World Oil Politics 94


The fall in the oil price is a bad thing in that it makes hydrocarbons more attractive against renewables, although on the timescale that investment decisions in energy production are taken, it would have to be sustained a great deal longer to have a major impact.

Contrary to popular myth, the fall has not been caused by Saudi Arabia cranking up production on behalf of the United States to damage Russia. Hydrocarbon supply has increased, while the increase in demand has been slower than expected. The United States itself has been responsible for a significant part of the production increase, though it is from a number of diverse sources. What Saudi Arabia has not done is play the role of market regulator by cutting back production to stabilise the price.

If you wish to see a target of Saudi inaction, it is the United States, not Russia. The single largest increase in hydrocarbon production in recent years has come through fracking in the United States. Fracking is high cost, and the fracking frenzy in the USA was built on a mound of corporate debt. Nobody would have initiated a fracking investment with oil under $70 a barrel. A few deep sea operations aside, no producers are hurt more than US frackers by the current oil price. The Saudis are enjoying watching the Americans fall on their arse.

As for Russia, I have explained repeatedly that it is a developing country economy dependent on raw commodity export. I am willing to wager that we will find that in 2014 the total GDP of Russia fell below that of Spain. Oil is not the only commodity price that is struggling. Putin has complacently presided over an astonishingly undiversified economy of which the key markers are raw commodity export, very narrow distribution of wealth from that raw commodity export, capital flight of 80% of the profit from that raw commodity export, and a consequent crippling investment shortage. The pretend sanctions “imposed” on Russia are responsible for almost none of the economic pain Russia is now suffering. Russia’s lack of value-adding industrial base and capital incontinence is coming home to roost.

I can’t finish this survey of oil politics without noting the appalling decision of the United Kingdom to open a naval base in Bahrain to service aircraft carriers. This crazed neo-imperial venture by a struggling economy is shameful. An aircraft carrier has no defensive purpose. Its entire rationale is the projection of airpower into foreign countries. That, after the total disaster of Middle East policy in the last decade, the United Kingdom is still seeking to project air power in the Middle East is horrifying. Furthermore, when we are supposedly trying to reach an agreement with Iran on its nuclear programme, it is incredibly provocative to open a major forward western
base almost within eyesight of Iran. Lastly, of course, Bahrain has a brutal dictatorial regime that has been murdering and torturing its majority Shia population for decades, with both open and covert British support. Britain’s callous action is a kick in the teeth for anybody who believes that human rights has a role to play in foreign policy.

The sooner we break up the United Kingdom the better. It really is a force for evil in the world.


94 thoughts on “World Oil Politics

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  • david holden

    Craig, have you a typo in the last paragraph but one? i think you meant “Bahrain has a brutal…”. not defending Iran, just going by logic of your text

  • Ba'al Zevul

    It would be rather surprising if Saudi had intentionally increased production. Or even unintentionally:

    http://peakoil.com/production/a-closer-look-at-saudi-arabia

    From this it looks as if, without Manifa and increased refinery capacity to handle heavy crude, Saudi production would have peaked and be in decline.

    The Saudis are enjoying watching the Americans fall on their arse. may not be entirely true. Again, on this view, the Saudis are biting their nails in a race to the bottom and only if they can discourage the frackers (US oil production is threateningly high) will they be able to bump the price back up – which will be the moment to put the brakes on production. I don’t see it working, as the frackers will, however reluctantly, bide their time until a more ‘realistic’ price returns.

    This kind of lunacy is encouraged by inefficient insulation, one-car-one-person commuting and buying stuff you don’t need. It will continue, therefore.

  • Republicofscotland

    The Russian state gas company Gazprom, said on Monday it would set up a new company to build a gas pipeline, to Turkey.

    The new firm will be called Gazprom Russkaya, Putin intimated that he’d be dropping the South Stream project, which had been planned to strengthen the security of supply of gas to Europe.

