conflict, and efforts are being made to de-escalate the situation

5. Impact on Peace Efforts: The Houthi attacks have come at a time when there was some progress towards a ceasefire in the ongoing conflict in Yemen. However, these recent actions by the Houthis are seen as potentially derailing the peace efforts

Overall, the recent activities of the Houthi rebels in the Red Sea region are causing significant disruptions in global shipping and trade, particularly affecting the oil market due to increased transportation costs and risks. These developments highlight the interconnected nature of global trade and the potential for regional conflicts to have far-reaching economic impacts.

Strategy Journal

UK Energy Crisis : The UK’s energy landscape is undergoing significant shifts as Prime Minister Rishi Sunak announces a strategic pivot in the nation’s climate action goals. Amidst an intensifying energy crisis, Sunak has proposed a five-year delay to the ban on petrol and diesel cars, pushing it to 2035. This move, part of a broader softening of policies aimed at achieving net zero carbon emissions by 2050, has been met with widespread criticism. Environmentalists, opposition lawmakers, and industry leaders have voiced concerns, pointing to the UK’s leadership role in climate policies. The decision also comes at a time when the ESB’s consumer business in the UK reported substantial losses due to the crisis, and global automakers like Ford emphasize the need for consistent government policies to support the transition to electric vehicles. The recalibration of the UK’s green agenda, coupled with recent approvals of new oil and gas licenses, underscores the challenges the nation faces in balancing economic pressures with environmental commitments.

Update 24 September : The UK grapples with soaring energy bills, expected to persist despite Ofgem’s recent 7% reduction in the price cap from £2,074 to £1,923 annually. This revised cap, while a relief, remains significantly above the pre-crisis average of £1,000-£1,200. The aftermath of the pandemic, coupled with the collapse of 30 energy suppliers and skyrocketing gas prices, has pushed energy costs to unprecedented highs. While Ofgem’s chief, Jonathan Brearley, welcomes the cap reduction, he underscores the broader cost-of-living challenges Britons face. Calls intensify for the government to intervene, with advocates like Adam Scorer of National Energy Action urging for targeted energy discounts. Meanwhile, Labour’s Ed Miliband criticizes the government’s perceived inaction on bolstering renewable energy. A forecast by consultancy Cornwall Insight paints a grim picture, suggesting elevated energy bills could be the norm until the decade’s end.

Strategy Journal

Russian companies reportedly earn over $1 billion from inflated shipping costs in crude oil sales, according to Financial Times analysis.
-Despite Western-imposed oil price caps post-Ukraine invasion, Russian producers charge higher amounts including freight costs.
– Investigation suggests potential $1.2 billion profit from overcharging and fees from Russia-linked vessels in three months.

UK July inflation data gains significance after Bank of England’s conservative interest rate hike.
– Economists predict 6.7% inflation rate, slightly lower than the central bank’s 6.8% forecast.
– China’s economic health uncertain with mixed signs of recovery, retail sales slowing, and industrial output figures due.

KoBold Metals, backed by powerful venture capitalists, embarks on $150 million copper exploration in Zambia.
– Zambia aims to triple copper production to over 3 million tonnes by 2032, addressing global energy transition copper shortage.
– Despite challenges, Zambia leverages substantial copper endowment and geographic potential for growth.

Strategy Journal
  • 573 km pipeline named Nestor Kirchner pipeline was completed from Patagonia to Buenos Aires. Vaca Muerta is the second largest shale gas reserve in the world. Companies are looking at feasibility of $ 10 bn LNG plant to export the gas  25 Jul’23
  • India is the world’s biggest rice exporter accounting for 40% of global exports
  • Rich Americans are now spending more on services than luxury goods. Europe is now full of American tourists.
  • Goldman reduced its forecast probability of a recession in the next year from 25 % to 20 %
  • Tightening of monetary policy – increasing interest rates to reduce economic activity and hence inflation
    • Quantitative tightening – reducing bond holdings, reducing size of their balance sheets by central banks
    • Bond buying in crises ( like COVID ) – selling in normal times preparing for next crises
    • Over tightening – may cause collapse of banks due to shortage of liquidity
  • Integration of businesses after acquisition – Processes, Corporate structure, IT, customer accounts ..
  • Inflation – Consumer demand or due to imported commodities
    • Dollar strengthens when investors expect higher rates
    • 10 year treasury yield is proportional to inflation
  • Heat causes low productivity, does that mean India has low productivity due to heat ?

Spencer Dale, the famous bp economist is still there and calls 2020 as most challenging and surprising years in his life.

BP released its 70th annual edition of the bp Statistical Review of World Energy