Softpanorama

Home Switchboard Unix Administration Red Hat TCP/IP Networks Neoliberalism Toxic Managers
May the source be with you, but remember the KISS principle ;-)
Skepticism and critical thinking is not panacea, but can help to understand the world better

Peak Cheap Energy

Fighting MSM disinformation and oversimplifications about cost of shale oil and other energy related topics:
as Arthur Berman noted "Shale oil is not a revolution, it is a retirement party"

News Casino Capitalism Recommended Links Secular Stagnation Gas wars Oil glut fallacy Subprime oil: Deflation of the USA shale oil bubble
Paper oil, Minsky financial instability hypothesis and casino capitalism Slightly skeptical view of oil price forecasts Paper oil and record oil futures trading volumes MSM propagated myth about Saudis defending this market share Russia oil production Iran return to western oil markets fear mongering Oil Burden: amount on money spend on energy vs. global GDP
Energy returned on energy invested (ERoEI) Energy Geopolitics Great condensate con A note of ERoEI decline Cushing is filling up hysteria Plato Oil as Hubert Peak in condition of rising oil prices Media disinformation about Plato oil and Hubert peak
Energy disinformation agency and friends Big Fukushima Debate Oil consumption growth The fiasco of suburbia US military energy consumption Media-Military-Industrial Complex Neoconservatism
Neocolonialism as Financial Imperialism  All wars are bankers wars Predator state Bakken Reality Check Junk bond bubble Debt enslavement Neoliberalism as a New Form of Corporatism
IMF as the key institution for neoliberal debt enslavement Media disinformation about Plato oil and Hubert peak Fiat money, gold and petrodollar Energy Bookshelf Financial Quotes Financial Humor Etc
80 years ago the Nobel Prize winning chemist explained where oil DOES come into the picture:

Though it was not understood a century ago, and though as yet the applications of the knowledge to the economics of life are not generally realized, life in its physical aspect is fundamentally a struggle for energy, …

Soddy, Frederick M.A., F.R.S.. Wealth, Virtual Wealth and Debt (Kindle Locations 1089-1091). Distributed Proofreaders Canada.

The ‘backing’ for the petrodollar now includes the monetized value of Chinese and third world labor and natural resources as well as OPEC oil. But controlling the outcome of life’s “struggle for energy” is still the crumbling cornerstone of both US foreign and domestic economic policies:

  • control the world’s access to energy and it has no choice but submitting to the hegemon’s will
  • the U.S. political system is now owned lock, stock and barrel by a financial / military industrial / fossil fuels complex (am I forgetting anybody?). The powers that be are trying to preserve the existing status quo by insuring that life remains a “struggle for energy”.

The denizens of Wall Street and Washington can perhaps be forgiven for believing they were the “masters of the universe” at the conclusion of WWII. What they can NOT be forgiven is their belief – then or now – is that “the end of history” had arrived (unless they cause it).

Steven comment on Michael Klare Delusional Thinking in Washington, The Desperate Plight of a Declining Superpower


Introduction

Nemesis eventually catches hubris.

"Shale oil is not a revolution, it is a retirement party"
Arthur Berman

When oil is traded too cheaply, the victim of such trades is always the future generations. The drop in oil prices in 2014-2017 might have been a curse, not the blessing as it slowed down or stopped the adaptation processes to the "end of cheap oil". The process that was already in place with $4 per gallon ($1 per liter) gas in the USA, when sales of large SUV dropped considerably and used large SUV could be  bought for a half of its usual price.  The reality is a harsh mistress: the situation in 2018 with depletion of existing oil deposits and new discoveries is now worse than in, say, 2000.  Technology an and will prolong the agony so so far there is no viable solution to "hydrocarbon age".

As of 2018 in the USA consumer still continue to do the same things as before 2008. Such as buying large SUVs. Which fits Albert Einstein definition of insanity ("doing the same thing over and over again and expecting different results"). As one NYT commenter noted (Moscow on the Brazos):

I don't get it. We're supposed to be running out of oil, right? Or has that changed? $2 gas and we've gone past the Bell Curve of supply and use? And now we're all drunk on cheap gas. I'm happy to see new innovative efficient technology, new electric and hybrid cars but now they're selling boatloads of SUVs and pickup trucks. They are back in big style. They are better now, instead of 11 mpg they're 15 mpg.

As IEA )which is a noted chaierleader of position "do not worry, be happy" as for the end of chep oil) noted in iea.org

In a Low Oil Price Scenario, longer payback periods mean that the world misses out on almost 15% of the energy savings seen in our central scenario, foregoing around $800 billion-worth of efficiency improvements in cars, trucks, aircraft and other end-use equipment, holding back the much-needed energy transition.

