Sic Semper Tyrannis

When It Comes to the Bidens, Journalists and Social Media Are Deaf, Dumb and Blind by Larry C Johnson

How would social media and the so-called mainstream media react if a Russian site popped up tonight with a video of Donald Trump in a Moscow Hotel room engaged in voyeurism as two hookers rain a yellow shower on the bed where Barack Obama slept? Would they cover it? Would they allow the story and the video to be re-tweeted and linked on Facebook pages? You bet your ass they would. They would be scrambling for first dibs on the stories like passengers on the Titanic trying to grab a seat on the last lifeboat.

Bearing that in mind you can begin to comprehend both the malevolence of both social and regular media and the enormity of their hypocrisy by examining their reaction to the breaking news last night when the videos and photos from Hunter Biden’s laptop were published a la ‘The Full Monty” on a Taiwanese website. Facebook and Twitter immediately quashed anyone attempting to publicize the news. These Silicon Valley sychophants sprang instantly into full-on protection mode for the Joe Biden campaign. Truth no longer mattered. The social media colossi decided to squelch, erase and obliterate any information that exposed the corrupt dealings of the Chinese-compromised Joe Biden and his family of reprobates. The Chinese now own Joe Biden’s wrinkled posterior. I don’t know the Manadarin phrase for–“Joe’s their bitch”– but Sleepy Joe is beholden to the Chinese.

The good folks at The Gateway Pundit reported on the sudden appearance of the hideous and perverse Hunter Biden videos and images and were immediately banned by both Facebook and Twitter. Jim Hoft posted the link to the site carrying the videos but was careful to keep salacious images obscured. But Facebook and Twitter reacted almost instantly and shutdown Jim’s Twitter account (you can read his experience here).

We can concede at the outset that Facebook, Twitter, Instagram and other internet expressions of self-conceit are not the Harper’s Weekly of the 21st Century. They are not real media and do not adhere to any journalistic standards. But the New York Times, the Washington Post and the major TV networks (ABC, CBS and NBC) are supposed to operate according to genuine standards of professionalism. But that dog is dead as King Tut. The last four years show beyond any shadow of doubt that the electronic and print media establishment has opted largely to eschew journalistic standards and embrace uncritically any slander and defamation of Donald Trump.

Let me take you back to January 2017. Here’s what the “responsible” media did with salacious, unverified news:

What was it you said about "Peak Oil?"

"U.S. crude oil futures turned negative Monday for the first time in history as storage space was filling up, discouraging buyers as weak economic data from Germany and Japan cast doubt on when fuel consumption will recover.

Physical demand for crude has dried up, creating a global supply glut as billions of people stay home to slow the spread of the novel coronavirus.

West Texas Intermediate crude for May delivery fell more than 100% to settle at negative $37.63 per barrel.

Meanwhile, international benchmark, Brent crude, which has already rolled to the June contract, traded 8.9% lower at $25.58 per barrel.

The June WTI contract, which expires on May 19, fell about 18% to trade at $20.43 per barrel. The July contract was roughly 11% lower at $26.18 per barrel.

Investors bailed out of the May contract ahead of expiry later on Monday because of lack of demand for the actual oil. When a futures contract expires, traders must decide whether to take delivery of the oil or roll their positions into another futures contract for a later month."
CNBC contributed reporting.  Reuters

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When I think of all the BS people used to send me about the end of the world coming as fools burned up the last pitiful remnant of Terra's supply of petroleum.  Lawdy! Lawdy!  Bless them all!

Well now, you can't sell the stuff at prices that justify production costs.  An ocean of floating oil containers circles the earth.

Sadly, the newly achieved US domination of the petro scene is finished for the foreseeable future.

And to make it all sooo much worser,  China is a big importer of petro products so they can import it at fire sale prices.  

Fire sale? Hmm!  pl

https://www.reuters.com/article/us-global-oil/oil-crashes-ends-negative-for-the-first-time-in-history-idUSKBN2210V9

 

Trump moves to unite the Middle East! (irony)

Teevee coverage of the recent events in the ME has been predictable.  Those who hated Trump continue to hate him, etc. 

A few observations:

1. I had hoped that Trump's decision to kill an Iranian general engaged in a diplomatic mission (among other things) while the man was on the soil of a supposed ally of the US was something Trump pulled out of his fundament either inspired by war movies or on the recommendation of "our greatest ally" but I am informed that in fact some idiot in the DoD included this option in the list of possibilities that was briefed to the CinC in Florida.  The decision process in such matters requires that when options are demanded by the CinC the JCS prepares a list supported for each option by fully formulated documentation that enables the president to approve one (or none) and then sign the required operational order.  Trump himself chose the death option.  I would hold General Milley (CJCS) personally responsible for not striking this option from the list before it reached the CinC. 

2.  The Iranians are a subtle people.  IMO they will bide their time whilst working out the "bestest" way to inflict some injury on the US and/or Israel.  When the retaliation comes it will be imaginative and painful.

3.  Trump is  now threatening the Iraqis with severe sanctions if they try to enforce their parliamentary decree against the future presence of foreign (US mostly) troops on their soil.  IMO a refusal to leave risks a substantial Shia (at least) uprising against the US forces in Iraq.  We have around 5,500 people there now spread across the country in little groups engaged in logistics, intelligence and training missions.  They are extremely vulnerable.  There are something like 150 marines in the embassy.  There are also a small number of US combat forces in Syria east and north of the Euphrates river.  These include a battalion of US Army National Guard mechanized troops "guarding" Syria's oil from Syria's own army and whatever devilment the Iranians might be able to arrange.

4.  This is an untenable logistical situation.  Supply and other functions require a major airfield close to Baghdad.  We have Balad airbase and helicopter supply and air support from there into Baghdad is possible from there but may become hazardous.  Iraq is a big country.  It is a long and lonely drive from Kuwait for re-supply from there or evacuation through there.  The same thing is true of the desert route to Jordan.

5.  Trump's strategery appears to be based on the concept that the Iraqis will submit to our imperial demands.  "We will see."  pl

https://www.washingtonpost.com/world/iran-strike-live-updates/2020/01/06/3b5451f2-3024-11ea-9313-6cba89b1b9fb_story.html?rand=4

"The Truth about Oil and the Iraq War, 15 Years Later" Commentary by The Virginian

(article by Gary Vogler)

'The oil agenda I discovered and experienced was to supply Iraq oil to Israel. The players were the neoconservatives in the Bush Administration, their favorite Iraqi – Dr Ahmed Chalabi and the Israeli government. One of the motives was because Israel was paying a huge premium for its oil imports and this premium had just started in the late1990s. The agenda called for the reopening of the old Kirkuk to Haifa pipeline and its significant expansion. When this pipeline plan became unattainable in the 2nd half of 2003 then Chalabi took other actions to get inexpensive Iraqi oil to Israel."  Vogler

See: http://universitypressblog.dept.ku.edu/uncategorized/1395/

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The author is a good man. However, I suggest he gives too much credit to the intellectual capacity of the Neocons and their Israeli counterparts - they are not that smart, but certainly willing to place personal gain above the national interest. Some involved may have seen oil for Israeli as an intended outcome, but it would have been one of several (poorly thought out) drivers behind the neocon agenda. More broadly the perceived "interests" of Israel would have been more on the agenda, with oil being a subset of that strategic thinking.

Those in the Israeli DMI, like the US IC, with half a clue about Iraqi infrastructure, regional politics much less the O&G industry would have realized early on that any Israeli pipeline links were pipe dreams - not to mention that the Haifa pipeline no longer exists (ceased to many moons ago). The history of smuggled oil (decades old) plus Kurdish supply that has gone to Israel since 2003 underscores the difficulty of taking Iraqi oil to Israel in an overt manner.

That said, the politicos - partnered with the likes of Chalabi - and the money men tried and did create opportunity once the invasion was decided (or just after) for themselves. The willingness of those in the USG to allow this was and remains shameful.  The Virginian

"Iraqi Government Confirms Cooperation With Syria, Iran And Russia ..." - South Front

 

"The Iraqi government has officially confirmed a cooperation with Syria, Iran and Russia to secure the Syrian-Iraqi border. According to the Iraqi Interior Ministry, there is a cooperation between the four countries on this issue.  The Iraqi media also reported refering Iraqi officials that Iraq and its allies will not allow establishing of any “buffer zone” between two countries."   South Front

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Well, pilgrims,  this is some really bad news for the "US led coalition." 

