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Stock Ideas Investors Daily Edge Pertamina’s most egregious act !
Stock Ideas Investors Daily Edge Pertamina’s most egregious act ! 
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| Pertamina’s most egregious act ! |
| Friday, 25 July 2008 | ||||||||
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Pertamina’s most egregious act towards its citizenry (besides “misplacing” billions of dollars)? Its road maintenance regime. When its network of roads in the heavy oil-producing region of central Sumatra got too dry and dusty, Pertamina would simply dump a few hundred barrels of crude on the road. In the dry season (from April through September) it would do this every day. It was a filthy practice born of convenience and cluelessness. Back then, crude was only $22 a barrel or less. Still, such a waste of money. The government let it go on for 25 years and then outlawed it. During a couple of my road construction projects in and around Duri (in Sumatra) – where Caltex had its major onshore operations – we would dig 15, 20, 25 feet into the ground and find these oily layers of deep blue and dark gray. It was like digging through a marble cake. All this venting is for a reason. It leads to Keith L.’s quite legitimate question: I enjoyed your article. A couple of points I would like to point out - one. The oil price situation is, in my opinion, more of a manipulative nature than supply/demand problem. Why? The developing nations (China, India) do not have the transportation infra-structure to allow people to drive miles and miles everyday... Legitimate, yes, but still way off base. The problem, Keith, is that you’re thinking rationally. Stop that. It gets you nowhere. You’re good with facts. True enough – these countries don’t have a well-developed road and highway infrastructure. But... They make do. If it’s a single-lane dirt road, it’ll do. More likely, it’s a narrow double-lane dirt road potmarked and uneven. It’ll do too. In oil-producing areas in Indonesia, such basic haulage roads would be used by the heavy-hauling vehicles of the oil companies. But the point is, they were roads – representing a great travel convenience. Within a couple of years, a village would grow up beside and around these roads (think of it as wanting to move five minutes from your local beltway).
After a couple of more years go by, these good folks are demanding that the company (like Caltex) building the original roads upgrade them. Eventually it does. The local government then gets into the act. Eventually, it adds to the road network. Over time, a decent local road network is developed. This is what your argument doesn’t take into account, Keith. The local residents don’t wait for that eventuality to buy cars. They buy cars first and figure the roads will at some point get built. A couple of weeks ago, my friend and sometimes tennis partner, Igor, was making the same point while grilling some Sashlik in his backyard. He was complaining that there are hundreds of infrastructure projects going on in Russia, but very few of them incorporate road-building. “They just don’t,” he said. “So you have buildings, factories, cultural centers, and the like, all being built before roads are even thought of.” I am sorry, Keith. But poor and undeveloped road networks in China, India, Russia and other countries won’t stop hundreds of thousands of new middle-class citizens from buying cars and then driving them wherever they want. They just won’t get to their destination as fast as we would in the U.S. But they won’t mind too much. Your first car is very intoxicating. Invest well, Andrew Gordon P.S. To let me know what you thought of today's article, send an e-mail to: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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