Today’s topic should have been yesterday’s, reigniting presidential campaign observations. Particularly because Joe Biden’s immediate attack on domestic oil production sparked the inflation causing economic upheaval around the world.
According to the BBC @www.bbc.com/news on January 18th, 2021, the date Biden took office: “A briefing note seen by Canadian and US media says Mr Biden will sign an executive order revoking the permit for Keystone XL on Inauguration Day - 20 January.
“He will also return the US to the Paris climate agreement - a global pact on cutting carbon emissions - reversing another decision by Mr. Trump, who took the US out of the accord on 4 November last year.
“Mr Biden has pledged to make the fight against climate change a top priority of his administration.”
Effects of Biden’s actions can be seen by the fact that in June 2022, the Bureau of Labor Statistics reported that Annual Inflation rose to 9.1%, the highest since 1941. Crude Oil prices averaged over $100 per barrel, while according to the AAA, regular gasoline prices averaged $5.016 in the middle of the month.
As good a recap as can be found anywhere comes from Investopedia, who said: “Yes, oil prices can affect inflation. [T]here is a cause-and-effect relationship between oil prices and inflation. When oil prices rise, it contributes to inflation by increasing the cost of inputs. Inflation measures the overall rate of price increases across the economy. The annual gain in the U.S. Consumer Price Index (CPI) set a 40-year high in March 2022 amid COVID-19 supply disruptions. Crude oil prices were the highest in a decade as the U.S. and its allies imposed sanctions on Russia due to its invasion of Ukraine. Higher oil prices contribute to inflation directly and by increasing the cost of inputs. Federal Reserve Chair Jerome Powell said in his semiannual testimony before the U.S. Senate Banking Committee in March 2022 that, as a rule of thumb, every $10 per barrel increase in the price of crude oil raises inflation by 0.2% and sets back economic growth 0.1%."
Therefore, the horrendous pity of the situation is the fact that the impact on the overall economy of inflation, and the blow to every citizens budget was all known and foreseen. Yet, for purely political purposes and to satisfy demands of the far left factions of the Democrat Party, Biden curbed U.S. oil production anyway.
Mr. Huang writes: “As the Organization of the Petroleum Exporting Countries and its allies came to an agreement on a record cut in oil production, U.S. President Donald Trump may have struck his “biggest and most complex deal,” according to oil expert Dan Yergin.
“What was so interesting — among many, very interesting things in this unprecedented event — was the turnaround, the pivot by Donald Trump,” Yergin, who is vice chairman at IHS Markit, told CNBC’s “Street Signs” on Monday.
“Just a few weeks ago, Trump had said the early-March plunge in oil prices were “good for the consumer” as it meant lower gasoline prices. That drop in crude prices had been triggered by an oil price war between Saudi Arabia and Russia after Moscow rejected a proposal by OPEC to cut 1.5 million barrels of production per day.
“The sharp decline in oil prices spurred giant capex and job cuts across the U.S. shale industry, which has some of the highest production costs in the world.
“But Yergin said: ”(Trump) came to see this as a national security issue, also an employment issue, and a very important factor in the U.S. economy … and he just jumped in.”
“This must be the biggest and most complex deal (Trump)’s ever made,” Yergin said. “Not only was he a deal maker, but he was also something of a divorce mediator.” Yergin said there were two main factors driving the turnaround to the deal that just six weeks ago “would not have seemed possible.”
Firstly, he said, the price of oil was in danger of crashing without a deal as there was limited inventory space left. That would have had “severe repercussions” beyond the oil industry itself and other sectors such as finance.
The other driving factor was likely due to a dearth in oil demand, where the “producers found they couldn’t sell their oil.” Crude demand has taken a hit in recent weeks as measures taken by authorities to stem the spread of the coronavirus pandemic have left major economies effectively frozen.
“I think all those things came together but then it was this dealmaker ... Donald Trump who got on the phones,” Yergin said. “I would say it looked like a mission impossible a few weeks ago. Turned out, it was mission possible.”
“His comments came after OPEC+ finalized an agreement to cut production by 9.7 million barrels per day — the single largest output cut in history.
What’s most remarkable is that if you take the politics out of it, any problems in massive oil production would have gone a long way to take care of themselves, whereas: “For his part, Trump has noted that market forces would naturally curb output stateside, after previously stopping short of saying the U.S. would scale back production.”
“Commenting on the deal that has been struck by OPEC+, Yergin said it has “bought time” and avoided what is known as a “tank top” by the end of April to beginning of May.
“He also said it addresses another problem of the buildup in inventories that were so high that they would have left pressure on the market over the next few years.
“This agreement goes two years, so it’s also meant to manage the inventories downward over that period of time,” Yergin said. “What this has done is averted what really would have been a disaster for the oil industry and I think it does give some stabilization.”
Thus, we have two theories at work in real-time, one working to its own advantage regardless of circumstance to constituents. The other taking a broader look before proceeding. Resulting in a case where one side is driven to pursue every situation primarily for its political impact, the other examining practical realities first. And the crime of the situation is that individual citizens are forced to pay the price of the politician’s theoretical battle in real cash, in real time right out of their own pockets.
That’s it for today folks.
Adios
