Commentary
-
Our commentary partners will help you reach your own conclusions on complex topics.
Hello from Fort England Air Force Base in Florida where it’s super sunny and all conversations are of golf.
There’s been all kinds of news that has been out in the last 48 hours about the Biden Administration’s efforts to thaw relations with Venezuela, Iran, and Saudi Arabia in an attempt mitigate, what is turning out to be a huge surge in oil prices.
We’re looking at somewhere between four and five million barrels of Russian crude potentially falling off the market in the next few weeks.
That is gonna have a catastrophic impact on global prices.
And the idea is that by loosening relations with these three countries that we might be able to shave off some of the worst of the pain, and there there’s some logic there. But, of course, there are political enemies and even allies of the Biden Administration who are saying, you know, how dare you open relations with a despot like Nicolas Maduro of Venezuela, or a guy who likes to hack journalists apart, Mohammed bin Salman in Saudi Arabia, or of course, the Mullahs of Iran?
To be perfectly blunt, it’s very, very American.
The United States has always played the divide and conquer game, particularly when it comes to great power politics.
We supported Stalin against Hitler. We supported Mao against Stalin. It’s always about finding the weaker player, and setting them against the stronger player, and then backing the weaker player. So the idea that the United States could cut deals with people like Stalin and Mao, but wouldn’t deal with a gaggle of Shia clerics who are yammering on about something that happened in the fifties or a pouty prince in Saudi Arabia who likes to get rid of bodies at barbecues or an incompetent bus driver in Venezuela, it really doesn’t fit our pattern.
We totally do that. So being outraged about it is, not very useful.
Now if you want to evaluate, this on the merits, that’s a completely different question.
So let’s start with Iran. Oil production in Iran is low not really because of sanctions, but because the Iranians don’t know how to run an investment regime, and they tend to penalize the people who do invest with them. So even if sanctions were lifted completely tomorrow, and the United States stepped back and let Iran do whatever it wanted, you’d be unlikely to see more than a half a million new barrels come to the market over the course of the next 12 months. I’m sorry. That’s just not very much. That’s certainly not very fast.
Second, Venezuela. Oh my God, that country has driven itself into the ground. So deep. Bringing new crude online in Venezuela is extraordinarily expensive. Venezuelans really can’t do it themselves and they need top notch American workers in order to do the technical stuff. And you’re talking about needing 10, 20, 30 billion dollars over the course of the decade to get a million or a million and a half barrels.
So there’s no solution there either.
Saudi Arabia may be a little bit better. The Saudis are really one of only two countries in the world, United Arab Emirates being the other one, that maintains any spare production capacity whatsoever. So they might, might, might be able to bring on a half a million barrels within six months and maybe that much again within 12, but all of that together is at most one quarter of what we would actually need.
U.S. shale can help, of course. And we were already on track to add about a million barrels per day of new capacity over the next 12 months. But there’s shortages in pipe. There’s shortages in metal. There’s shortages in sand. There’s shortages in labor. And that assumes, of course, that the financial system, was pro-shale overnight. Even in the most successful expansion U.S. shale seen, it has never added more than about 2.2 million barrels in a single calendar year.
So no matter how this goes down, even if all of these sources managed to pitch in, we’re really only at a little bit more than half of what we would need to avoid a heat explosion in oil prices. So I don’t think that’s gonna happen. And I certainly don’t think the geopolitics is gonna line up that quickly, which limits the options of the Biden Administration for what’s coming. Gasoline prices are already $4. That’s kind of a politically sensitive point where we’re at record levels now.
And if you are Biden, there’s really only one card you have to play here. In the 2015 omnibus bill, which is, we used to be called the energy bill, the Biden Administration, any American president has the legal authority to cancel any exports of raw crude from the United States to the rest of the world. That’s a card that Biden can play in a day, and in doing so, it would sever the U.S. pricing model from global pricing for oil.
