Recently read a smart lad who noted a few simple things:
- Biden’s been releasing oil from the Strategic Petroleum Reserve (SPR).
- The SPR has basically two types of oil: sour and sweet.
- Biden has been releasing almost all sour since that’s what most US refineries need.
- At the current rate of release, the SPR runs out of sour crude to release around March.
OilX, a consultant, estimates that by the end of October, the SPR will hold only 179 million barrels of medium-sour crude. To put that into perspective, during the period June 2021 to October 2022, the US is likely to sell about 180-190 million barrels of medium-sour crude from the reserve. Clearly, Washington is running out of firepower to repeat that exercise.
Of course, when Biden stops releasing oil, either because he’s out or because he chooses to stop after the election or the holidays are over, then prices are going to spike if sanctions are still in place against Russia and/or Russia is unwilling to sell to the West. As a bonus, the government will need to buy oil itself to stock the reserve back up.
This means you have to ask yourself whether or not the Ukraine war will still be going on thru the winter. It’s hard to say, but unless the US tells the Ukrainians to give Russia enough of what it wants to get peace, the answer appears to be yes, especially as winter is the best time to wage war in Ukraine, as it is when the ground is most solid and many rivers are likely to iced over. Putin needs a decisive, obvious win and if he can’t get it diplomatically, he has to get it on the ground.
Putin’s happy with slowly grinding forward militarily in part because he’s also aware of what sanctions are doing to the West. The most rabid anti-Russia country outside of Eastern Europe has been Britain, and energy price increases which are often 500% or more are taking Britain apart. More of this later, and I want to see what new PM Truss’s plan is, but if Britain doesn’t get its act together soon, this could be the year its descent into 2nd world status becomes unstoppable.
Russia can get most of what it needs from sources other than Western nations, but energy and inflation issues are kneecapping much of the West. Why not drag things out and see how much damage is done?
Remember that the entire previous post-war order was essentially destroyed by stagflation caused by oil price shocks back in the 70s (that gave us neoliberalism.) This order can be destroyed the same way.
What this means for Americans is that there’s a very good chance of a big inflation spike after the election. It might hold off for as long as spring, it might start a few weeks after the election. It won’t just hit gas prices, oil is important for much more than driving cars, so it’ll rip thru the entire economy. Stock up on what you need before the election if you can.
And let this be a lesson that GDP means very little when the chips are down. Who cares if you have Hollywood and lots of fast food stores and Google and FaceBook? What matters is what you grow, dig up, refine and make.
Russia has enough energy and food and can buy the manufactured goods it needs from India and China.
The West, with a few exceptions, does not have enough energy and the primary manufacturing power is China. In certain ways we’re in a weaker position than we were during the last oil shocks.
Dan Lynch
“there’s a very good chance of a big inflation spike after the election.”
My assumption is that the Strategic Reserves will stop flowing after the election, but, at the same time, there may be a global depression brewing, particularly in Europe, that will reduce the demand for oil, so hard to say how that will play out.
In my mind, war is a looming threat. The Ukraine war does not seem to be going away any time soon, the U.S. UniParty is attempting to stir up a war over Taiwan, and the new prime minister of the UK is an unhinged warmonger, even more so than the outgoing unhinged warmonger. Now ask yourself what do politicians do when they have no solutions to domestic problems?
anon
With inflation, Covid, and the rise of other pandemics, people should be staying at home more than they were in 2020. Instead, people are being forced back to the office, students back to schools, moratoriums on loan payments are ending, and stimulus checks have stopped. This will all come to a head at some point in the near future. When that happens the US government will need a scapegoat and another war abroad.
VietnamVet
This post explains the crisis quite clearly.
I remember the first oil shock – the odd-even gasoline rationing. And, yes, together with going off the gold standard, these resulted in the triumph of neoliberalism. This time the rationing will be by price. If you have no money or credit, die. The energy shortages will be much worse; 1) there is a proxy world war underway, 2) western corporate/state rulers actually believe their theology’s propaganda that deregulated markets work, and 3) North Sea and Alaska oil fields are too depleted to make up the shortages. This is not Oil Sheiks hording petroleum to get richer. This is Russia, China and Iran trying to break apart the Western Empire.
There is no “Invisible hand”; especially in a lawless war. The West will lose the war with Russia for one basic reason; its rulers can’t and won’t see reality. They will not sign an armistice and build a DMZ on the West bank of the Dnieper River to rebuild sustainably. Russia has energy and food resources that if successfully denied to Europe will prostrate the splintering West.
The last six months are similar to the run-up to the American Civil War and World War I. With nuclear weapons and climate change; the occurrence of a human extinction event is foreseeable. The fundamental tragedy is that corporate CEOs and their purchased western politicians cannot see beyond themselves.
Sadly, none of the current western rulers will address the survivors, in the future, and say, as Abraham Lincoln did on November 19, 1863;
“We here highly resolve …. that these dead shall not have died in vain …. that government of the people, by the people, for the people, shall not perish from the earth.”
In truth; republican democracy vanished, secular America is no more, and the West is essentially leaderless.
Carborundum
Americans learn that fucking over WCS for short-term domestic political gain hurts in the long-term. How karmic.
Olivier
@Ian China buys a lot from Russia but is being rather stringy with what it sells to it: why else would Russia resort to buying primitive munitions from North Korea, for instance?
different clue
@Olivier,
Maybe Russia is laundering someone else’s sophisticated weapons through North Korea. Maybe it is Russian disinformation designed to trick the West and Ukraine to “keep hope alive” and to keep fighting so Russia can have several more years to grind Ukraine and NATO EUFUKUS down to a containable level.
Jams O'Donnell
@ Olivier.
NK weapons are not ‘primitive’ – NK is among the top five in missile technology. If you doubt this, do a search in ‘Military Watch Magazine’.
Olivier
@James From what I read Russia is not buying missiles from NK but mostly ordinary munitions plus maybe tanks.