At the same time, the current slump in oil prices proved to be pretty long (started in Sept 2018)  and defy all expectations. That means that any person who tried to predict commodities price in the current environment is suspect ;-).  In a "very long run" the supply/demand dynamic is at work, but market for the period less then a year prices can be pretty arbitrary and completely disconnected with the cost of producing oil and supply and remand ration. This is a side effect of financialization when the volume of "paper oil" traded is the order of magnitude larger then the volume of actual oil expected for any given period.  That is another proof that neoliberalism is an unstable system with a built-in positive feedback loop. As such neoliberalism is quite capable of dragging us through shortages, depressions, environmental disasters, and even wars on the way from one equilibrium to another. So all those general considerations that are provided below are nothing but an educated guess. As John Kenneth Galbraith aptly said: "The only function of economic forecasting is to make astrology look respectable." Readers beware...

This is a skeptical page that was created due to strong doubts about MSM coverage of the current oil prices slump. Especially the idea of oil glut (which in the USA for some strange reason coincide with rising imports of oil.

in this sense MSM cries about getting close to self-sufficency look strange. Yes some tipes of oil-like products produced by shale wells are not very desirable (condensate) and they are stored distorting the whole picture but with rising imports thee can be not "oil glut". But not for the US MSMs. This looks like a phenomenon which came directly from  Geroge Orwell's novel 1984  where it was called "doublespeak". 

The first thing to understand is that at a given stage of developing of drilling and other related technologies there is a minimal price of oil below which production can be continued only at a loss. This price point is different for different types of oil, and slightly varies between different regions but it does exist. For example, a shale/tight oil well often costs around $6-8 million, which needs to be amortized over the life of a well which in the case of shale/tight oil is approximately five-six years. To make things worse unlike conventional wells that can produce approximately at the same rate for a decade, those wells experience a steep decline after two first years. With more half of oil extracted in the first two years. The cost is much higher for non-conventional oil producers than for conventional producers and that means that at prices below, say, $70-$80 per barrel production of shale oil leaves the trail of junk bonds production as well. One is impossible without the other. 

Canadian tar sand production is even more expensive. Deep water drilling is somewhere in between conventional and non-conventional oil, pricewise.

There are different estimates, but most analysts agree that the US shale/tight oil producers need around $70-$80 per barrel to be able to pay their debts and around $60-$70 to break even. Those numbers are slightly less for deep water oil ($40-$50) and slightly higher for Canadian tar sands. The picture below illustrated difference prices to produce different types of oil ( see below) is reproduced from What Me Worry About Peak Oil  by Art Berman (December 27, 2015 ):

This means that production of light oil from tight zones need the price of $70-80 per barrel to pay the debt.  The same applies to extra heavy, deep water, and EOR projects. Offshore arctic and ultra deep water are extremely expensive and with their own special environmental risks as BP recently discovered. The implication seems to be that "non-conventional" oil projects do require prices in $80-$100 range to continue pump oil at the same rate (Red Queen's race - Wikipedia) and this implies continued drilling of new wells.

In this sense 2010-2013 were gold age for oil production worldwide, as prices were close or above $100 and billions were invested in high cost oil resources

All-in-all it looks that "Shale oil is not a revolution, it is a retirement party" as aptly observed Arthur Berman).

Now prices dropped below $33 (as of Jan 6, 2015) and at this level of prices all tight oil producers  are losing money  on each barrel of oil they produce. Debt fueled boom in the shale space will most likely never return. Most shale players managed to survive 2015 (some due to hedges; some due to junk bond dent they accumulate and still did not put into capex). But to survive in 2016 will be more difficult and they are in danger of defaulting on their bonds. Mass extinction might well be in the cards, if low prices persist for the whole year.

 when the almighty money almagamations like the Carlyle Group swoop in and buy up all the distressed assets, we just might see oil prices rebound. The vultures won’t have the motive to short the heck out of oil, like they are now.

Junk bonds has duration around five-seven years, so bonds taken in 2010 will be due soon and refinancing them now is very difficult. That means weaker non-conventional oil producers will probably be bankrupt if not in 2016, then in 2017, if prices stay low. This process already stated with something like a dozen bankruptcies in 2015. According to OilPrice.com more expected in 2016:

At the same time world demand for oil will continues to grow and will grow in 2016 probably by 1.3 Mb/d or more.  In 2015 it rose from 92.45 to 93.82 Mb/d. The only country that has additional capacities now is Iran but how quickly it can expand production in low price regime and whether it will be willing to sell additional oil at such low prices to get currency is difficult to predict. Some think that Iran will be able to add another 0.5 Mb/d in 2016 which can only compensate for the drop of US production and nothing else. Production in all other countries will be iether stable or slightly declining due to natural decline of wells with age and lack of capital investments in new drilling. Typical estimate is 1% decline or around 1MB/d of lost supply. Natural rate of decline of most conventional wells is around 6% and non-conventional around 20 (not evenly distributed; the first year production can even rise).  It it doubtful that remaining capital investments will be able to offset everything but 1% of decline. Real decline from non-OPEC members in 2016 can be more.

