I have a slightly different take from Blue Sky’s on the subject of overpaying for oil companies.
While I don’t know whether we are anywhere near peak oil (we seem to start fretting over this whenever oil prices reach stratospheric levels) , I believe that over the next several years oil prices will continue on an upward spike ( In last sunday’s NYT magazine Peter Maas had a good in-depth story on oil) and Indian oil consumption would continue to go up. A premimum of 21% on current market price may not be too high a price to pay under such circumstances. What may be a bigger deal is the political uncertainty in Kazakhstan. But then show me a third world country with large oil reserves that has political stability! From a geopolitical risk perspective – I am not sure that we can buy our way to energy security (our oily overtures to Iran run the same risk). But it is certainly worth trying.
Wall Street Journal had a front page story on this subject this morning (‘Persuit of Oil Firm stokes Rivalry of Asian Giants’):
While the US remains the world’s biggest consumer of oil by far, China and India are quickly emerging as the great markets of the future as their consumers trade in their bicycles and scooters for passenger cars. Faced with stagnant production at home, India now imports 70% of its crude oil.
India has pushed for collaboration between Indian and Chinese national oil companies on selected bids. But one senior official at an Indian oil compan said he didnt think it would lead to many joint bids anytime soon. “Both countries want all the equity oil and gas which is available,” he said. “We can’t suddenly become great griends.”
…Although India’s ONGC is starting with lucrative contracts, officials there and at other Indian Oil companies complaint that they are at a disadvantage next to Chinese companies, which they say have access to cheaper loans through the Chinese state and are better able to stomach the exorbitant cost of buying oil assets at a time of high oil costs.”
Neither are we the only people agonizing about oil. – check out Fareed Zakaria in today’s Washington Post.