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Putin orders Russian forces to start pulling out of Syria - FT.com
. . . oh, right, "withdrawal." This is the "we don't retreat, we runaway," theory of withdrawal. Putin has overextended Russia, with active fronts in Ukraine, and Syria, and he still is occupied with problems in Georgia, and Chechnya. On top of those military, and police problems, he is faced with a collapsing Ruble, and a nearly dead economy. Yeah, sure, it's not collapsing, it's just running away. Whatever, Vlad. So, what's the plan? "Yet there was little sign of any souring of attitudes toward President Vladimir Putin, with people instead blaming global economic trends or a Western plot. Magomed, a businessman walking along the upmarket Stoleshnikov Lane in central Moscow, said Western countries were deliberately driving the rouble lower. 'But we will defeat them. Russia is too large.'" The plan is the tried and true dictators friend, "blame the US," or the West, or both for some wackadoo conspiracy to destroy the tin pot dictators currency. This should rally the troops for a while. It really does work well, just look at Cuba, and Venezuela. But it will not help correct the collapse of the Ruble, or the Russian economic collapse. Russia can chart its course following the path of Hugo Chavez in Venezuela. And with oil positioned to stay low for years Putin has nothing left but "blame the US." Oil prices will move around but the trend is lower, and this will continue. The oil bulls all believe there will be some Saudi/Russian agreement to lower production. But US shale, even after the closing of a large number of wells is still creating a serious surplus of supply over demand. Add to the problem that Iran wants in and will pump whatever they can, and supply will remain high for a very long time. Other players will soon be adding to supply, like Venezuela. Today Venezuela is handicapped by its government, and it control of its oil industry. It is mid collapse. Once that is completed, and a new government takes full control, there will be a new accord with US and other western oil companies, which will quickly return and help Venezuela pump more oil. Even though oil prices are low, Venezuela needs the foreign hard currency to help purchase necessities like food and toilet paper. Brazil is also in a state of near collapse with massive inflation, and myriad political scandal ripping the country apart. And like Venezuela it needs hard currency more than it needs oil, even if it must produce oil at a loss. Asset sales, and privatization will likely occur. Brazil is in dire straits, and the money is necessary to keep things functioning, if only barely. Expect US, and western oil companies to be allowed to develop oil new fields, and to create new efficiencies in new, and old oil fields. Likewise, Mexico has undergone much change in how it considers its oil output. It used to be the piggy bank of the Mexican federal government, until that resulted is shockingly reduced oil revenues. Changes in Mexican law have occurred and will likely continue to occur to allow US, and western oil companies to enter this market, pump oil, and help the Mexican oil industry create new efficiencies. Crumbling infrastructure, low oil prices, poor management, and worse government make this difficult, and necessary. MEO Australia goes out on front foot in Cuba oil exploration I would take this seriously, since Cuba is grindingly poor. Once again, the need for hard currency trumps costs to a great extent. Right now, most oil producing nations need the revenues from oil to meet their budgets. Without these revenues, they are facing serious problems. This means that most of these countries will need to continue to pump oil at the levels they are pumping today, or at greater levels, to help maintain government revenues. Plus, any time oil prices rise, all producers will rush to capitalize on this "boon." Oil supply will remain high for the foreseeable future. Even India is hot to develop oil. On the other side of the equation is demand. China continues to decline. The mouse that roared . . . India is now facing increasing headwinds from its banking sector. India has been considered a light spot in the international economy, but this banking crisis will dampen that, as will the generally moribund world economy. Europe is in a deeply weakened state with little potential going forwards, and the rest of the world is looking quite weak. Forecasts of world recession are in the air, and, really, it is difficult to argue the contrary position, athough the Peterson Institute for International Economics does so. We also are facing a new paradigm with increasing AI and automation of everything, even things we never though would be automated, like driving. George Jetson drove his flying car much of the time, although it seemed capable of driving itself. We forget how much less oil we will likely need if parents no longer need to drive children to and from every event, or elderly parents to and from appointments. The parent driving the child means the parent frequently drives to the event, and then back, then back to the event to pickup the child, and then home. This means four independent trips of equal length. However, with a self driving car, there would only be two trips. Further, it should be easier to carpool children with ride share self drive cars than with human driven cars. After all scheduling is often a problem for the human/parent driver. Add the Uber on demand self drive car, and scheduling conflicts evaporate, as do total miles driven. The elderly parent also offers efficiencies. Now, the adult child may need to drive many miles to pickup the parent at her home for an appointment. With an Uber like share ride self drive car this long drive to pickup the parent would be unnecessary. While Uber can perform this task today, the cost of the human driver makes this somewhat less likely. We are likely to see many other cost saving measures. Heavy trucking is likely to build trucks/engine combinations which will be optimized for carrying specific sized freight, I suspect this will be the standard international shipping container. They will be able to travel primarily at night and travel at the optimized fuel per mile speed. Smaller, more efficient engines will become the norm, since shippers will not need to maximize load size to help amortize the operator costs. Trucks traveling mainly at night should allow the trucks to drive at a stead state speed with fewer stops and starts, which would also reduce daytime driving congestion, reducing fuel use. Ride sharing, always difficult now, should be much easier, and, if desired by the public, we should see cars specifically designed for ride sharing, perhaps longer vehicles with more doors, and private seats. The self drive technology also promises fewer collisions so the vehicles can be made lighter, improving fuel economy. Engines would not need to be so large or powerful. If I am not driving, I care more about costs than power. Myriad other improvements should continue to lead to reduced fuel use, or at least a slowing of the demand curve. It appears oil will be low priced for a very long time. At least until something unbalances the system to favor demand and lower supply. Putin is correct to get out of Syria, he is likely too late, and the people of Russia need to brace for the coming Russian economic collapse. Oil dependent economies will be hard hit by this economy for a very long time. Good luck Russia, you are going to need it. How Saudi Arabia Turned Its Greatest Weapon on Itself
