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Oil's Collapse Is a Geopolitical Reset in Disguise

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Re: Oil's Collapse Is a Geopolitical Reset in Disguise

#151

Post by ilstormcloud »

hasseio wrote: post #126
unclebucknasty wrote: post #117

> How might the United States and its partners prepare for more turmoil in these countries... Serious question: who, exactly, are the United States' partners these days?

The 5 Eyes? NATO?

5 eyes are more of client states than partners at this point. That's not to say they have no utility, far from it, I think they are very potent. It's just that 'partner' is not the right word to describe them. I say this mainly because they don't seem to have opinions about foreign policy other than the one set by the USA. A better example of a partner in my opinion would be Germany, or France. As for NATO, The only countries that need it are the USA, UK and the Eastern European countries. For western and southern Europe, NATO seems like a gym membership they haven't gotten to canceling. That's not to say member states are not partners or friends of USA, just that they know they can create something better for the current reality. Change was always inevitable, but GWB and Trump might have accelerated it to reckless speeds.

Re: Oil's Collapse Is a Geopolitical Reset in Disguise

#153

Post by njharman »

person_of_color wrote: post #59
voz_ wrote: post #2

Additional detail: The author was one of the architects for major pieces of the Iraq war, including the surge. https://en.wikipedia.org/wiki/Meghan_O%27Sullivan

Interesting. So why is this person not shunned from her industry for being partly responsible for a geopolitical disaster? It's akin to taking business advice from Ken Lay and Jeffrey Skilling.

Their "Industry" is selling political agenda and influencing governments for corporate benefit. Seems successful.

> geopolitical disaster

"disasters" are profitable (for those able to benefit from corruption). And enable western/democratic governments to get away with violating their citizens. PATRIOT Act for instance. Read 1984 for background of how "fear of attack" and "security" is used to keep the masses in line.

Re: Oil's Collapse Is a Geopolitical Reset in Disguise

#154

Post by simonh »

rckoepke wrote: post #92
simonh wrote: post #85

Earlier quoted context omitted.

The disagreement between Saudi (representing OPEC) and Russia which lead them to increase production was just a few months ago, so you won’t see it’s consequences in oil production numbers for the last few years. It was widely reported in the media. https://en.m.wikipedia.org/wiki/2020_Russia–Saudi_Arabia_oil...

> which lead them to increase production was just a few months ago https://www.eia.gov/opendata/qb.php?category=1039874&sdid=ST... Production for the month of March is published and does not show a significant increase. Again, its likely that the sources you follow are providing misinformation - not just about this, but about other things as well. More generally, I follow oil news quite closely (as I work in the sect…

Certainly recent price movements have mainly been driven by a dramatic fall in demand, but price drops in late March were also partly driven by Saudi announcements of production increases following they and Russia announced the breakdown of talks.

https://www.wsj.com/articles/oil-price-war-batters-poorer-op...

This is all so recent that it’s entirely possible they have reversed course already, absolutely. However this isn’t some wacko conspiracy theory, it’s based on the explicit statements of these countries governments all over the mainstream media.

Re: Oil's Collapse Is a Geopolitical Reset in Disguise

#155

Post by mFixman »

There's a thing I don't understand and could use some explanation.

Didn't this same thing happen at a lower level in 2014, when Saudi Arabia pumped a lot of oil to international markets to bankrupts American shale oil producers? And didn't the price go back up after some time when the Saudi government couldn't afford breaking up OPEC?

Why can't the same thing happen now? The price and supply of world oil is almost completely controlled by Saudi Aramco, and there's nothing preventing them from increasing the price in the future.

Re: Oil's Collapse Is a Geopolitical Reset in Disguise

#156

Post by Macha »

mFixman wrote: post #155

There's a thing I don't understand and could use some explanation. Didn't this same thing happen at a lower level in 2014, when Saudi Arabia pumped a lot of oil to international markets to bankrupts American shale oil producers? And didn't the price go back up after some time when the Saudi government couldn't afford breaking up OPEC? Why can't the same thing happen now? The price and supply of world oil is almost co…

1. It takes time to adjust to demand changes and they're hoping covid19 restrictions ease in a reasonable time frame and demand goes at least partially back. 2. Russia started flooding the market prior to this to disrupt the saudis and US oil producers. Cutting production would need their collaboration or they've ceded market share and influence to Russia.

