In the last three and a half years, crude oil prices fell precipitously and have languished at prices rarely seen in the post-9/11 era. Citigroup analysts say they expect that to reverse in 2018, as mounting wars once again drive prices higher.
2017 saw prices stabilized by OPEC cuts, and Citigroup says that President Trump “looms large” as a potential wildcard whose various overseas wars are likely to drive oil to $80 within the next year.
They warned this could include both supply disturbances in countries like Iraq and Libya, as well as more uncertainty about possible US sanctions and wars in places like Iran and North Korea.
US oil last saw $80 a barrel just before the 2014 Congressional elections, and fell belong $30 a share in 2016. Prices have been rising since, particularly since July, and are now around $60 a barrel.
Thanks Citigroup. Fantastic analysis on how to make money on the death of other’s.
The Bloomberg video showed the pundits all but dancing and singing with glee over the prospect that wars will raise oil prices. Why? Because incredibly environmentally destructive shale oil production in Canada and the US, and offshore deep drilling, is also a lot more expensive to produce than sweet mid-east oil, while it lasts. They want a big increase in oil prices to bring the profits and destruction home to America, but not quite $80 a barrel or more which could wreck the economy.
Is Trump threatening the world with various wars mostly to fuel US oil corporate profits?
I am not sure the reason for price rise is entirely
due to wars. The banksters always make money, on high or low. There are many other facts not neatly fitting into wars scenario.
After all, the war talking Trump has not started (yet) any wars. His committment to defeating ISIS — at least set a marker for execution of a task — end of mission. But many special interests are not that keen on ending anything — quite the contrary, Israel keeps on bombing/shelling Syria just to convince US of the need to stay. It is those that are most anxious to continue the warfare, that are pushed harder to justify wars.
And while we had all these wars going on for awhile — prices were collapsing. Anyone remembers the jubilancy od Saudi delegation after OPEC meeting in Vienna, when they prevailed in keeping the high production level. Why, did not we have then our shale hopes, hopes dimminished by the plummeting prices? As I clearly remember — the goal was to bankrupt Russia, Venezuela and Iran, and smack down Nigeria’s cleptocracy by cutting back on bribes due, bribes keeping the country open to energy plunder, and the utter destruction of the environment. There was an enormous amount of cheerfull predictions how the combined effect of sanctions and low oil prices would crash the economies of the targeted countries. Those predictions did not materialize, but Saudi Arabia paid dearly for this folly.
The combined effect on Saudi spending on weapons, and wesponizing destitute population by fundind Islamic cults was unreal. The level of desparation in places like Iraq, Egypt, Libya and Sub-Saharan Moslem regions has reached severe proportions — with millions destitute and on the march. Combination of wars, descent into warlordism, desparate IMF loan dependency of weakened states, corruption surrounding anything worth selling — created a large pool of young, willing and able to direct their anger at any authority and institution unable to protect them. Saudi charities and Salafi preachers bought entire communities into believing that sovereign states are corrupt, and that fhey should let go of believing in their countries and leaders and accept the earliest forms of Islamic governance. The governance based nit on nation states, but on caliphates, Medieval notions of the span of control. And then answerable to Saudi sovereign and the religious and legal Mecca Sharia authority.
With the experienced militants recruited among Iraqi and Libyan ex-military, and the entire logistics — transport, money, weapons, telecom, ammunition, medium to heavy artillery — they wreaked havoc across Iraq and Syria, but also in many other countries from China to Middle East, and Africa. What a cost that was to Saudi Kingdom! But the Criwn Orince Mihammed bin Nayaf was an absolute CIA favorite, and expecting to go much further. Tackle Iran. Tackling Gulf Council was the first step — a war like posture agains Qatar the first salvo in demanding anti-Iran loyalty. War in Yemen always was and is, on behest of US. It is not Saudi Arabia that insists in keeping North and South Yemen united against the wishes of both. It is US concept of having one obedient country from Oman to Saudi Arabia controling Arabian side of Bab al Mandeb. But Saudi Arabia is trapped in a credibility bind — and unless it can show a “win”, must find a way to save face.
I think most people missed the significance of Saudi coup, the removal of Nayaf, and the take over by father and son team. The Kingdom sucession body approved of — with the agreement that the current Crown Prince cannot name his son as an heir, and the decision on sucession therefore remains with the Council.
The live-hate affair with the young ruler — for in Saudi Arabia Crown Prince IS the head of Government — shows the nervousness of our establishment over the changes.
While the affairs of the Kingdom cannot be changed without a lots of jnternal and external bargaining — one key change has been made. Saudi Arabia and Russia, two worlds largest oil producers, have cut a deal on reducing the output. A great deal of sweetening the pot was insured by Saudi Arabia. Some known, many more not. With the help of Egypt, Saudi Arabia accepted the changed definition of conditions imposed on Qatar, to “principles”. It is Saudi-Russian deal that is moving the market. The new oil fields btought on line is equivalent to the volume in 1944.
And to add to US predicament, actual market price for shale oil and gas is still debateable. The production is kept up by opening the credit spigot even higher then before, bringing some of the already bankrupted fields back into production. But with sweet spots already exausted, it will cost even more. Canadian tar sands have finally published the fact that the extraction is matching market prjce, but it is ONLY the extraction, not the additional chemical processing it requires to match standards. And transit to ports not included for a typical FOB pricing.
Now, US is importing RUSSIAN gas, as the shipment from Netherlands shows. There are guesses that US does not have enough to ship the liquified gas to Europe via Poland as contracted for. But this is probably speculation — more likely it is short to meet Asian customers where demand is growing.
Regardless of what happens to US actual ability to deliver, a real drivers are the reorientation of oil and gas to Asian markers, and Russian pipeliness are by far the cheapest alternative. And the joint Russian-Saudi tightening of market will favor customers with long term contracts — while spot market will become expensive for those that rely primarily on such pricing devices. US may have to prioritize — domestic market vs. supplying spot market, and Europe that foolishly lost opportunities to cement prices via pipeline delivery. If unable to prop up spot market, or unable to deliver on its promises to European and Asian customers, it will have to raise domestic prices, and/or start buying in a more expensive market. The piper of revolving interest for shale revolution will eventually have to be paid. The amount of projected bailout needed to save the banks is astronomical — so much of it will have to be passed on to domestic consumer. Unless US can continue bying Russian gas from countries that have it, and want to profitn from the trade, while US can sell it at high prices in LNG spot market.
But Russia will have to prioritize who to sell to, as the production cuts soak up the glut created previous years. Banks will never lose, unless we decide to stop bailing out private institutions for their reckless decisions. But I do not see the change of mood yet in US public opinion. Fracking has been raised to the status of national pride, and we will bail out banks. It is just the American way. Financials should be happy, as in goid or bad times, they collect profits, and socializeb losses.