1.  The US has struggled since the invasion and occupation of Iraq to make the country a reliable ally  in its wars against regional actors in the ME.  One can debate endlessly what the causes were for these wars.  The "oilies" and other economic determinists have their explanation.  The Zionist conspiracy fans have theirs.  The "demonic forces" people (me) have ours.   The MIC crowd have theirs. But, no matter what your explanation the reality of the long military COIN, financial and political struggle cannot be seriously doubted.  If you think it was somehow not a real struggle look at the pictures of men with metal, robotic looking legs in the ads for various wounded veterans' aid groups. 

2.  The present government of the US along with its European allies is now continuing to struggle to help its painfully clumsy Iraqi government ally to capture Mosul against rather small but incredible determined Sunni Muslim fanatics who, in the main, would rather be dead than live in the Western mindset of the 21st Century.

3.  A while back Mattis and Kushner went to Baghdad to see Al-Abadi, the  "moderate" Shia Arab prime minister.  One must imagine that at least part of the message was an exhortation to "get your act together."  And a few days ago the Iraqi Shia population was treated to the spectacle of President Trump not only being "appointed" mukhtar in America but then his further denunciation of Iran the foremost Shia power center.  The Sunni princeling lounging in a chair behind Trump watched him IMO as a cat watches a bird.  One can only imagine the conversation among the potentates and dictators in that room after the mukhtar had finished his obeisance. 

4.  Iraq, Russia, Syria and Iran are now proclaimed to be allies by the Iraqi Interior Minister (police and police troops)The US with its encrusted neocon, ziocon and R2P Borg blew the last 15 years in the Islamic World and we are obviously invincibly ignorant and determined to remain so.  pl

 

https://southfront.org/iraqi-government-confirms-cooperation-with-syria-iran-and-russia-to-secure-syrian-iraqi-border-video/

 

Bad news for the Gulfies and their Israeli friends.

 

If new incremental costs per barrel for US shale oil are as low as described in this article the political power of the Arab States of the Gulf is markedly reduced.  It should be remembered that shale is only one portion of the ever growing wealth of petroleum reserves being discovered on US territory.  The new Permian Basin reserves in Texas as well as those on the north slope of Alaska come to mind.  pl  

http://www.zerohedge.com/news/2017-03-21/how-opec-lost-war-against-shale-one-chart

"... 12-Year Low and Are Likely to Plummet Further." Time.com

"The world economy is bracing for a glut of oil that could send prices tumbling even further as demand cools while supplies of already-prevalent crude increase as sanctions are lifted on Iran.

With demand from a contracting Chinese economy falling and Iran to resume exports, “unless something changes, the oil market could drown in oversupply,” "  Time.com

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Tell me the thing about "Peak Oil" again...  pl 

http://time.com/money/4185083/oil-prices-forecast-decrease/

Crude prices continue to fall

Inventories continue to grow, prices continue to drop.  Tell me again about the "peak oil" thingy.  pl

http://www.marketwatch.com/story/4-reasons-crude-oil-prices-are-in-a-nasty-death-spiralagain-2015-12-10

 

pl

Straws in the Middle East wind (FB Ali)

Having performed the modern equivalent of the ancient practice of predicting the future based on examining the entrails of a sacrificial animal, I'd like to share my findings with this Committee.

The young Saudi Prince Muhammad, having sown his wild oats in Yemen, seems to have now been taken in hand by the elders of the clan. In the process, of course, he perpetrated the most notable war crime of the post-WW2 era. Having drawn in the US as a (probably reluctant) aider and abettor, he has also ruled out any valid grounds for the US media and sundry 'keepers of the world's conscience' to expostulate in horror every time Rami Abdelrahman announces from his London basement that the vile Assad's forces had killed a dozen or two civilians. Not that this will stop them, of course. 

The clan elders steered Prince Muhammad (still the face of the regime, being the apple of his father the King's eye) to Cairo, where he was lectured on the facts of life by President el-Sisi (and then signed a pact between Egypt and Saudi Arabia). In the 'world according to Sisi', the villains are Islamists such as the Muslim Brotherhood and the various jihadi groups, while anyone fighting them, such as Assad of Syria, are good guys. Turkey is up to no good; it backed the MB and now supports the jihadis; it aims to re-establish its rule over the Arabs. Iran and Hizbullah are undoubtedly suspect as Shia, but have their hearts in the right place as they also fight jihadis. And, of course, all this needs lots of money, so thank you in advance for your generous assistance.

Field Marshal el-Sisi himself is currently on a roll, but his future is anything but certain. Having been let out from the penalty box where he'd been put for a while by the US, he has been compensated by a shower of F-16s, money, high-level visits, etc. With the blood he has already shed, and his continuing tough ways, he may have a suicide bomber get close enough some day. Or, if things start to go downhill in the country, another general or a junta may remove him.

Where is "Peak Oil" now?

"U.S. crude oil stocks rose 2.5 million barrels, the Energy Information Administration (EIA) said in its weekly report, contrasting with expectations inventories would be down 2.3 million barrels.

 "The crude oil inventory rise was driven by a strong rebound in crude oil imports, which neared 8 million barrels per day," said John Kilduff, partner at Again Capital LLC in New York.

Crude oil imports from Saudi Arabia rose to 1.44 million barrels per day (bpd), up from 1.32 million the previous week, according to EIA data. Imports from several other OPEC-member countries also rose." CNBC

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"Peak oil, an event based on M. King Hubbert's theory, is the point in time when the maximum rate of extraction of petroleum is reached, after which the rate of production is expected to enter terminal decline.^[1] Peak oil theory is based on the observed rise, peak, (sometimes rapid) fall, and depletion of aggregate production rate in oil fields over time. Mostly due to the development of new production techniques and the exploitation of unconventional supplies, Hubbert's original predictions for world production proved premature.^[2]

Hubbert's original prediction that US Peak Oil would be in about 1970 was accurate, as US average annual production peaked in 1970 at 9.6 million barrels per day.^[3] However, after a decades-long decline, the successful application of massive hydraulic fracturing to additional tight reservoirs caused US production to rebound, hitting 9.2 million barrels per day in early 2015.^[4]"   

wiki - peak oil

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"... there was never really a short term shortage of petroleum.  The talking heads and the mindless anchors on TV business shows hyped and hyped the long term shortages until the unthinking came to believe in oil shortages as every day fact.  Talib, in "The Black Swan" describes this phenomenon.  Once something like the phony oil shortage became "fact" then the oil commodity was a good candidate for the "play" of traders of the wild eyed variety.  Now, they are getting out.  This reveals the lack of "fundamentals" underneath todays prices."  turcopolier - 2008

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 Peak oil enthusiasts -  Iranian oil is coming...  You look pretty stupid now.  pl 

 

http://www.cnbc.com/2015/07/21/oil-prices-fall-as-industry-data-points-to-rising-us-crude-stocks.html

https://en.wikipedia.org/wiki/Peak_oil

http://turcopolier.typepad.com/sic_semper_tyrannis/2008/08/the-price-per-b.html

The Pakistani stance on Yemen … and its implications for Saudi–Arabia

 

By Patrick Bahzad

The Pakistani Parliament has spoken – or maybe it was the Chiefs of Staff in Rawalpindi. Pakistan will not commit ground troops to a land-based operation against the Yemeni "Houthi" rebels. The news arrived on Friday and have stunned several Arab States, mostly Saudi-Arabia, but also the United Arab Emirates. In the US as well, a sense of disbelief seemed to prevail among the usual proponents of the anti-Iran faction.

Pakistan's decision has drawn sharp criticism from these players, yet it is based on an instinct of self-preservation and national interest that should not come as a surprise, even to those advocating for a more aggressive approach in Yemen. What is at stake for Pakistan is not just its alliances with countries in the Gulf, but its standing in the future geopolitical landscape at the intersection of the Middle-East and South-Asia.

A decision made in defiance of military and economic ties

The violence of the reaction to Pakistan's declared "neutrality" with regard to the Saudi led coalition can only be interpreted as an indicator of the upset this decision has caused. In very undiplomatic terms, Anwar Gargash – the Foreign Minister of the United Arab Emirates (UAE) – has hinted at the serious consequences the Pakistani reluctance might have and openly declared, Pakistan could pay a heavy price for its "unexpected" position. The Saudi reaction has not been as vocal, but it goes without saying that Riyadh can't have been thrilled either.

