What are your thoughts on this perspective re: OPEC 's oil production cut?
"The decision of OPEC+ to cut production is not simply about prices. It is about the ongoing struggle over democracy playing out in Ukraine, as the Ukrainians fight off the Russian invaders.
The Russian economy depends upon oil sales, and the U.S. and European Union have sought to cut into that money to hurt Russia’s ability to continue its attack in Ukraine. A day ago, after Russia illegally annexed four regions of Ukraine, the 27 member nations in the European Union joined the G7 (which is made up of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) to set a price cap on Russian oil, in addition to another round of sanctions. Theoretically, this plan should have enabled countries that need Russian oil for heat this winter to get it, while keeping the prices low enough to starve Putin’s war efforts.
Russia is co-chair of OPEC+ and is desperate for oil money, on which its economy depends. That economy is crumbling under international sanctions, and Russia’s oil production has dropped about a million barrels a day at the same time that the country has been forced to discount its oil to sell it. As Russia’s invasion of Ukraine is failing, it needs more money, and Russia asked for the OPEC+ cuts to increase prices." ~Heather Cox Richardson
That's one way of looking at it and it might make sense for western Europe, at least in the short term. There would be better options for the USA, maybe even Europe, if national policy had been to encourage increased domestic production for the past two years. Instead of striving for plentiful domestic energy, we are now faced with a time lag to ramp up production even if the current policy were reversed. Even then, oil and gas producers would be hesitant to make the required investments because there is no consistent, legally defined continuity from one administration to the next. Bureaucratic rule makers simply do what they please as long as they are supported by (or directed by) the President and his advisors.
Our idiot legislators pass useless expensive spending bills instead of balancing the budget, funding the national defense and ensuring continuity of government.
Oct 8, 2022·edited Oct 8, 2022Liked by Chris J. Karr
Thanks for the links and good advice. What I see is an 8% or so reduction in monthly production (from earlier highs) during a period of pent-up demand. And this is occurring after depleting the strategic petroleum reserve by nearly 200 million barrels - the equivalent of about 16 or 17 months of domestic production.
With regard to the CBS link, the reasons the oil companies were burned and the Wall Street pressure might well be a lack of continuity of federal policy. Of course, a national Covid panic did not help. It's complicated. I gave up investing in airlines years ago because there was always uncertainty. Right now, my only new investment is I-Bonds at 9.62% and I'm aggravated by the limits. Oil companies probably have a lot more options for their cash.
I do not specifically blame democrats although I do not think they are very enthusiastic about solving the problem. I blame Congress for failure to codify an energy policy that is not subject to the whims and biases of the executive branch. I looked at the volatility graph and I do not believe it shows much of anything about the cause - especially when it shows inflation adjusted costs of a commodity which is a major contributor to inflation.
What are your thoughts on this perspective re: OPEC 's oil production cut?
"The decision of OPEC+ to cut production is not simply about prices. It is about the ongoing struggle over democracy playing out in Ukraine, as the Ukrainians fight off the Russian invaders.
The Russian economy depends upon oil sales, and the U.S. and European Union have sought to cut into that money to hurt Russia’s ability to continue its attack in Ukraine. A day ago, after Russia illegally annexed four regions of Ukraine, the 27 member nations in the European Union joined the G7 (which is made up of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) to set a price cap on Russian oil, in addition to another round of sanctions. Theoretically, this plan should have enabled countries that need Russian oil for heat this winter to get it, while keeping the prices low enough to starve Putin’s war efforts.
Russia is co-chair of OPEC+ and is desperate for oil money, on which its economy depends. That economy is crumbling under international sanctions, and Russia’s oil production has dropped about a million barrels a day at the same time that the country has been forced to discount its oil to sell it. As Russia’s invasion of Ukraine is failing, it needs more money, and Russia asked for the OPEC+ cuts to increase prices." ~Heather Cox Richardson
That's one way of looking at it and it might make sense for western Europe, at least in the short term. There would be better options for the USA, maybe even Europe, if national policy had been to encourage increased domestic production for the past two years. Instead of striving for plentiful domestic energy, we are now faced with a time lag to ramp up production even if the current policy were reversed. Even then, oil and gas producers would be hesitant to make the required investments because there is no consistent, legally defined continuity from one administration to the next. Bureaucratic rule makers simply do what they please as long as they are supported by (or directed by) the President and his advisors.
Our idiot legislators pass useless expensive spending bills instead of balancing the budget, funding the national defense and ensuring continuity of government.
Oil producers got burned from overproduction and price volatility in recent years, so now they "play it safe" and try not to overproduce.
https://www.cbsnews.com/news/oil-production-prices-us-companies-wont-increase-2022-dallas-fed-survey/
You may also want to look at oil production rates before talking about them.
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRFPUS2&f=M
Thanks for the links and good advice. What I see is an 8% or so reduction in monthly production (from earlier highs) during a period of pent-up demand. And this is occurring after depleting the strategic petroleum reserve by nearly 200 million barrels - the equivalent of about 16 or 17 months of domestic production.
With regard to the CBS link, the reasons the oil companies were burned and the Wall Street pressure might well be a lack of continuity of federal policy. Of course, a national Covid panic did not help. It's complicated. I gave up investing in airlines years ago because there was always uncertainty. Right now, my only new investment is I-Bonds at 9.62% and I'm aggravated by the limits. Oil companies probably have a lot more options for their cash.
Look at the price of crude oil charts:
https://www.macrotrends.net/1369/crude-oil-price-history-chart
That volatility isn't from policy, at least in the US.
So please: don't be so quick to throw blame at Democrats.
I do not specifically blame democrats although I do not think they are very enthusiastic about solving the problem. I blame Congress for failure to codify an energy policy that is not subject to the whims and biases of the executive branch. I looked at the volatility graph and I do not believe it shows much of anything about the cause - especially when it shows inflation adjusted costs of a commodity which is a major contributor to inflation.