To really understand the impact of Russian oil and gas on Europe — and to understand the impact on the future of Ukraine — you have to study the existing pipeline system.
Nobody seems to be willing to do their homework to understand the magnitude of the problem.
Here is a decent schematic showing the network of current pipelines. It is a massive distribution system. Click on this graphic and study the enormity of Russia’s hold on Europe.
We are living in interesting times. We are facing a pandemic, an economic crisis, a stock market brouhaha, and an oil bust.
Today, we focus on the oil bust. In case you haven’t been following things, the Russians and the Saudis got into a pissing contest as to the level of oil output by the OPEC + bunch.
OPEC + is the Organization of Petroleum Exporting Countries which has been around since 1960 and is in the oil pricing manipulation business. The + means Russia is in the talks.
The result of the Saudi Arabia v Russia pissing contest — the Russians would not agree to reduce production levels — was a collapse in global oil prices with some incredibly low prices — 1950s prices — which then translated into lower gasoline prices.
These two clowns wrecked the global oil business in an amateurish “who has the bigger dick” contest.
If you slept in on Daylight Savings Time, then you may have missed that we have another war erupting in the Middle East — Saudi Arabia (through the newly public Aramco which it controls) has lowered the price of its crude, while threatening to increase crude oil production by more than 2,300,000 barrels daily to a total of 12MM barrels per day.
This is a hissy fit on the heels of an unsuccessful OPEC + meeting (the plus being the addition of Russia) attempt to reduce production by 1.5MM barrels.
As always when this group meets, there was a lot of discussion, but no consensus.
The Middle East is on the verge of an explosion precipitated by a spiral of Iranian provocative behavior. Your Big Red Car would like to calmly discuss what has transpired to bring the world to this point. We need to know the history of the region and Iran.
In 1979, the Shah of Iran — an American ally of some long standing — fled and the resulting leadership void was filled by the Ayatollah Khomeini, a religious exile of some fifteen years. The son of a religious scholar, the Shiite cleric was said to have memorized the Qur’an as a youth.
The Shah — Mohammed Reza of the family of Pahlavi — had been put into power in 1941 by the Russians and the British (when they attacked and seized Iran in World War II to safeguard supply lines to Russia) and was considered to have been only the second “modern” Shah. As Shah, Reza was pro-Western. He spoke English, French, German, and Persian (Farsi), but was at his core a playboy.
Reza, as Shah, launched the White Revolution in the mid-1960s. His advancement of the Iranian culture was extraordinary as was the growth of the standard of living amongst the Iranian people and womens’ rights. It is important to note that the Shah “reigned” and, ultimately, “ruled.” The big driver was oil wealth of gargantuan proportions. In many ways, he was ahead of his time in the westernization of Iran.
Oil, y’all? Texas tea?
Big Red Car here down in the Oil Patch of Austin By God Texas. OK, no oil wells in Austin, but I can get to some in half an hour.
So, we talked about Texas oil here:
Today, we talk about oil in the United States.
Big Red Car here talking Texas oil, y’all. One of the worst reported business phenomenon is the enormous strength of American oil production and Texas’ part in that.
Y’all know all about the enormous flows from shale oil, fracking, and horizontal drilling, right? But, you ask, “How big is it, Big Red Car?”
As you can see, it is an impressive curve with a May 2018 monthly flow of 4,243,000 barrels per day. This is larger than any Middle East country other than Saudi Arabia. Hello, America!
Trump on oil, Big Red Car?
We woke this morning to a Tweet from our Tweeter-in-Chief picking a long overdue fight with OPEC. The Organization of Petroleum Exporting Countries was formed in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.
Currently, it is composed of Algeria, Angola, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emerates, and Venezuela. Sudan has applied to join. Indonesia was once a member.
[See what odd bedfellows a bit of oil and money creates?]
There is an “observer” class consisting of Egypt, Mexico, Norway, Oman, and Russia.
OPEC produces about 44% of the world’s oil while holding 73% of the world’s proven oil reserves.
OPEC exists to manipulate the price of oil by controlling the level of production thereby driving prices up through artificial scarcity.
Big Red Car here with gasoline prices in the ATX now at a low of $1.69/gallon at Sam’s Club in South Austin where it was about $1.49/gallon less than two months ago. It’s all about the price of oil. Wow!
Still, that is historically cheap.
Big news in the last few days out of Doha — the OPEC + Russia countries were unable to agree to freeze oil production at current levels through the end of 2016.
The fly in the ointment?
You guessed it — Iran.
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