Both Gulf countries, Saudi-Arabia and the UAE, are pumping massive amounts of money into Pakistan, year in year out. The Emiratis have built-up substantial trade relations in recent years, while the Saudis have always provided relief funding to bolster the faltering Pakistani budget. Last year alone, Saudi-Arabia has injected 1.5 billion US dollars into the bottomless pit that is the Pakistani Treasury. Riyadh has also been there in times of need for current Pakistani Prime-minister, Nawaz Sharif, for example when he needed shelter at the end of 1999, after the Pakistani army under General Musharraf had organised a coup and ousted the legitimate government.

With regard to operation "Decisive Storm", Riyadh and Abu Dabi expected – or rather demanded – Pakistan to repay its debt, as it had always done in the past. Up until now, Islamabad had never bulked at the finger snapping from the Gulf. After the seizure on the Great Mosque of Mecca by Saudi fundamentalists in 1979, which had been organized in part by a brother of Osama Bin Laden, as many as 20 000 Pakistani troops were dispatched to the Kingdom, in an effort to strengthen its defences against any challenge from within. That is also the reason why the "Saudi Arabian National Guard" recruited a number of ex-Pakistani military over the years, to fill its ranks with troops more apt at fighting local insurgents and – even more importantly – more loyal to orders coming from the House of Saud.

Response to Walrus on US goals in the Ukraine (by CP)

"In retrospect, the big question that needs to be asked is whether the entire Ukraine crisis didn’t turn out to be ultimately a botched-up ‘color revolution’. The US got in  their man in power in Kiev to replace the ousted government – Prime Minister Arseniy Yatsenyuk – but at what enormous cost and of what avail? The principal strategic objective of establishing US military presence in Crimea and vanquishing Russia’s Black Sea Fleet altogether (which Catherine the Great had established in 1783) couldn’t be realized. The successor regime in Kiev is indeed under American thumb but is unable to stabilize the situation. Meanwhile, the agenda of getting Ukraine into the EU and NATO got frustrated. Ukraine itself is irrevocably split and its economy is in free fall. The IMF’s painful therapy may only aggravate the socio-economic tensions leading eventually to a popular uprising."

I think that M K Bhadrakumar is up to something here.

Ever since the Bushmen wrecked the train with their harebrained idea to remake Iraq and the Middle East proper, the US had their hands full with juggling with the wreckage and their various surges in Iraq and Afghanistan. In the wake of Bush's eventual and inevitable withdrawal from Iraq, they consequently suffered from a lack of leverage in the Middle East and a lack of relevance frankly.

Being preoccupied with the Middle East, the US weren't very present or active in Europe, nor were they really missed. Europe was preoccupied with the economic crisis and itself. The security situation was settled. NATO was business as usual, a habit more than a necessity.

The vaccuum left by Bush in the Middle East had allowed Russia to fill in, and they seized the opportunity to play a more active role in the Middle East. Russia held a prominent position in the negotiations with Iran. Their leverage allowed them to negotiate the Syria Chemical weapons compromise, skillfully thwarting State Department supported war plans. The US assented to the deal - after all it spared Obama an unpoular and messy war - but grumbled^* and would not let that stand.

I think that what was basically the latest in a string of skillfull Russian foreign policy coups at US expense in effect triggered a rabid US counter-reaction to Russia's assertiveness. The Hegemon wanted to get rid of that hassle some meddler crossing his designs and cut Russia down to size.

I believe that the US had identified as the means by which the Russians projected their power: (a) access to the Mediterranean, (b) through the Iran negotiations and (c) the leverage given to Russia by their energy exports into Europe and (d) their relations with Cuba. They chose to attack all four.

An additional bonus was that (e) they would make NATO relevant to Europe again.

Saudi Arabia's Human Geography Trap

Adam L. Silverman

¹

COL Lang wrote about ISIS's probing attack across Iraq's western border into eastern Saudi Arabia. Since then several interesting commentaries have been posted about what ISIS's target is. One argues that ISIS is planning on taking Mecca. Another that the goal is the oil fields. Both authors are correct, but there is a bigger strategic picture that they are missing. ISIS has three strategic objectives that have to be achieved in Saudi Arabia: 1) take the oil fields, 2) seize Mecca, and 3) weaken or overthrow the monarchy. All three of these objectives are related to Saudi Arabia's human geography combined with several other Saudi socio-cultural dynamics, such as the official religion of Saudi Arabia and the politics of and within the House of Saud.

Saudi Arabia's Human Geography Trap

Human geography is how people, places, and physical things, such as infrastrucure interact. In the case of Saudi Arabia's Eastern Province the natural resource of oil, the infrastructure for its extraction and processing, just happen to be where Saudi's Shi'a live. This can be seen in the map above. This confluence of vital natural resource and minority community has proven to be problematic in the past. ISIS's intentions to push into the Kingdom of Saudi Arabia makes this coincidence of collocation into a significant pitfall. As has been seen in Syria and Iraq, ISIS does not tolerate Shi'a Islam. This intolerance is rooted in the exact same Wahabbi Islam that is the officical religion of Saudi Arabia. It is promoted by the Saudi religious authorities, as well as members of the Saudi royal family and government. Wahhabi Islam, the theological and theopolitical offshoot of Hanbali Islam has been the unifying ideational system of Saudi Arabia from the Kingdom's creation. It is also completely intolerant of Shi'a Islam viewing it as a particularly insidious form of apostasy.² 

The trap is the result of Saudi Arabia's Shi'a residing in the same place where Saudi oil can be found. Should ISIS make a push to take the oil fields, they will attempt to ethno-religiously cleanse the area of Shi'a at the same time. This is going to place Saudi Arabia in a far more difficult position than just having to protect the oil fields and infrastructure. They will have to defend the Shi'a as well. Remember, the official religion of Saudi Arabia, which is the same religion that undergirds ISIS (and al Qaeda), is intolerant of Shi'a Islam. This commonality of Wahabbi religious belief makes Saudi Arabians the most easy ISIL information target. The Information Operations (IO) campaign, and the messaging that ISIL will utilize, do not have to be explained or enforced in regards to the Saudis - its the same religious message. The only discordant note, of course, may be dealing with the declared caliphate of al Baghdadi. The sameness of the belief system is what will make defense of the Eastern Province difficult. Protecting it will require that Saudi Arabia either protect the Shi'a - in place or as internally displaced Saudis - or ignoring the plight of the Shi'a who have come under ISIS control and focusing solely on the oil infrastructure and reserves. The former provides an opportunity for ISIS to effectively target Saudi Sunnis and try to pull their support away from the Saudi government through a coordinated, theologically rooted information operation decrying the Saudi government and military for protecting apostates. The latter creates external risks for the Saudis. These include problems with its foreign supporters and patrons, such as the US, who will have human right concerns regarding the protection of the Saudi Shi'a or lack thereof. Another, more regional concern, will be in regard to Saudi's regional rival Iran, which has cast itself as the protector of Shi'a. The combination of Saudi's oil infrastructure and its Shi'a in the Eastern Province is going to add a significant complication.

While Mecca is a clear ISIS target, the real ISIS objectives are capturing the oil fields and if not taking down the monarchy, then seriously compromising it. Taking the oil fields is important as it allows ISIS to add additional petroleum resources to those they have seized in Iraq. This, in turn, will allow for further sales on the black market bringing ISIS increased revenue to fund its expansion, consolidation, and operations. Capturing the Saudi oil fields would also, essentially, destroy OPEC and the global oil marketplace as we currently know it. Saudi's recent driving of oil prices to under $50.00 a barrel had multiple drivers. One was to make it financially unprofitable to extract oil from tar sands. Once the price of oil goes below $60 to $65 dollars a barrel, tar sands extraction just is not worth it. This motivation, however, quickly gave way last Fall to trying to beggar ISIS. The lower the price of oil on the global market, the less revenue ISIS can bring in selling the oil from the seized Iraqi oil fields on the black market. Should Saudi lose control of its oil, it will lose control over OPEC, which is likely to deal a serious blow to the stability of the global petroleum market.