  • ------------·´`·.¸¸.¸¸.··.¸¸Node

    It seems unlikely to me that the US has lost control of the price of a barrel of oil. Its currency is inextricably linked to it. Its oil companies spent a large part of the 20th century buying up and destroying public transport systems so as to make ordinary people dependant on it. Its military engages in perpetual war to take control of the sources of it. The companies investing in fracking are the same companies who have controlled the price of oil for over a century.

    Energy supply is part of the control structure of our puppet masters. Saudi Arabia is their pawn. Whatever the reason for falling oil prices, it is not because the tail is wagging the dog.

  • Republicofscotland

    “I can’t finish this survey of oil politics without noting the appalling decision of the United Kingdom to open a naval base in Bahrain to service aircraft carriers. This crazed neo-imperial venture by a struggling economy is shameful. An aircraft carrier has no defensive purpose.”
    ____________________________

    Its a reward for the UK for turning a blind eye, to the brutal regime.

    On March 14, 2011, troops from Saudi Arabia and the United Arab Emirates invaded the country to assist the Bahraini government in its crackdown on demonstrators.

    Britain has continued to sell arms to Bahrain despite continuing political unrest in the Gulf state, new official figures disclose.

    According to the figures the government approved the sale of military equipment valued at more than £1m in the months following the violent crackdown on demonstrators a year ago, 2001.

    They included licences for gun silencers, weapons sights, rifles, artillery and components for military training aircraft.

    Also cleared for export to Bahrain between July and September last year were naval guns and components for detecting and jamming improvised explosive devices. No export licences were refused.

  • AdrianD

    I’ve seen plenty of snarky comments on various threads about how the fall in the oil price would have crippled the Scottish economy had the referrendum gone the other way.

    I know that oil revenues were always seen as a bonus (although never reported as such in the BT media), but can anyone point me to anything that might show what this drop might have meant for an independent Scotland? Thanks.

    Oh, and of course, Frank Gardner was of course entirely sanguine about the new Bahraini base all over the BBC at the weekend. Strange that.

  • Ba'al Zevul

    The Russian state gas company Gazprom, said on Monday it would set up a new company to build a gas pipeline, to Turkey.

    Which is not a hell of a lot of use to it unless it’s feeding the Balkans. Russo-Turkish line through Bulgaria and Albania? Or connection to the forthcoming Western TAP line from Azerbaijan to Italy? A bit of a duplication of effort if the former, but would achieve the objective of the South Stream. The alternative, assuming sanctions are lifted, as one day they must be, allows Russia an entry into European markets. Place bets now.

  • Republicofscotland

    O/T

    It was a much lauded report, by the unionists of what state Scotland would be left in if it became independent, according to the UK Treasury. We were never done hearing about how Scotland would become bankrupt, and run out of North sea oil and gas, in a matter of few years, if we left the safety of mother Britain.

    Yet in a report today by the same UK Treasury on what state the UK would be left in, if it decided to leave the European Union, has been squirreled away, and won’t be seen by the public’s eyes.

    The reasons given is that the release of the report could lead to economic harm in the UK, not even a FOI request will be entertained, on this matter, such is the gravity of the report.

    Already uncertainty over an EU in out referendum has been blamed, in part, for a forecast slow down in Scotland’s economy, this new report can only add more uncertainty to the economy of the UK as a whole.

  • Republicofscotland

    “Which is not a hell of a lot of use to it unless it’s feeding the Balkans. Russo-Turkish line through Bulgaria and Albania? Or connection to the forthcoming Western TAP line from Azerbaijan to Italy? A bit of a duplication of effort if the former, but would achieve the objective of the South Stream. The alternative, assuming sanctions are lifted, as one day they must be, allows Russia an entry into European markets. Place bets now.”
    ___________________________________

    From What I can pick up from the statement Ba’al, Putin’s plan is to set up a gas hub on the Turkish-Greek border, to supply Europe.

    Of course it may all just be a bit of posturing by Putin, as sanctions still apply.

