Georgia - Russia - US War Conflict, Oil / Gold prices plummets, Junior Stock Prices

As far as mining goes, oil is a huge expense for drills and mobilization into difficult to reach areas. Some companies have reported $100,000 a day just in helicopter expenses and drill costs.

Responding to supply and demand, when production is lowered, or when there is a threat of oil supply tightening - prices inflect upwards in correspondance.

This is where it gets interesting - or to be accurate, completely irrational.

The Pipeline War: Russian bear goes for West's jugular By Svetlana Skarbo and

Jonathan Petre
Last updated at 1:00 PM on 10th August 2008

The war in Georgia escalated dangerously last night after Russian jets reportedly bombed a vital pipeline that supplies oil to the West.

After a day of heightening international tensions, Georgian leaders claimed that the Baku-Tbilisi-Ceyhan pipeline, which transports oil from the Caspian Sea to Turkey, had been attacked. But it is thought the bombs missed their target.

Their claims came after Russian jets struck deep into the territory of its tiny neighbour, killing civilians and ‘completely devastating’ the strategic Black Sea port of Poti, a staging post for oil and other energy supplies.

Reports last night also said that Russia had bombed the international airport in Tbilisi.

A bloodied woman lies injured in the ruins of an apartment block in Gori after another Russian air strike

Georgian economic development minister Ekaterina Sharashidzne said: ‘This clearly shows that Russia has targeted not just Georgian economic outlets but international economic outlets as well.’

The pipeline is 30 per cent owned by BP and supplies 1 per cent of the world’s oil needs, pumping up to a million barrels of crude per day to Turkey.
It is crucial to the world’s volatile energy market and the only oil and gas route that bypasses Russia’s stranglehold on energy exports from the region.

As President Bush led the West in intensifying pressure on Russia to halt the bombing in Georgia last night, the two countries were edging closer to full-scale war over their conflicting claims for disputed territory.

Under attack: Georgian soldiers in the town of Gori sprint past a block of flats destroyed by a Russian bomber

Georgia’s President Mikheil Saakashvili called for a ceasefire and accused Moscow of mounting an unprovoked invasion that put ‘the entire post-Cold War order of Europe and the world at stake’.

But Moscow said that the conflict could not be resolved unless Georgia withdrew from its breakaway region of South Ossetia. The alarming developments followed a second day of drama and bloodshed in the pro-Western country in which:

• Russian jets widened the offensive by bombing the central Georgian town of Gori – Joseph Stalin’s birthplace – in an attack on military targets that Georgian authorities claimed killed 60 civilians, and attacked the port of Poti.
• Georgia claimed that Russian troops had opened a new front by moving into another disputed province, Abkhazia, which has also suffered from ethnic tensions.
• Georgia declared a state of war, recalled all its 2,000 troops from Iraq and ordered a mass call-up with reservists being sent to the war zone to ‘defend the motherland’.
• Russia claimed that it had ‘completely liberated’ the capital of South Ossetia Tskhinvali – a claim denied by Georgia – after flying in elite troops in an operation Moscow said was intended to force Georgia into a ceasefire.
• Georgia claimed to have shot down 12 Russian combat aircraft – but Moscow confirmed that only two planes were missing.
• Georgia may pull its 35-strong Olympic team out of the Beijing games because of the Russian military attacks, the country’s National Olympic Committee said

In the past any type of remote threat to the oil supply has been met with another hike in oil prices - is the rise in USD that powerful of an emotional roadblock that people can no longer think rationally?

Freddie Mae and Fannie Mac's debts have not been written off magically into thin air. It's coming from taxpayer's pocket, in times when unemployment is hitting all time highs and consumer confidence is at lows.

Humor is a must to get through these tough times, have a chuckle at the latest variation of inflation as deduced by professional economists... Stuckflation.

We can see headlines today all over NYSE and NASDAQ

U.S. stocks solidly up as crude offers definitive drop

Will this be sustainable? Only as far as until the next round of bad news I think. Rounds of quarterly reports are due soon - but some experts are conservative about issuing pure statements about gold and commodity prices in the short term.

Well respected fund managers alike and amateur investors from Minyanville comments that lowered gold and oil prices aren't necessarily a good thing.

Why?

Simple - it means the economy is slowing down, for North America at least.

And with falling currency and China / Russia / India starting to wake up, it could be the London Exchange that takes over as the dominant exchange soon.

Jeff Saut, lead economist and analyst from Raymond James is still bullish on gold. He's a well known advocate for gold back in 2001 and continues his holdings for his clients.

With the dollar rallying and commodities slumping of late, a lot of folks have declared the commodity boom to be dead.

But "it's still the first or second inning" of the cycle, says Jeff Saut, chief investment strategist at Raymond James, citing a ratio of the CRB Index vs. the S&P and (more importantly) growth in emerging markets

Saut was one of the first on Wall Street to recognize the approaching boom, turning bullish on commodities and "stuff stocks" back in late 2001.

He reduced those bets - and corresponding bearish dollar positions - in late 2007 but still believes "the wind is still at the back" of not just oil, gas and coal but base metals, agriculture, timber i.e. Anything where "if you drop it on your foot it hurts," he says.