The monarchy is ISIS's other target. It is right now going through a somewhat rough patch. King Abdullah, who is 90, has been recently hospitalized with pneumonia. The succession has been clearly established since 2013. Crown Prince Salman is the immediate heir and Deputy Crown Prince Muqrin is second in line to the throne should something befall King Abdullah. What is interesting here is that Deputy Crown Prince Muqrin is not only the youngest of the Sons of Saud, his mother was also a Yemeni consort/concubine. This has raised some questions, both within and without the Saudi royal family, about his legitimacy. The current line of succession further isolates the remnants of the Sudairi Seven, their sons and grandsons, who had long dominated the politics within the House of Saud. The next succession is also the last one that is solely under control of the king. All future successors after Abdullah's two choices will have to be approved by the Allegiance Council, which is made up of thirty-five senior princes. While the succession has been clearly delineated, the ill health of King Abdullah creates opportunities for ISIS to further their objectives against the Kingdom. 

ISIS has three different objectives it needs to achieve in Saudi Arabia. The first is taking the oil fields, which will provide ISIS with increased revenue on the black market. It will also be an additional economic weapon in ISIS's arsenal in the attempt to consolidate and expand its caliphate. The second is to drive across the country and seize Mecca. Control of the holiest city of Islam will further enhance ISIS's theocratic and theopolitical messaging, justifications, and IO campaign. Taking Mecca would also create an additional opening to further weaken or bring down the monarchy. Saudi Arabia, specifically the monarchy and the religious authorities, have always been the target of al Qaeda. ISIS, as an al Qaeda offshoot, is partially driven by the same theopolitical calculus: that Islam cannot be returned to the straight path until the House of Saud is removed and the religious authority is purged and replaced with a proper Islamic system of governance, religion, economics, and social control. It is perhaps this reality that shows just the extremism and unreality of the reactionary Islam promoted by al Qaeda and ISIS - the belief that Saudi Arabia is not properly Muslim or not Islamic enough!

¹ I found this map of Saudi demographics, as well as the where the oil fields are, here. The bottom righthand corner of the map, however, indicates that it was created by StratFor.

² As`ad Abu Khalil's The Battle for Saudi Arabia has one of the best written and documented histories of the creation, development, politics, and religion of the Saudi monarchy.

Why are energy prices still so high?" re-re-published 28 November 2014

 

The news media is full of stories about steadily rising Iraqi oil production, US oil and gas production - dittp.  If so, why is crude still priced up around $105/barrel? (when first published in July, 2013)

This does not seem to be a matter involving short term supply and demand.

Is this altogether a feature of market forces in which investors key off each others bids to ride prices up and down within a high range?

What happened to "peak oil?"

Let's hear your views.  pl 

Baiji has Fallen

Adam L. Silverman, PhD*

Baiji has fallen to "the rebels". The reporting is very unclear as to whether this means ISIL or the more tribal and more rural Sunnis and (non-exile) Shi'a that were the Awakenings and Sons of Iraq, as well as those that were also former Baathists or members of the Iraqi Army under Saddam Hussein. Regardless, the Government of Iraq no longer controls the refinery complex.

When I was deployed south and east of Baghdad in 2008 the Baiji refinery was producing much more heavy fuel oil than fuel for vehicles. It was being used to generate electricity, as well as as an industrial fuel. My understanding of this was that the manner in which the refining was being done produced significantly more heavy fuel oil than gasoline. If that is still the case, then the capture of the refinery not only impacts the Iraqis ability to fuel their cars and trucks, but also to generate electricity, cool their homes, and run a number of industrial activities. Iraqis pump water through their irrigation canals for agriculture with electricity generated by burning heavy fuel oil, so the capture of Baiji could seriously impact Iraq's still struggling agricultural sector. Should that take a significant hit, then people will migrate to towns and cities looking for work. This will create further sectarian stress. It will also recreate the phenomenon of 2006 through 2009 where (usually) men would take money to either assist with building IEDs, emplacing them, and/or detonating them so they had money to feed their families. They were not necessarily anti-Iraqi government or against the Coalition Forces, just desparate and ripe for exploitation.

* Adam L. Silverman is the Cultural Advisor at the US Army War College. The views expressed here are his own and do not necessarily reflect those of the US Army War College and/or the US Army.

The West and Ukraine − and the wars within (FB Ali)

Poor Professor Petro! A professor of politics at the University of Rhode Island, he was selected by the US State Department as a Fulbright Research Scholar in 2013 and went to Ukraine on a year's affiliation with a university in Odessa. Thus he happened to have a ringside seat when the troubles began in that country, and presumably watched in horror as the West appeared to misread and mishandle an internal power struggle into an international crisis. Doubtless he sent urgent missives to people he knew who might be able to influence US policy, but to no avail. Finally, he put his warnings into an article (Six Mistakes the West Has Made (and Continues to Make) in Ukraine) and published it on The National Interest.

But Dr Petro is wrong if he thinks the West is simply mistaken. Of course, there are intellectually challenged persons who do seriously misunderstand what is going on (John Kerry and Catherine Ashton, for example, and many media writers and columnists). Others fall into the same category because, though nominally bright, their ideological mindset causes them to seriously misjudge the situation (Susan Rice and Samantha Power, for instance). But the real reason behind the West's policies in Ukraine and Eastern Europe is that there is a strong faction among its policymakers that fully understands what is going on but has deliberately chosen this course of action. There is also a sane element in the West that seeks to impose a sensible policy, but is currently unable to prevail. The future of Ukraine, of relations between Russia and the West, and, indeed, of the world, depends on the struggle that is going on between these two groups, as well as the wider conflict over Ukraine between the West and Russia. To follow the course of these consequential contests it would help to identify who is in the various camps, and what they are trying to do.

The War Party

This is not too strong a title to give them since they believe the West won the Cold War and are angry that Russia has dared to challenge their consequent right to reorder Europe They would like to put Russia in its place (some of them would not even be too averse to starting a shooting war, if that became necessary). The leading elements of this faction are neocons and right-wingers. In the USA the most prominent are the neocons of the State Department (led by Victoria Nuland) and the CIA. Supporting them are the neocons in Congress, the 'think tanks' and the media, as well as the military industry. In Europe such elements are to be found in several governments, militaries and intelligence agencies.

 

 

Maddow, Isikoff and Corn explain the Iraq War

 "MADDOW:  At the top of the list for Bremer is oil.

 BREMER:  I had been told we had to get the oil going because it was  an oil-dominated economy.  This was fairly straightforward.  Unless you can  get the oil going, you can`t get the economy going.

  MADDOW:  What Bremer and his team find when they get into Iraq is an  oil infrastructure decimated by decades of war, sanctions, and corruption.

   ROB MCKEE, COALITION PROVISIONAL AUTHORITY:  I was shocked when I got  there about how undercapitalized it had been, how neglected it was.

    BREMER:  The oil fields were being held together by baling wire and  duct tape, in some cases literally duct tape.

    MADDOW:  The day after Bremer arrives in Baghdad, the Bush  administration draws up secret policy guidelines, which are later  declassified, stating that the coalition will move to privatize state-owned  enterprises in Iraq, including the oil industry.

     BREMER:  Oil was the lifeblood of the Iraqi economy.  You got to get  the oil going if you`re going to get the economy going.  It was not  something we were going for selfish American reasons or because we wanted  more oil on the world market or all of these fantasies that people dream  up.  We were doing it because we were the Iraqi government."   MSNBC

----------------------

It has been my contention for a decade that the neocon drive to invade Iraq and revolutionize the Middle East has to be seen against a long US policy of maintaining energy flows out of the Gulf (that Gulf).  That does not mean that the decision to invade Iraq was made by nefarious oil industry interests rather than by the Bush/neocon government.

 It should be remembered that Saddam would have been more than happy to have UN/US sanctions against  Iraqi oil production and exports relaxed so that Iraq could earn foreign exchange.

Maddow and MSNBC are relentlessly Left and anti-capitalist.  She, Isikoff and Corn take every opportunity in this production to exonerate the neocons and blame the war on business.  pl 

http://www.nbcnews.com/id/54605650/ns/msnbc-rachel_maddow_show/#.Uxn6UmeYa00

US oil/gas independence soon.

