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OPEC's smallest member, the country of Ecuador, has been flexing its muscles as the government prepares for a fight with foreign oil firms. There were multiple stories over the weekend that Ecuadorian President Rafael Correa had threatened to kick out foreign oil companies and nationalize their operations if companies don't agree to a new payment schedule. Currently big oil companies like Brazil's Petrobras and Spain's Repsol YPF are being paid a share of the revenue up to a certain price. Correa wants them to agree on a new deal that limits their income to being paid for production, which gives Ecuador a greater share of its oil revenues. Maybe Correa has seen the peak-oil handwriting on the wall and is planning ahead.

While we're on the topic of planning ahead the Pakistan electric power company unveiled their latest report on why the country has been suffering an energy shortfall. It seems that the country was unprepared for the addition of 30 million electrical home appliances over the last three years, which put too much strain on the country's power generation. The official report blamed a flood of air conditioners, fans, freezers, microwave ovens, refrigerators, televisions, and washing machines for draining the electrical system. How many of us take for granted our home electrical appliances. We don't give it a second thought that when we plug it in the power will be there. It sounds like the population of Pakistan is taking steps to move into the 20th century. How will they handle their energy demands if they try to move into the 21st century? Pakistan only has about 172 million people. Now imagine one billion people in India and more than one billion people in China all trying to move into the 20th century. How much stress will that put on the world's energy demands?

Speaking of demands, the world at large, at least the western world is demanding that Iran stop its nuclear development program. Endless talk and threats of tougher sanctions don't seem to have much affect. Lately there has been an increase in speculation that Israel may decide to hit Iran's nuclear facilities before President Bush leaves office in January 2009. There has actually been some conjecture that Israel might make a move to destroy Iran's nuclear infrastructure this October before the U.S. Presidential election. It's true that there has been some back and forth on whether the White House would approve such a move by Israel. Last July there was talk that Bush did approve but late September there were new reports that Bush had changed his mind due to concerns on how Iran would retaliate. I certainly don't envy the next U.S. President who faces the onset of peak oil and the threat of a nuclear Iran.

It looks like Monday's markets are bound for more volatility and weakness. Asian markets were trading sharply lower as investor run for cover on fears that the credit crisis would spread in spite of last week's $700 bailout plan. Japan's NIKKEI index lost 3.6% on Monday. Hong Kong's Hang Seng index was down 2.6%. China's Shanghai Composite plunged 3.7%. Even Australia's major stock market index was down more than 3%. There were few if any safe havens. Gold futures were lower, down about $7 around $828 an ounce. Meanwhile crude oil was sliding about 2% toward $92 a barrel.

Jim Brown

OptionInvestor.com

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