    Meanwhile, a senior Russian diplomat claimed the USA was trying to instigate a regime change in Russia, Sergi Ryabkov, claimed the sanctions against Russia, were mainly about ousting Putin’s regime.

    A report by the opinion poll firm Levada, showed that Russian’s have a negative view of the USA, only 1990, showed a more negative view of the USA, by Russians.

  • CanSpeccy

    I am willing to wager that we will find that in 2014 the total GDP of Russia fell below that of Spain.

    This is mere repetition of the absurdity you asserted the other day when you equated Russia’s GDP with that of Poland as well as of Spain.

    Spain’s GDP is 56% of Russia’s, according to the CIA, IMF, etc., and less if adjusted for purchasing power parity. If Russia were to suspend oil production altogether, its GDP would be reduced as a direct result by $235 billion or about 10%. In fact, Russia’s GDP per capita is higher than that of EU member Poland.

  • Republicofscotland

    O/T

    Don’t you just love, Conservative Peer, Baroness Jenkins of Kennington’s condescending remark, “Poor people don’t know how to cook.”

    As if somehow cooking was the domain of only intelligent and refined folk.

    I wonder if Baroness Jenkin’s managed to convey her sentiments to her colleague Ian Duncan Smith who’s no stranger to claiming £37 quid of taxpayers money for his breakfast.

  • Tony M

    Taking a rather Scoto-centric view, I think efforts to collapse the price of oil in the event of a Yes vote win in the referendum would have had a long lead time, couldn’t just be kicked off on Friday 19th September, it would have to have been moving that way beforehand, with preparatory acts which could not be quickly reversed. These must still work themselves out of the system, iron laws of supply and demand will see prices rise inexorably, the next peak price will be higher still than the last giddy heights.

    I agree oil (and gas) revenues would have been merely a bonus, Scotland would have been in modest surplus even without hydrocarbon taxation and licensing; the general tax base would actually have increased as central government functions and thus expanded distinctly Scottish civil service functions would have located across the country. There is still some diversity in the economy, including in Scotland, despite more than 30 years of pro-City policies inimical to manufacturing. The view put in a recent edition of the The Lobster is that more damage was done to diversity of the economy especially in Scotland, where what manufacturing was left and the lighter industries set up to mitigate contraction of traditional sectors themselves began going under, during the Labour decade from 1997 to 2007, than had been done in the previous 18 years of Tory misrule including the period of big closures and shutdowns, the Tories killed large ventures in shipbuilding, mining car and truck production, engineering, steel-making and Labour’s decade of economic ineptitude seen off a myriad of medium and smaller sized concerns, which in the end proved as, if not more destructive, than the long Tory ruin.

    Unionist policy since McCrone, began in earnest by Thatcher, has long been a sustained pre-emptive strike against the viability of an independent Scotland and increasing our dependence on southern concerns for almost every basic need. It has been a pastoralisation of Scotland, as rUK could not stand the internal competition for British or European markets from Scottish enterprises, the result was that remaining rUK firms became flabbier, less inefficient and presumptuous as guaranteed captive, monopolistic ‘home-nation’ markets were always taken for granted as a given, and they missed the opportunities of the hundreds of million people European marketplace. U-KOK myopia.

  • Republicofscotland

    Well, well, well things must be bad in the Den of iniquity, aka Westminster, when even Danny Alexander, is beginning to get the jitters about, the Tories eternal austerity cuts.

    Alexander is said to be dismayed at Gideon Osborne’s “slash and burn” approach towards the public.

    Alexander and his cohorts in the Lib/Dems are starting to distance themselves from the Tories, in my opinion its not so much in solidarity with the poor and disabled, but more to do with the up and coming 2015 GE.

    Where the Lib/Dems will be decimated at the polls for their acts by association, and rightly so.

  • Richard

    My uncle has been an oil man for years and I met him recently at a family bash. He’s human and can be mistaken just like everyone else, but he seems to think that the increase in oil supply is set for a few years at least. What happens to price, then, depends on demand which, for some reason, hasn’t taken off yet.