"The IEA said it saw a continued fall in U.S. oil imports with North America becoming a net oil exporter by around 2030 and the United States becoming almost self-sufficient in energy by 2035. "The United States, which currently imports around 20 percent of its total energy needs, becomes all but self-sufficient in net terms - a dramatic reversal of the trend seen in most other energy importing countries," it said. IEA Chief Economist Fatih Birol told a news conference in London he believed the United States would overtake Russia as the biggest gas producer by a significant margin by 2015. By 2017, it would become the world's largest oil producer, he said. The United States will rely more on natural gas than either oil or coal by 2035 as cheap domestic supply boosts demand among industry and power generators, the IEA said. "  Reuters

-------------------------------------

This will make a big difference in the US economy and with regard to the long standing relationship to the Saudis.  pl  

http://news.yahoo.com/u-overtake-saudi-top-oil-producer-iea-132331660.html

Oil prices - 2012

"A year ago SST had a piece on oil prices at the height of the Libyan revolt. There were all kinds of theories expounded on why oil prices should escalate beyond reason. It is time to look back and see what really happened during the last year. Using WTI one month futures at Cushing, OK as a base, the price was $94/bbl a year ago. It is $87 today. The highest price during the year was about $110 (caused by the usual geopolitical crap in the Middle East) and the lowest $78 (caused by a temporary glut of oil on the US Gulf Coast due to a refinery startup failure)."  R. Whitman 

Download OIL PRICES 2012

Huge Mediiterranean oil and gas deposits

"The discovery in late 2010 of the huge natural gas bonanza off Israel’s Mediterranean shores triggered other neighboring countries to look more closely at their own waters. The results revealed that the entire eastern Mediterranean is swimming in huge untapped oil and gas reserves. That discovery is having enormous political, geopolitical as well as economic consequences. It well may have potential military consequences too. Preliminary exploration has confirmed similarly impressive reserves of gas and oil in the waters off Greece, Turkey, Cyprus and potentially, Syria."  Thethe

-----------------------------------------------

What was that you said about "peak oil?"  pl

 http://www.thethe.com/news/tag/oil/

 

Gasoline will go a lot lower.

"The price of gasoline has dropped to a five-month low, giving drivers some relief ahead of the July 4 holiday.

The national average fell to around $3.40 per gallon on Tuesday. South Carolina, at $2.987, has the distinction of being the first state with an average below $3 since February 2011. Even in states that impose high gas taxes, such as New York and California, pump prices are averaging less that $4.

Americans are now spending roughly $200 million per day less on gas than in early April, when gas peaked at $3.94 per gallon. And analysts are expecting further declines. One economist on Tuesday forecast the national average will soon fall to $3.10 per gallon."  Yahoo News

--------------------------------------------------

I think it will go lower.  Gasoline prices are not determined by world wide supply and demand.  There is no short term shortage of crude oil. Forces internal to the markets are largely responsible for price movements.  These forces are the result of attempts by traaders to outguess each other in forecasting price movements.

I may have mentioned that a couple of weeks ago gasoline bought from major oil companies in the Harrisonburg, Virginia area was selling for 70 cents per gallon cheaper than the same product in the Washington, DC area.  Why is that?.  Gasoline is not produced in the Shenandoah Valley.  It must be trandported there in tanker trucks.  This, obviously adds to the cost.  I conclude from this phenomenon that the oil companies are pricing products at what they think the ttraffic will bear.

Look for a big drop in prices before the November election.  That might do it for BHO.  pl

http://news.yahoo.com/us-gasoline-prices-cheapest-since-january-151415588--finance.html

 

Guest Post from oilprice.com: The Most Immediate Threats to Global Energy Security - Jellyfish Interview

Earlier today COL Lang, hopefully enjoying his summer vacation, emailed to ask if I'd make sure the following interview, which was conducted by oilprice.com's Jen Alic was reposted in full.  Oilprice's publisher, Mr. James Stafford, contacted COL Lang to offer him and the SST community a full reprint of this very interesting interview.  You all will find it reprinted in its entirety below:

The Most Immediate Threats to Global Energy Security - Jellyfish Interview

By Jen Alic | Tue, 19 June 2012 14:32

As global energy supplies come under increasing attack by non-state actors and private energy holdings become key targets of political maneuverings and criminal activities, Oilprice.com discusses the nature of the growing threat and how to reverse the risk with “smart power.” 

To help us look at these issues we got together with Corporate intelligence specialists Jellyfish Operations and security expert Jennifer Giroux.

Michael Bagley is the president of Jellyfish, a global boutique intelligence firm that combines on-the-ground intelligence collection and analytics with an unprecedented country-to-country economic diplomacy program that helps governments, corporations, institutions and private individuals forge secure partnerships, discover new opportunities and mitigate operational risks. 

Jennifer Giroux is a global security expert who specializes in emerging threats to energy infrastructure in conflict-affected regions.

In the Interview Michael & Jennifer talk about the following:

• Why the risk to global energy supplies is increasing
• Violent entrepreneurialism: Why piracy is on the rise
• The most immediate threats to global energy security
• Which countries are most likely to see attacks in the future
• Why Saudi Arabia could be the next country to have its energy infrastructure come under attack
• Why energy companies assets are becoming key targets.
• How energy companies can create opportunities in Conflict-Affected Regions
• Why companies need more than just intelligence to operate in hostile environments

Oilprice.com: Energy supplies have always been at risk, particularly due to geopolitical maneuverings, transit through countries in conflict and those suffering from ongoing political instability, as well as piracy on the high seas. You have both mentioned that the risk to global energy supplies is increasing. How do you support that claim?

Gasoline price fall coming?

IMO this is likely.  As you all must know by now there is no shortage of crude oil at present.  No amount of fear mongering and "peak oil" advocacy can disguise that fact.

The rise in filling station prices is all market action.  Investors and suppliers bid against  estimated price rises in the markets.  This is basically a casino operation.

A fall in gasoline prices combined with slowly falling unemployment levels will doom "Kolob" Mitt's hopes. 

I don't intend to vote for either of them.  pl 

http://www.bizjournals.com/boston/news/2012/04/11/gas-prices-growing-evidence-theyve.html

54% think the Pres, can set gas prices.

I am always surprised by the peope who think the president of the US is an analog of the CEO of a corporation.  They think he has relatively unlimited power over the economy of the country.  The Democrats are now reluctantly admitting that this is not true in the matter of gasoline prices.

How about it?  What power does the president have over this?

I am tempted to think that market play could be regulated to force prices down, but would that just drive the action overseas?  pl 

"Crude Oil Falls in New York, Approaching a Bear Market as 2011 Gain Erased" - Bloomberg

 
"Oil fell to the lowest level in four months in New York, bringing its loss from this year’s peak to more than 20 percent, on speculation Greece’s debt crisis and a weakening global economy will curb fuel consumption.

Futures slid as much as 2 percent, erasing this year’s gains, as Europe failed to agree on releasing a loan payout to spare Greece from default and Japan’s exports fell. Oil traded for a second day below its 200-day moving average, a major technical-support level. Today’s low signaled a bear market."  Bloomberg

---------------------------

Well, boys and girls, how low will it go?  "Peak Oil," anyone?  pl

http://www.bloomberg.com/news/2011-06-20/crude-oil-falls-in-new-york-approaching-a-bear-market-as-2011-gain-erased.html

Gasoline prices and investors.

 
What role Wall Street investors play in the high cost of oil is a hotly debated topic in "Washington. Despite weak demand, the price of a barrel of crude oil surged more than 25 percent in the past year, reaching a peak of $113 May 2 before falling back to a range of $95 to $100 a barrel.

The Obama administration, the Bush administration before it and Congress have been slow to take steps to rein in speculators. On Tuesday, the Commodity Futures Trading Commission, a U.S. regulatory agency, charged a group of financial firms with manipulating the price of oil in 2008. But the commission hasn't enacted a proposal to limit the percentage of oil contracts a financial company can hold, while Congress remains focused primarily on big oil companies, threatening in hearings last week to eliminate their tax breaks because of the $38 billion in first-quarter profits the top six U.S. companies earned."  KC Star

------------------------------

Jump ball! 

- There is no oil shortage presently driving high prices.

- We are being screwed by traders, hedge fund managers, etc.

-  The Saudis do not love us.  They will probably join in the "screwing" soon, if not already.