Re: Oil's Collapse Is a Geopolitical Reset in Disguise

#157

Post by cturner »

smnrchrds wrote: post #102
rckoepke wrote: post #48

Earlier quoted context omitted.

Partially. The USA offers some of the best technology for extracting and refining oil, but no US citizens or companies can offer their expertise to Iran. However, most oil companies are international and have headquarters in multiple countries - so quite a few large oilfield service companies can do business with Iran as long as they don't cheat the system to provide USA-based services. Schlumberger, a French/Texas/D…

> Iran seems to be able to sell nearly as much as it wants, presumably at near-market prices. Not really. I am no expert, but my understanding is that US sanctions bar Iran from accessing any financial services by US institutions or in US dollars. Apparently, they have jurisdiction to enforce that if a transaction uses US dollars. Unfortunately for any country who provokes the ire US, currently USD is the only real o…

"currently USD is the only real option for international trade"

I think you have conflated currency matters with sanction matters. I will attack that here, but much of your point stands.

My points here: international business tends to be done in USD only because it is convenient, and no business ever failed to happen due to that convention.

International trade tends to happen in terms of the USD because USD is convenient. Factors: (1) The world's largest economy does its business in USD; (2) There are many large lenders in the US and (3) There is a free and liquid FX market for USD.

Many companies reduce their friction by working in USD. They borrow some money in USD and then spend some money in USD, and thereby avoid paying a fee to their bank's FX desk. Instead of managing a complex risk situation between their home currency and a dozen others, they concentrate it into a simple risk situation of their home currency vs USD.

Iran could put oil in ships, and send it to China. China could put gold in ships and send it to Iran. Or - far more easily - Iran could price its transaction in terms of New Zealand dollars, and the two parties could make adjustments to a ledger in a tax haven.

The USD conventions is akin to the role of English as lingua franca. It's convenient., or China

The other part of your point is that US sanctions are harsh and far-reaching. No arguments against that here. Would I trust billions of dollars to a tax haven bank, or in countries with a strong rule-of-law tradition? Also, any time you want to spend substantial money in the developed world, the other party is going to need evidence that it is not sanction affected.

Re: Oil's Collapse Is a Geopolitical Reset in Disguise

#158

Post by mFixman »

Macha wrote: post #156
mFixman wrote: post #155

There's a thing I don't understand and could use some explanation. Didn't this same thing happen at a lower level in 2014, when Saudi Arabia pumped a lot of oil to international markets to bankrupts American shale oil producers? And didn't the price go back up after some time when the Saudi government couldn't afford breaking up OPEC? Why can't the same thing happen now? The price and supply of world oil is almost co…

1. It takes time to adjust to demand changes and they're hoping covid19 restrictions ease in a reasonable time frame and demand goes at least partially back. 2. Russia started flooding the market prior to this to disrupt the saudis and US oil producers. Cutting production would need their collaboration or they've ceded market share and influence to Russia.

Like that very article says, Russia needs a much higher oil price than most countries in the Middle East to keep a positive balance.

Demand will come back after the pandemic is over, and the Russian government can't flood the market for very long.

Re: Oil's Collapse Is a Geopolitical Reset in Disguise

#160

Post by TheOtherHobbes »

xiaolingxiao wrote: post #13

I found this part really interesting: "For dozens of oil producers, the plunge in oil prices is devastating. No major oil producer can balance its budget at prices below $40; according to the International Monetary Fund, with the exception of Qatar, every country in the Middle East requires at least $60, with Algeria at $157 and Iran at a whopping $390. The average Brent price of oil over the past month has been a ha…

This is dramatic, but from on POV it's also overplayed, because virtually every national economy is in the same straits now. Massive government deficit spending everywhere has been keeping furloughed and damaged economies ticking over in the hope that they can somehow be brought back to life in the near future.

From another POV the world was on a mad debt-fuelled spending spree, and a lot of the spending was either useless or downright destructive.

Oil is in the middle of that. An oil economy has been an obvious strategic stupidity since the oil shocks of the 70s. But instead of switching to renewables as soon as possible, there was a political decision to double down on instability and to protect the supply - and also provide "social" spending on militarism - with expensive resource wars.

The world has basically been run like a frat party for the last sixty years or so. Now it's waking up to find the house is on fire, the rent is due, and the landlord is waiting outside with some "friends" to have a quiet word.

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