    I was gobsmacked when I heard about the base in Bahrain – just when I thought nothing could surprise me ever again. What a bunch of infantile pygmies we are governed by!

    As always, however, while the U.K. may be a force for evil in the world, I am still at a loss to understand why separatism is the solution for a problem which unionism doesn’t cause.

  • craig Post author

    RepublicofScotland

    Yhere are no sanctions on Russian oil or gas supply to the West. The sanctions against Russia have almost no real effect at all.

  • Republicofscotland

    “Yhere are no sanctions on Russian oil or gas supply to the West. The sanctions against Russia have almost no real effect at all.2
    _______________________

    Thanks for the info, I wasn’t sure if sanctions applied to oil or gas.

    Meanwhile at present Brent Crude up to $67 a barrel.

  • nevermind

    My sincere congratulations Craig, today’s report on torture, redacted or not, has absolutely vindicated you and imho there is now a reasonable case for arguing to get an apology from the FCO, as well as from those who fired you, for reasons that did not stood up at the time and which were dismissed.

    jack Straw has lied, and so has David Milliband, a now indisputable fact. Whether Mr. Belhadj will now apply for a new review in his case due to the changed circumstances is to be seen.

    I wish I was there to crack open a bottle with you. enjoy..

  • Habbabkuk (la vita è bella)

    “As for Russia, I have explained repeatedly that it is a developing country economy dependent on raw commodity export. I am willing to wager that we will find that in 2014 the total GDP of Russia fell below that of Spain. Oil is not the only commodity price that is struggling. Putin has complacently presided over an astonishingly undiversified economy of which the key markers are raw commodity export, very narrow distribution of wealth from that raw commodity export, capital flight of 80% of the profit from that raw commodity export, and a consequent crippling investment shortage. The pretend sanctions “imposed” on Russia are responsible for almost none of the economic pain Russia is now suffering. Russia’s lack of value-adding industrial base and capital incontinence is coming home to roost.”
    _____________________

    Thank you, Craig.

    The above complements nicely the remarks made by Marshall of the Sejm Radoslaw Sikorski as quoted in a blog article by Charles Crawford a few days ago (I reproduced the whole of Charles’ blog article on the last thread).

  • Habbabkuk (la vita è bella)

    “My sincere congratulations Craig, today’s report on torture, redacted or not, has absolutely vindicated you..”
    ________________

    That is correct, Nevermind.

    But it has most definitely not vindicated those who predicted most confidently on this blog that the report would never be published/be sabotaged be so heavily redacted as to become meaningless, etc, etc, etc zzzzzzzzzzzzzzz !

    Humble pie eating time, I’d say (you know who you are! 🙂 )

  • CanSpeccy

    @Habbabkuk

    ” I am willing to wager that we will find that in 2014 the total GDP of Russia fell below that of Spain.”

    How do you expect this miracle to occur, Habby. Will Spain with a youth unemployment rate currently over 50%, experience a 60% GDP growth this year, or will Russia’s GDP contract by eight hundred billion or so, an amount greater than the GDP of Saudi Arabia, Netherlands, Indonesia or Turkey?

  • Herbie

    Discussion of the recent Turkey/Russia pipeline deal, and how it relates to TAP and TANAP;

    “Instead of being in competition with Southern Corridor projects like the Trans Anatolian Pipeline TANAP (which will traverse Turkey) or the Trans Adriatic Pipeline (TAP), he contends the new Turkish-Russian pipeline could work off of the synergies of being in the same neighborhood: potentially transporting Russian gas further afield to other European markets. That could be likely, he says, as much of the Southern Corridor capacity may be underutilized.

    He offers, “This would be very strange, because the European Commission gave the TAP pipeline an exemption, because they said it provided diversification. If Russian gas comes through an exempted pipeline that’s going to be very funny for everyone.””

    http://www.naturalgaseurope.com/new-russian-pipeline-plans-a-win-for-turkey

    The TAP and TANAP pipelines are from Azerbajan, which with Georgia is pro-Western, anti-Russian.