Go for it.  pl

Read more: http://www.kansascity.com/2011/05/25/2903397/saudis-often-warned-us-about-oil.html#ixzz1NlU59pvo

 

"...Oil Price Should Be $60 To $70 A Barrel." - Forbes

 
"Rex Tillerson, the boss of ExxonMobil admitted last week that the price of oil–based purely on supply and demand- should be in the $60 to $70 a barrel range. Forbes

----------------------------

Well, here we have the truth from the "horse's mouth."  You don't have to believe ignorant old me.  "$60 to $70 a barrel range."  Lenzner continues by stating that, broadly speaking, the rest of the price is created by the "market forces" that I keep talking about.

I find it difficult to believe that the casino-like process of playing with the possiblity of extracting profits from the maniplulation of futures contributes to the production of petroleum.

This "game" contributes to the bank accounts of the players, but what does it do to the rest of us? 

If the answer is nothing, then the "crap shoot" in New York and other places should be dealt with, probable through international treaties of regulation.  pl

http://blogs.forbes.com/robertlenzner/2011/05/14/exxon-mobil-ceo-says-oil-price-should-be-60-70-a-barrel/

#Oil crude futures prices falling.

 
"Commodities fell broadly Wednesday and early on Thursday"  WSJ

------------------------------

At the risk of being boring, this is yet another demonstration that all this exagerated pricing in oil is market action of one kind or another.  Day traders, fund managers, dogs and cats, etc.

Long term shortages? probably.  Short term? No.

http://online.wsj.com/article/SB10001424052748703864204576319000023930160.html?mod=googlenews_wsj

#Gasoline prices now are just market action

 
"Oil dropped to the lowest level this month on Tuesday as energy forecasters said the world's supply of oil will remain ample, and a prominent investment bank said prices are too high."  Boston Globe

------------------------------------

We haven't had a good oil price fight here for a while.  I am curious if you "peak oil" types think the high prices now are the product of long or short term shortages.

IMO, 30% of this is just speculative action in the markets operating at the margins of the spot market.

I am not a great admirer of Donald Trump but I heard him say the other day that there is a lot of crude afloat in tankers that can't be sold or placed ashore.  True?  pl

http://www.boston.com/business/articles/2011/04/12/oil_price_tumbles_on_supplies_and_goldman_pullback/

#Media silliness

 
On "Morning Joe" today the Washington Post columnist Eugene Robinson said some remarkable things.  His Pulitzer has gone to his head.  Complete with self-satisfied smirk, he held forth on the motivations of American foreign policy in the MENA region.  "Its all about OIL" he said, "Iraq, Libya, Bahrain, Saudi Arabi."  Its all about OIL. 

Its a pity that this does not make sense.  Qathafi always sold oil into the world market at market prices.  He did not threaten to cut off the flow of oil.  Bahrain has litttle oil.  Saudi Arabia has mega oil and we are doing everything that we can to iritate them about the wave of unrest.  We never benefited at all from Iraqi oil.  Look at our national debt! 

Work on this conundrum.  Are their motivations in foreign policy other than economic ones?  pl

#Some Thoughts on Libyan Intervention

Adam L. Silverman, PhD*

After following all the recent SST posts and comments pertaining to Libya, as well as some of the reporting and commentary in other places, I think the issues pertaining to American intervention in Libya come down to the broad categories of why and how.  While I think that The Twisted Genius and COL Lang certainly have laid out and proposed the best variant of how US intervention should take place, after observing both the politics surrounding the uses of American military force for the past decade, as well as the actual way the US ultimately uses force, I'm not feeling too optimistic that what they are delineating, based on year's of hard learned experience, will actually be done.  In fact I'm pretty sure we will see something of the usual suspects version of the use of force: a no fly zone that doesn't do much to remove Qathafi (which is now, if I understood the President's remarks correctly, the overall stated US objective: that he has to go), followed by pressure from both our allies (France, Britain) and from the internal foreign and defense policy mavens that we must do more, America is looking weak, we're not living up to our standards - the usual arguments for boots on the ground intervention, which will result in said intervention.  Then we will start hearing the arguments that we have to expand operations so as not to discredit those who have already risked so much and because we can not allow Libya to descend into an ungoverned state of chaos, destabilize the region, and become a haven for al Qaeda, other extremists, and/or international criminals.  This will then become the basis for the need for the US to build a modern Libyan nation-state.  Since only time will tell how what we do plays out, let me move on to a brief discussion regarding whether we should or should not intervene.

#Oil, Energy and the Markets

 
It has been pointed out to me that we (I) have been neglectful of the economic aspects of presently developing history.  Such issues as crude oil prices, "peak oil," and nuclear power alternatives are, or should be, in the forefront of our committee's considerations.

Therefore, I call upon you all in my capacity as chairman, to begin a renewed emphasis on energy issues in our discussions.

I propose an initial string on the subject of the mechanisms that control oil spot prices.  pl

 

Oil Disaster Open Thread

I am increasingly seeing materials that suggest an "End of Days" scenario as an outcome for the Gulf/BP catastrophe.  Let us review the "bidding" on this.  pl  

What's the pressure in the hole?

 "Some experts are beginning to worry about whether BP, or any company, has enough strength to pay the eventual price for one of the worst environmental disasters in U.S. history — a tab that may continue to run for two or three decades.

"One of the problems is that we don't even know if $20 billion will be enough. This is all on an unprecedented scale," said Joe Hahn, a professor at Pepperdine University's Graziadio School of Business and Management who formerly worked as an engineer in the oil industry.

Hahn said the company might face the additional problem of severe fines from its decisions before and after the oil rig exploded.

"Initially, I thought they would be able to survive this, but they are in serious financial trouble. Their future is very questionable right now," Hahn said."  LA Times

------------------------------------------------------------------

This article mentions 20 billion in  BP assets that have been "set aside" as a "kind of collateral" for payment of the "trenches"of the $20 billion dollar fund. What assets are these?  How well are they secured from the possibility of a Chapter 11 bankruptcy or dissolution of the BP Group elements within the reach of US law?  

Hayward's performance yesterday made me think that he was "buying time" for BP, buying time for them to come to grips with whatever they decide is the best course of action for their stockholders.

Dylan Ratigan yesterday interviewed one Matthew Simmons on the subject of the actual condition of the hole that BP is trying to plug.  Simmons, evidently a leader of the "Peak Oil" people, insists that the down hole pressure is not 11,000 PSI as Hayward said to Congress.  Simmons maintains that the pressure is really more like 60,000 PSI.  If that is the case then it would seem that both the present leak and the relief wells may be ineffective.  What do you all know of this?

Simmons also says that USGS scientists in the Gulf have determined that there is no casing (metal pipe) left in the bore hole.  He says that the pipe has been blown out by the extreme pressure.

His solution?  A small yield nuclear explosive in the bore hole.  Opinions?  pl

http://www.latimes.com/business/la-fi-oil-spill-bp-20100617,0,2351140.story

Can Obama seize BP assets?

 "Barack Obama will order BP to hand over control of damage claims arising from the oil spill in the Gulf of Mexico, his spokesman said today as the company was granted permission to try a new method of containing oil from the spill.

The US president is to give a televised address to the country tonight, his first from the Oval Office during his presidency, to reassure Americans that the government is in control of the crisis.

Obama's spokesman, Robert Gibbs, said the president was poised to seize the handling of damage claims from BP, if necessary. He would also use the speech to identify a person to lead the recovery effort and discuss reducing the US's reliance on fossil fuels and imported oil."  Guardian

----------------------------------------------------------------------------------

I want to see BP pay for it - all of it.  that would be an enormous sum.  There are direct costs of the clean up and then there are costs to individuals and businesses in lost income.  Those costs will continue for years.  Then there are costs to the state governments concerned in lost tax revenue from businesses damaged and tourists that wil have disappeared from the Gulf coast area.

Mr. Gibbs says that the US has the legal power to force BP to disgorge all that money.  Is that true?The US has a long standing tradition of resistance to ex post facto legislation.  Would some form of impoundment of BP's assets stand up in federal courts?  BP is an international company with a European base.  Why do we not think that BP would transform itself in some way to limit liability ans salvage assets for the benefit of stockholders?  They said they will pay for everything?  Don't be amusing.  These are businessmen about whom we are talking, not "grunts" on a ridgetop in Afghanistan.  Business is not about sacrifice, honor and service.  It is about making money.  It looks as though BPs liabilities in the Gulf region are virtually unlimited.  They will try to escape from that.  pl 

http://www.guardian.co.uk/environment/2010/jun/15/obama-bp-oil-spill-claims

"Study: Oil speculators dominate open interest in oil futures" Ruth

"Using data from the Commodity Futures Trading Commission (CFTC), the authors state that the previous claims by the commission that speculation wasn't influencing oil futures markets were based on inappropriate analysis. The authors present new evidence that speculative trading is playing an increasingly important role in the oil market.