And in the case of the United States, that would leave a lot of shell crude trapped. The refiners would be howling with fury, but it would mean that we wouldn’t be in shortage and the pricing system between the United States and the rest of the world would break, going back to something that was a lot more similar to what we had before World War II.
Biggest downside of that isn’t for the United States, it would be that the rest of the world would lose access to Russian crude and American crude at the same time. So you could easily envision an American system where $70 becomes the functional ceiling and a global price where $150 becomes the best case scenario for a floor with, in some parts of the world, such as China at the end of very, very long supply lines, probably never dropping below $200 again. That’s where this is headed.
Okay. That’s it from me. Hope you see everybody’s shiny faces the next time we talk, take care.
-
China’s Fujian aircraft carrier is nothing to worry about
A number of U.S. commentators have raised alarms over China’s rapid construction of naval military vessels — and about China’s supposed ability to outproduce the United States in any long, protracted conflict. Recently, China unveiled a new aircraft supercarrier named the Fujian. These developments coincide with increasingly aggressive Chinese naval behavior. Straight Arrow News contributor…
-
Russia unveils drone-resistant ‘turtle tanks’
The Russian military has unveiled a new drone-resistant tank, which has gained the nickname “turtle tank” due to its heavy shell-like armor and low mobility. While heavy artillery can stop the advance of these turtle tanks, Ukrainian forces have run desperately low on artillery and heavy munitions. Straight Arrow News contributor Peter Zeihan dives into…
-
Texas heat challenges a strained energy grid
As May begins, much of the country is experiencing the gradual onset of warmer weather. Texas is already feeling the full force of it, with temperatures in many areas reaching the 80s and 90s. During this time of the year in Texas, power grids can become strained due to increased demand spurred on by early…
-
Japan’s navy gets an upgrade
Following their defeat in World War II, the people of Japan pursued a largely pacifist foreign policy. Today, following Russia’s invasion of Ukraine and with near-daily news regarding China’s threatening activities throughout the greater Pacific, the Japanese are reinvesting in military defense and reaffirming their alliances with Pacific partners like Australia and the United States.…
-
How could RFK Jr. impact 2024 election?
Many Americans speculated about how a potential RFK, Jr. campaign might impact the 2024 elections. While RFK is neither a Democrat nor a Republican, many of his positions favor Donald Trump’s base over Joe Biden’s, particularly his various conspiracy theories on a wide range of subjects. Straight Arrow News contributor Peter Zeihan says that GOP…
Latest Stories
-
Florida ban on lab-grown meat comes after Bezos invests millions in industry
-
Sanders' reelection bid reignites debate over age limits
-
Wind energy could get even greener by replacing steel with wood
-
Hamas accepts cease-fire proposal to pause war
-
41% of Americans believe the US will see a second civil war in next 5 years
Popular Opinions
-
In addition to the facts, we believe it’s vital to hear perspectives from all sides of the political spectrum.
Latest Opinions
In addition to the facts, we believe it’s vital to hear perspectives from all sides of the political spectrum. We hope these different voices will help you reach your own conclusions.
The opinions published in this section are solely those of the contributors and do not reflect the views of Straight Arrow News.
Latest Commentary
We know it is important to hear from a diverse range of observers on the complex topics we face and believe our commentary partners will help you reach your own conclusions.
The commentaries published in this section are solely those of the contributors and do not reflect the views of Straight Arrow News.
Peter Zeihan
Geopolitical StrategistRussia unveils drone-resistant ‘turtle tanks’
Texas heat challenges a strained energy grid
Japan’s navy gets an upgrade
Dr. Frank Luntz
Pollster and Political Analyst‘We want to find common ground’: Gen Z’s stubborn optimism
‘Take the job seriously’: Why Americans are fed up with Congress
‘If we can shrink it, it will stop growing’: Americans talk debt, deficit
Pete Ricketts
U.S. Senator for Nebraska