  • Rehmat

    In July 2010, Lebanese resistance group Hizbullah warned Zionist entity to quit its plan to steal the huge natural oil and gas reserves discovered under the waters of the Eastern Mediterranean Sea, which connects the coasts of Lebanon, Gaza, Cyprus and the Zionist entity. However, as usual, the Zionists claim that like Arab land and water – all other natural resources were promised to them by their Biblical God.

    Israeli infrastructure minister Uzi Landau responded by threatening with a new war with Lebanon if Hizbullah tried to stop Israel from stealing the new-found gas discovery: “We will not hesitate to use our force and strength to protect not only the rule of law but the international maritime law”. It was an absurd claim, of course, in light of the utter contempt Israel held for maritime law in the attack (in international waters) on the Turkish relief flotilla and killing nine Turkish aid workers on board.

    According to Mexican geo-political expert, Alfredo Jalife-Rahme, based on Israel’s past actions – it is very doubtful that the Zionist entity would share this tens of billions of dollars wealth with its neighors. Instead, it will steal it by siphoning them via sophisticated technology or better seize them by force with the help of the Zionist Occupied Governments in the US, Canada and the EU.

    In 2009, the Zionist entity started developing two oil and gas fields, Tamara and Dalit with a combined gas reserves of 6.3 trillion cubic feet, according to US Noble Energy. In June 2010, Canada’s Bontan Corporation announced that its Mira and Sarah prospects, adjacent to the Tamar field in the northern waters, have up to 5.71 trillion cubic feet of natural gas reserves.

    When Tamar begins producing it could lower Israel’s energy costs by a $1 billion a year and bring $400 million a year in royalties into government coffers. That suggests a total of about $40 billion in savings and $16 billion in government revenues over the total yield of the field. Those numbers would only rise as Leviathan comes on line.

    The Noble Energy Inc. has been drilling for oil in Israeli waters since 1998 and discovered the Mary-B field, where production started in 2004, i.e. four years after the discovery. Its relatively limited production capacity is of approximately 600 million cubic feet per day. The Mary-B is located along Palestinian territorial waters, and is also a shared field. There is another field that was discovered and that is being developed by British Gas in Palestinian waters near the Gaza shore. The field is ready for production, but Israel has refused to allow production and gas delivery directly to Gaza and the power station there, without directing the pipeline to the port of Ashkelon first. In other words, Israel wants to control the quantity of gas supplied to Gaza, to know its volume and subsequently, its financial value. However, these conditions were rejected by the operating company and the Palestinian officials, and no gas is being produced from the Palestinian field.

    http://rehmat1.com/2010/08/24/israeli-theft-of-lebanese-oil-and-water/

  • fred

    “I’ve seen plenty of snarky comments on various threads about how the fall in the oil price would have crippled the Scottish economy had the referrendum gone the other way.

    I know that oil revenues were always seen as a bonus (although never reported as such in the BT media), but can anyone point me to anything that might show what this drop might have meant for an independent Scotland? Thanks.”

    Snarky comments eh?

    The fall in oil prices is going to be grim for many people in Scotland as part of the UK, if Scotland had been an independent country with no currency of it’s own and no central bank it would have been devastating.

    Here is a quote for you from today’s Scotsman:

    In passing, I can’t help pointing out that all the jeering from the SNP and its Yes people at Better Together for harping on about the risks to an independent Scotland of depending on volatile revenues has now been shown for what it was – empty idiotic sneering at hard political and economic realities.

    http://www.scotsman.com/news/peter-jones-cheaper-oil-means-vanishing-jobs-1-3628855

  • N_

    I am willing to wager that we will find that in 2014 the total GDP of Russia fell below that of Spain.

    Here are the World Bank’s figures for 2013, in current USD:

    Russia: $2.097 tn
    Spain: $1.358 tn

    I think the only realistic factor that would let you win the wager would be a major war.

    Don’t forget that oil isn’t the only mineral in Russia. There’s that shiny yellowish one too.

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