They note that while the question of what has produced sharp swings in oil prices since 2005 is a complex one that requires further and deeper study, there are "inescapable facts" that need to be part of the debate about regulating the activities of institutions betting on movements in oil price purely for financial gain. Specifically, speculators, which the CFTC designates as any reportable trader who is not using futures contracts to hedge, have increased their footprint in the marketplace dramatically since the late 1990s.

Hedgers are typically producers and consumers of the physical commodity who use futures markets to offset price risk. By contrast, speculators seek profits by taking market positions to gain from changes in the commodity price, but are not involved in the physical receipt/delivery of the commodity.

"To protect the U.S. economy and American consumers, there needs to be greater market oversight," Medlock said. "The tremendous increase in the market presence of speculators by fifteenfold speaks for itself."" Ruth

-----------------------------------------------------------------------------

Need I say more?  pl

Crude prices are driven by investors.

"The 15 percent drop in oil prices since the end of June was the longest and steepest decline so far in 2009. Prices had been rising since February, more than doubling from lows hit near $33,as traders started to price in an eventual recovery.

But many analysts cautioned prices had risen ahead of the real economy, with unemployment still climbing and global oil inventories mounting up.

The fragile state of the global economy dominated the annual G8 summit, with the United States, Japan, Germany, France, Britain, Italy, Canada and Russia acknowledging there were still significant risks to financial stability.

OPEC's 2009 World Oil Outlook has added to the gloom as it said world demand for oil may take years to recover from the slump in 2009 because of economic weakness and demand destruction." Reuters

------------------------------------------------------------------------

Does anyone here still think that crude oil prices are governed in today's markets by eventual world shortages?

I reckon that the time has come to provide an opportunity here for further debate on this question if there still is a question.  pl

 

"Judicious investment" in oil

"Downgrading the forecast, IEA said the oil demand would rise 0.6% or 540,000 barrels per day on average during 2008-2014. In its latest Medium-Term Oil Market Report, the Paris based agency said the oil demand would rise to 89 million barrels per day in 2014."

-------------------------------------------------------------------

OK.  Crude prices declined to around 32 dollars per barrel and now are back up around 70 dollars.

Why?

There is no short term shortage of crude.  Oil producers and traders are impounding the stuff all over the world, holding it in waiting for the steadily rising price to come to the level they want.  Speculation?  The "S" word?  OK.  Let's call it "judicious investment."

Demand is down just about everywhere at the moment, so more and more oil has to be withheld from the markets to keep the price going up.  This is very "judicious investment."

How high will the price of crude go this summer?  That depends on the skill of the producers and investors.  pl

 

Oil Prices, OPEC and the Financial Markets

"It's a warm spring day in Vienna, and OPEC delegates meeting in the former imperial capital seem more relaxed than they have been in months. There is less behind-the-scenes skullduggery than usual. Instead, it's an opportunity to hold leisurely dinners with colleagues, or even take time out to watch Barcelona beat Manchester United in the European Champions' League soccer match on TV. And why not? The oil market, deathly ill just three months ago, has recovered faster than just about anyone—including OPEC—expected, with prices now above $63.50 per barrel. "They are jubilant," says Kamel Al-Harami, a Kuwaiti oil analyst.

It came as no surprise that with prices moving up OPEC saw no reason to change production levels at its May 28 parley. "Stay the course," the Saudi Oil Minister Ali Naimi shouted cheerfully as he left OPEC's glassy blue and white building to take in the sunshine. OPEC's medicine for weak markets announced late last year—a series of cuts amounting to 4.2 million barrels per day—seems to be working, even though demand remains limp and inventories are near record highs. "We worry less when prices are improving," says the Algerian Energy Minister Chekib Khelil. He added that he thought rising prices were sustainable if the European economies follow what OPEC sees as signs of improvement in the U.S."  Business Week

---------------------------------------------------------------------------

Time to start up the oil wars again on SST.

If Business Week is to be believed, OPEC restraints on production (their right), market action and investor belief in future higher prices are raising price per barrel in spite of low demand and massive inventories. 

OK.  Now let's hear from the "Peak Oil" people as to whether or not these rising prices reflect the undeniable long term shortages of hydrocarbons.

My Escalade is still purring along nicely on Regular gas.  pl

Oil, Commodities, Instability?

Is the price of oil settling on a long term price of $40 a barrel? Some hard evidence is showing up. The Iranian government is setting its 2009-10 budgets on a price of $37.50. This week’s price started below $40 but March futures are in the $43/$44 range. The world recession is tracking to have an equal impact on the price of commodities.

Not being an economist, I would have assumed that consumption was in sharp decline and thus the supply and demand cycle kicked in. It appears this has been aided by the action of hedge funds as well. From Steve Austen’s blog: http://www.oil-price.net/#20080105#20080105

But when the banking industry collapsed, hedge funds had to raise cash by "deleveraging", liquidating their leveraged energy ETF positions sending the price of oil tumbling. Anecdotally shorting of banking ETFs was suspended by the US Securities Commission during that time but not shorting of energy prices, and the leverage mania soon found an escape route in utrashort oil ETFs, compounding the speed of this downward spiral. By December 2008 the oil price had collapsed 75% and frankly, who would complain about cheap gas these days?

Cheap gasoline will mean big cars.

El presidente has decided to give GM and Chrysler money from the TARP.  They have until March to re-structure enough to survive as distinct business entities.  If they can't do that they have to re-pay the money.  Oh?  With what?  Ford does not want any money just yet, maybe later.

Who thinks that the Big Three will solve their problems by March, or maybe July, or maybe October? I do not think that their financial situations will allow them to continue for much longer in their present form.  Merger or liquidation awaits them.

As I said before, I have two excellent vehicles, one from GM, and the other from Ford.  I am completely happy with them.  Before these I had two Ford products.  Both were without any problems.  People like to say that the Big Three did not make good vehicles.  I have never experienced that.  People also say that the Big Three should not have made full sized cars, pick-up trucks, or SUVs.  Well, capitalism implies obedience to market forces.  Most Americans like big vehicles. The Big Three responded to that preference.  If you prefer a command economy of the sort that we might approach in the USA, then you might have the opportunity to see if you like automotive products that environmental activists design.  The products of the former Soviet automotive industry come to mind.  Those who were lucky got "Lada."  The nomenklatura rode around in "Zil."  Do people think that the American nomenklatura are going to ride around in tiny electric or hybrid cars?  Get real.

Gasoline will be below a dollar a gallon soon.  How long the price will stay at that price level is not immediately apparent.  Will most Americans want little cars when gasoline is at prices of that sort?  I doubt it.

Do the environmental faithful believe that Obama would ask Congress to legislate against big vehicles if polling (triangulation) says that most people are opposed to that.  Do people think that he will ask for high gasoline taxes?  Come now!  Look at his cabinet choices.  This man is a politician, and a skilled one.  2012 is coming...

Someone suggested that I keep the Escalade as a museum exhibit.  Who laughs last, laughs best.

Does "peak oil" have any effective meaning?  pl

I bet that OPEC can't...

"Crude-oil futures soared above $49 a barrel Thursday, propelled by sharp weakness in the dollar and expectations that the Organization of Petroleum Exporting Countries will deliver a significant production cut next week.

Crude for January delivery rose $4.46, or 10.2%, to end at $47.98 a barrel on the New York Mercantile Exchange.

Earlier, the contract hit an intraday high of $49.12 a barrel in electronic trading on Globex.

Other energy futures also rallied. January reformulated gasoline rose 11 cents, or 11%, to end at $1.08 a gallon and January heating oil gained 11 cents to finish at $1.51 a gallon."  Marketwatch

--------------------------------------------------------

Can OPEC decide on production cuts?  Sure.  Can the OPEC countries endure pain from loss of revenues brought on by demand destruction and lower prices?  Probably not.  Will the members cheat on their quotas trying to "make up" the lost revenue?  Probably.  Can OPEC discipline its members to ensure that they will not cheat on their production quotas?  Certainly not.

