China Coal-Fired Economy Dying of Thirst as Mines Lack Water

Bloomberg: Coal mining and power stations use as much as 17 percent of China’s water, and almost all of the collieries are in the vast energy basin in the north that is also one of the country’s driest regions...

US Pushes for Global Eye on South Sudan Conflict

New York Times: When the National Security Council, the most buttoned-up part of a buttoned-up Obama administration, is aggressively trying to get the word out about a violent, murky conflict in a distant land, it’s worth listening to. It’s also worth asking, why single out this crisis?...The United States and other Western nations have poured billions of dollars into South Sudan, before and after the referendum, to try to turn a destitute land, with oil reserves but a long history of violence and little in the way of institutions, into a viable country...

The future of oil

The Economist this week:

• The world’s thirst for oil could be nearing a peak.
• The day of the huge integrated international oil company is drawing to a close
• The father of fracking: Few businesspeople have done as much to change the world as George Mitchell

Six natural resources trends to look out for in Africa

FT's beyondbrics: When it comes to natural resources in Africa, coverage tends to focus on the problematic (see Rio in Mozambique), the awkward relationships (see China), the political risk (see Congo) and the collapse in labour relations (see South Africa). But despite the setbacks, Africa still has vast untapped reserves and lots of potential. So what should investors look out for in the next few years? Research from Ecobank has identified six themes...

The oil boom’s foreign policy dividend

Reuters: The domestic benefits of the US oil production boom are well documented — everything from the creation of high-paying jobs to sending less money to foreign oil producers. Less well appreciated are the geopolitical benefits. US oil production has already paid foreign policy dividends in at least one vital area: It has paved the way for stronger sanctions on Iran by helping to keep the global oil market well-supplied and minimizing oil price volatility...

Sorry, commodities are a poor diversification tool

Financial Times: An interesting paper has just landed on the BIS working paper site, in which the myth that commodities provide a solid diversification tool for investment portfolios has been beautifully debunked. The grounds for this are mostly due to too much correlation, and volatility. Here’s the abstract (our emphasis):

In the recent years several commentators hinted at an increase of the correlation between equity and commodity prices, and blamed investment in commodity-related products for this. First, this paper investigates such claims by looking at various measures of correlation. Next, we assess what are the implications of higher correlations between oil and equity prices for asset allocation. We develop a time-varying Bayesian Dynamic Conditional Correlation model for volatilities and correlations and find that joint modelling commodity and equity prices produces more accurate point and density forecasts, which lead to substantial bene fits in portfolio allocation. This, however, comes at the price of higher portfolio volatility. Therefore, the popular view that commodities are to be included in one’s portfolio as a hedging device is not grounded.

Is there an African resource curse?

Oxfam: Oxfam Ambassador Anquan Boldin was among the four witnesses to offer their views to Congress on how countries’ discovery of oil, minerals and other natural resources can exacerbate poor governance and corruption, thereby denying the economic benefits of mining across populations. He was joined in the hearing by Mohammed Amin Adam, Executive Director of the Africa Centre for Energy Policy in Ghana, Tutu Alicante Leon, Executive Director of Equatorial Guinea Justice, and Corinna Gilfillan, Director of Global Witness in the US. Their responses to the question, “Is there an African resource curse?” are taken below from their testimonies.