"The oil wars of the 21st century are underway. In recent years, the Saudis have made clear that they regard the oil markets as a critical front line in the Sunni Muslim-majority kingdom’s battle against its Shiite-dominated rival, Iran. Their favored tactic of “flooding,” pumping surplus crude into a soft market, is tantamount to war by economic means: the oil trade’s equivalent of dropping the bomb on a rival. In 2006, Nawaf Obaid, a Saudi security adviser, warned that Riyadh was prepared to force prices down to “strangle” Iran’s economy. Two years later, the Saudis did just that, with the aim of hampering Tehran’s ability to support Shiite militia groups in Iraq, Lebanon and elsewhere." This is a comedy routine, the House of Saud has no substantive economy outside of oil, while Iran does, and is already rebuilding that economy after the elimination of international sanctions. ". . . [I]n 2011, Prince Turki al-Faisal, the former chief of Saudi intelligence, told NATO officials that Riyadh was prepared to flood the market to stir unrest inside Iran. Three years later, the Saudis struck again, turning on the spigot. But this time, they overplayed their hand. When Saudi officials made their move in the fall of 2014, taking advantage of an already glutted market, they no doubt hoped that lower prices would undercut the American shale industry, which was challenging the kingdom’s market dominance. But their main purpose was to make life difficult for Tehran: “Iran will come under unprecedented economic and financial pressure as it tries to sustain an economy already battered by international sanctions,” argued Mr. Obaid." There is a reason Lawrence of Arabia was necessary, it is not because the Arabs are great strategists. The elimination of the international sanctions allow Iran to begin quickly rebuilding their economy. The House of Saud, on the other hand is faced with oil prices which do not pay the bills. The Saudi's are in talks with various business consultants on developing and building their economy, to create an economy outside of oil. This is far too little, far too late. And who will be manning these industries, Saudis? What a joke. Saudis only want a position of authority in the company, the actual work must be done by others. It was not Iran which came under "unprecedented economic and financial pressure," but Saudi Arabia. "And then there is Saudi Arabia itself. All the evidence suggests that Saudi officials never expected oil prices to fall below $60 a barrel. But then they never expected to lose their sway as the swing producer within the Organization of the Petroleum Exporting Countries, or OPEC. Despite wishful statements from Saudi ministers, the kingdom’s efforts last month to make a deal with Russia, Venezuela and Qatar to restrict supply and push up prices collapsed. The I.M.F. has warned that if government spending is not reined in, the Saudis will be bankrupt by 2020. Suddenly, the world’s reserve bank of black gold is looking to borrow billions of dollars from foreign lenders. King Salman’s response has been to promise austerity, higher taxes and subsidy cuts to a people who have grown used to state largess and handouts. That raises questions about the kingdom’s internal cohesion — even as the king decided to shoulder the burden of regional security in the Middle East, fighting wars on two fronts. Has there ever been an oil state as overleveraged at home and overextended abroad? Meanwhile, by concluding the historic nuclear agreement, Iran is getting out from under the burden of economic sanctions. It will not be lost on Riyadh that this adds another oil producer to the world market that it can no longer control. The instability and economic misery for smaller oil-producing states like Nigeria and Azerbaijan look set to continue. But that’s collateral damage. The real story is how the Saudis have been hurt by their own weapon." This article is a primer on how low oil prices are helping peace loving democracies, and throttling the more malignant oil tyrants. The author makes a serious foot fault early in the article writing, "In the West, we have largely forgotten the lessons of 1974, partly because our economies have changed and are less vulnerable, but mainly because we are not the Saudis’ principal target." This misunderstands the relationship between the House of Saud and Wahhabism. The US, and the West are the target, the principal target. Iran is only a regional target, and is considered only a religious pretender, which the House of Saud believes it can swat like a fly. The House of Saud is not an ally, just as the USSR was not an ally during, and then after WWII. After we gave the USSR massive support of food, weapons, train cars, fuel, airplanes, trucks, jeeps, pretty much everything but tanks, rifles, bullets, and men, Stalin turned agains the US, and the West, and opened a new front, the Cold War. If the House of Saud ever though the US were weak enough, it would do something similar. It is not an ally. While Iran is also not an ally, it could be, if we cultivate economic prosperity, and adopt a more rational Middle East policy. I am not holding my breath on either. For now, our primary policy in the Middle East needs to be the continuation of low oil prices. The House of Saud needs to be broken, and the Islamic Reformation needs to move apace. This will only happen if the House of Saud is placed under serious economic pressure to the point it fracture sufficiently to separate from the canker of Wahhabism/Salafism. The resulting loss of funding for Wahhabism/Salafism would impoverish this terror funding entity, and allow the Shia to pressure for actual reformation. Just as the Catholic Church needed reformation prior to 1500, so does the Wahhabist/Salafist Islam. This is not a war we need be involved in, but it is a war we should monitor closely. It would be nice if we were not saddled with the worst political class in history, but we are, and we will need to force them to do what is necessary, not what is expedient, nor what is most beneficial to the political class. The destruction of the cancerous oil tyrannies, and the Islamic Reformation will be built on the back of low oil prices, which is in major part due to shale oil, and fracking. We should be expanding this not limit available, drillable reserves. This will ensure low oil prices for a very long time, perhaps well past the time we leave oil as a primary energy source. |
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