Translation - Crude prices will appear to stabilize and then begin to fall again,  pl 

http://www.marketwatch.com/news/story/crude-futures-soar-12-trade/story.aspx?guid=%7BC2D4E75E-3C68-4112-ACA7-08AFA18CA3FF%7D

Is the price of oil a tolling bell?

The price per barrel is now approaching $42.  We should consider the implications.  If the price of crude continues to fall, then at some point there will be widespread shut-downs of production and exploration.

OPEC will meet soon to seek a solution to the decline in their resource basis that is inherent in the massive price decline.  There has been so much destruction of demand in the course of the world economic crisis that it may not be possible for OPEC to enforce restraint on the financial "hunger" of its members for the funds that come from high levels of production.  In other words, this decline in price may be beyond the power of OPEC to reverse. The decline in the oil market has become emblematic of the larger economic decline.   Is the world headed for another Great Depression and is the oil industry leading the way down into "the pit?" 

Comments?  pl

How low will oil go?

By now, those of you who are interested have noted that the price of crude dipped balow $50/barrel today.

You may also have noticed that I have thought for some time that much of the price range that was achieved this last summer was the product of human herd behavior in treating this commodity as a "poker chip" in large scale and ever more complex Ponzi schemes.

We have probably not reached the bottom in the process of what is now quaintly called "de-leveraging" of those prices. 

Down underneath the hot air and fluff there are prices for crude oil that are supportable on the basis of cost of production and transport plus a profit margin sufficient to cause producers to accept the risk involved in the "ahl bidness" as they say in the Permian Basin.

What is that price? pl

PS -  Yes, you can throw in "Peak Oil" in your comment if that is soothing.

http://www.msnbc.msn.com/id/12400801/

Will OPEC production cuts work?

"Even the Saudis, who argued for keeping the markets well supplied at the last OPEC meeting, seemed to have been struck by the speed of the price drop.

When prices spiked this summer, the cartel’s leaders attributed the jump to speculation, and Saudi Arabia, the world’s biggest oil producer and OPEC’s most powerful member, opened the taps and increased production to a record of 10 million barrels a day. The Saudis have since pared their output to around 9.5 million barrels a day, according to analysts.

As the lowest-cost producer, Saudi Arabia can afford to let prices fall for a while without hurting its budget. Most analysts estimate that the Saudis could live with oil at $55 to $65 a barrel. But other producers need higher prices. Nigeria’s oil minister said his country would be more comfortable with $80, Qatar has set a range of $70 to $90, and Iran’s representative said that prices below $90 a barrel would hurt.

For Iran and Venezuela, the drop in prices is particularly painful,"  NY Times

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OPEC agreements on production cuts are not going to halt the fall in the world price of crude.  The fantastic prices that prevailed in the Summer of 2008 were the outcome of trading in oil as financial investments rather than as commodities.  Deregulation led to this as it led to speculative excess in many other commodities (real estate derivatives being the most famous example).  A valuation of crude by the financial markets resulted that had little to do with short term demand and everything to do with the boundless "greed" espoused by Gordon Gecko.

The collapse of the stock and credit markets that has occurred has started an unwinding of the fantasy of the false short term valuation of crude oil.  At the same time the actual economic slowdowns that are happening around the world are reducing real short term demand for oil to even lower levels.  This produces a downward spiral that has a certain built in momentum.

The oil producing countries need the revenues that they were earning at the inflated prices of oil that prevailed last Summer.  In many countries the governments themselves are the principal owners of the oil producing companies.  A loss of revenue by the oil companies is a direct "hit" on the governments' budgets.  Political stability in these countries is to some extent dependent on budgets.  Cutting production is a gamble that many of these governments will hesitate to adopt.  Cheating on OPEC established quotas for production is an old feature of the oil supply situation.  In addition, there will be countries who will simply not "play ball" with OPEC in this.

Conclusion:  Production reduction efforts on the part of OPEC will not be fully effective.  Demand will continue to fall for some unforeseeable period of time. Therefore, crude oil prices wil continue to decline.  To what level will prices decline and for how long?  That is not knowable at this time, but It is likely that price will decline to below 50 dollars a barrel.  pl

http://www.nytimes.com/2008/10/25/business/worldbusiness/25oil.html?_r=1&pagewanted=2&bl&ei=5087&en=e931bc5317323329&ex=1225080000&oref=slogin

Oil - Down, Down, Down.

No comment needed, but....  Seems like this is a predicted Black Swan.  Musta been dumb luck on the "Casenova the Turkey" model. pl

Fabius Maximus teaches us. Thank You, Fabius.

Our brother Fabius, who evidently writes about oil was courteous enough to inform me that he has posted the following in his blog.  I thank him for his help in explaining this complex phenomenon.  So many have sought to help in similar ways.  I am especially grateful to the army of social scientists who "lent a hand" in so many ways.  pl

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"Colonel Lang shows us why the 21st century might prove difficult - even painful - for America"

As the evidence grows that global oil production will peak in the next decade, many Americans grow increasingly frantic to deny this possibility.  Hence the campaign against speculators (an historically common response to changed conditions).  We see this even by intelligent and experienced people, showing how deeply rooted is our desire not to make the necessary (and probably painful) adaptations necessary.

"How to burn the speculators" - Galbraith

"On these matters, there is a quick fix. Under pressure, the cftc is closing the London loophole. Early in the next administration, Congress must slam shut the Enron and swaps loopholes. Index speculation should be curtailed by making such strategies illegal for regulated pension funds and by imposing limits for all traders on how much they can buy or sell. Investment banks using credit default swaps to enter the commodities markets should be regulated to the standards that apply to speculators, not as if they were heating-oil vendors hedging against a warm winter. Investigations now under way at the Federal Trade Commission, the Federal Energy Regulatory Commission, and the Department of Justice should be intensified, and criminal manipulation of the markets, if detected, should be punished.

Finally, the federal government should burn the oil speculators by selling up to 4 million barrels a day from the Strategic Petroleum Reserve. And as economist Tom Palley has pointed out, consumers can help too. An awful lot of gas is stored in cars. If people stop topping off and make do with half a tank, they'll back up supply and lower demand. It's a brilliant suggestion and definitely worth a try.

And while this is being done, and especially if all this smoke leads to fire, someone should ask, "What did Henry Paulson know, and when did he know it?""  Galbraith

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Am I beating this horse to death?

Yes.

Why?

...Because the horse isn't dead yet.

pl

http://www.motherjones.com/news/feature/2008/09/exit-strategy-how-to-burn-the-speculators.html

The price per barrel - down, down, down.

The TV business channel 24/7 crowd have more or less lapsed into sullen quietude over the continuing fall in the price of the oil commodity.  Why?  They can't explain it in terms that they are willing to accept.

Some of the anchors are restive and asking embarrassing questions that are "slapped down" as quickly as they arise.

The rise of the dollar, the destruction of US demand, the unexpected decline of Asian demand, etc., etc., ad nauseam.  These are the "herd" answers.

In fact, there was never really a short term shortage of petroleum.  The talking heads and the mindless anchors on TV business shows hyped and hyped the long term shortages until the unthinking came to believe in oil shortages as every day fact.  Talib, in "The Black Swan" describes this phenomenon.  Once something like the phony oil shortage became "fact" then the oil commodity was a good candidate for the "play" of traders of the wild eyed variety.  Now, they are getting out.  This reveals the lack of "fundamentals" underneath todays prices.

A woman "talking head" on CNBC said today that oil is seeking an "equilibrium price" based on the real supply and demand situation.   She was correct.

She was hooted down.

pl

Kudlow - "Drill, drill, drill, so that the futures traders will flee."

Larry Kudlow, the financial whiz, was on the Joe Scarborough show on MSNBC today.  He repeated his unending mantra of "drill, drill, drill," as a way out of the current wilderness of high priced crude.

His insistence on this simplistic solution to the short term price situation has never made a lot of sense to me.  Kudlow is a smart man.  He gets around enough in the right circles to know that short term traders in oil futures are the fire behind the crude prices we see now.

When pressed by one of the hosts on the show to explain how favorable congressional action on drilling both on and off shore would affect the price in less than several years, he "came clean."

"Ah," he said (roughly).  "Approval of drilling will frighten the futures traders out of the market and the price will go a long way down."  "They are already leaving the oil futures market" he went on.  "This will push them out even faster."

Need I say more?  pl

http://en.wikipedia.org/wiki/Larry_Kudlow