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Table of Contents
How Did We Get Here?
Different Grades of Crude
OPEC Production Cuts
What About Domestic Production?
A note on Politics
Conclusion
1. How did We Get Here?
Energy policy in the US is… broadly speaking, retarded. Far too many people expect energy to be available at the flip of a switch. Americans do not realize that the reliability and relatively low cost of energy here is something that took a lot of work for us to achieve, and that it is held in place by a free market. Many people want to put their thumb on the scale and shift things for their own preferences. Many of these people do not have any experience or knowledge of how intricate the system is, and some think that simply reading about it is enough to understand it. That’s not enough, you have to see it yourself and actually participate in it before you can really start to get it. These people would do well to heed Jordan Peterson’s advice to clean their room. I.E. Start in your own environment with the things you do understand before trying to fix the things that you don’t.
The cost of energy is baked in to the price of all goods. Energy is required to extract, refine, transport, assemble, transport again, and sell whatever it is you are buying. When energy is made more expensive, life as a whole becomes more expensive. Only a court eunuch could be unconcerned with with the plight of the people, for he has no people of his own to be concerned for and knows that he never will.
The US has been mismanaging what are significant energy reserves that could otherwise be utilized for diplomatic leverage. That mismanagement will have several implications on what other countries can do to the oil markets, energy markets, and to Western Reserves of energy in what will soon be a western sphere that will have extended shortages of energy.
Prior to this post, we have discussed the US depletion of our Strategic Petroleum Reserve, and how the Saudi’s have been getting closer to the BRICS nations, while slowly walking away from the US and the West. All of these events are now playing into the geo-political macro of today’s world. The west does not have any understanding of how much most of the world dislikes us, and how unfavorable the western trade sphere is becoming for those who participate in it.
Meanwhile the US is selling it’s strategic reserves in order to lower gas prices ahead of the mid-term elections. And they’re bragging about doing so too.
As these countries begin to get more leverage against us in the diplomatic sphere, they will use it. If I were them, I would be using it. We are not a valuable ally, and as we show weakness on the global stage, it is in every energy producing country’s interest to turn the screw and extract as much money from the West as they can.
When the media told us that the world was laughing at us because of Trump, they were only telling you half of the story. Our allies were laughing at us because of Trump, while those on the cusp, the second world, and countries that have always been our enemies in some form or other were coming to the table. I don’t really much care if German elites and diplomats were laughing at us if it meant North Korea might stop launching missiles and actually sat down with the South Korean Government.
I don’t much care if the same British central bank that was too cowardly to sit through a Brexit vote without torching their own currency were laughing at us, if it meant US troops finally leaving Somalia. I don’t much care if Macron and his beard of a wife (yes, really) were laughing at us if it meant we didn’t turn Syria into Libya 2.0. Results are more important than appearances. That was the first presidential term of my life where the president did not start a new war or invade a new country. Socialists in Spain can laugh all they want from the summer home they inherited from their fathers noble lineage; I don’t care. That was far better than this.
But, lets stop looking backwards, and instead look forwards to identify some trends in the oil market moving forward and how they will impact the markets abroad.
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