Actually even Saudis managed only marginally increase their exports in 2015; they just exported slightly more oil  (around  +0.3Mb/d more) at very low prices which supports the current low oil price regime, but not their economy which ended 2015 with a record deficit around $100 billions by Saudis estimates ($150 by IMF estimates). What is Saudis motivation of doing this (and depleting both their coffers and oil reserves) is a difficult question to answer but probably this is an economic war with Iran. The second important source of support of low prices is Wall Street games with futures.

The key problem here is that shale and tight oil producers were not that profitable at above $100 per barrel oil price range that existed in 2010-2013 and accumulated large amount of debt (several hundreds of billions, mostly in junk bonds) during those "good times" . The debt that now needs to be serviced so they have an albatross around their necks.

The destruction of oil supply while very gradual already started albeit slowly, as decline of wells is still compensated by hedging, new drilling and projects that have been started in the "good old days" are still coming online. This decline might well accelerate toward the middle of 2016, if prices do not recover. In any case hedges will expire somewhere in 2016 and after that it will be clear who is swimming naked.

In other words the current oil prices are IMHO not sustainable (too low) even in one-two year timeframe. When most hedges expire and the number of bankruptcies start to increase, Wall Street might be unable to press oil futures down anymore so push back in prices can be pretty violent. .

BTW Saudis lost around $100 billions this year and their foreign reserves shrunk to around $600 billions. Projected loss for 2016 is around $85 billions. So they need around one decade to deplete their foreign currency reserves.

Some suspicious consistency in the US MSM stories about oil price slump

“Where ideas are concerned, America can be counted on to do one of two things: take a good idea and run it completely into the ground, or take a bad idea and run it completely into the ground.”

—George Carlin

Oh what a tangled web we weave, When first we practice to deceive!"

Walter Scott, Marmion, Canto vi, Stanza 17

 

To make the story short current MSM behaviour is highly irresponsible and suggests that all of them are in the pockets of Wall Street or worse. After all oil is a irreplaceable commodity that will eventually run out. Low oil prices from this point of view are the last thing we need. It's like drinking party on the deck of Titanic. What should be done is creating the infrastructure for living with much less oil available. Which is possible only with high prices for this commodity. also the destruction of oil patch that now is happening should be get so much cheerleading. It is a tragedy for many people. The ability to fill gas tank for less then 2 dollars is not everything in this life. 

Economist Herbert Stein (1916-1999) wrote in 1986: "if it can’t go on forever it will stop." Despite this self-evident truth there is interesting, highly correlated bias, in coverage of oil prices slump for most of the US MSM: all predict essentially that current low oil prices will stay if nor forever, then for a very long time. And that what happened in 2015 is not anomaly, despite clear indicators that at this price most US producers sell their barrels at loss.  They salivate that this situation will continue in the first half of 2016 and well into 2017. They also completely discard negative externalities of this event.  As oil has crashed to $33 levels there is  a lot of MSM talk that the current price is really the long term historical average price, that 2005-2014 was an anomaly (bubble) and that we will stay in this range (say, $20-$40) for years to come.  Actually you can bet that at any price point MSM will claim that the cost of extraction is 20% lower, no matter what the price level is.

You can bet that at any price point MSM will claim that the cost of extraction is 20% lower, no matter what the price level is.

Yes, there are few places in the Middle East and Russia from which oil can be profitably extracted at this price range. But those countries depend on oil for revenue to balance the budget so even in those places this situation is unsustainable.  More then 80% sources of oil are unprofitable at those prices. That includes all shale/tight oil and all deep offshore anywhere in the world.

Still for some unknown to me reason in MSM low oil prices (below the cost of production) and depletion of valuable natural resource are now considered to be a universal good. While at best this is nothing more then initiated by Saudis "Hail Mary pass" to save Western civilization from secular stagnation. Externalities be damned, full speed ahead. Shale oil industry and destruction of its workforce, junk bond market troubles are just collateral damage. Does not matter one bit. Give us cheap oil brother and all will be fine.
 

For some unknown to me reason in MSM low oil prices (below the cost of production) and depletion of valuable natural resource are now considered to be a universal good. While at best this is nothing more then initiated by Saudis "Hail Mary pass" to save Western civilization from secular stagnation. Externalities be damned, full speed ahead. Shale oil industry and destruction of its workforce, junk bond market troubles are just collateral damage. Does not matter one bit. Give us cheap oil brother and all will be fine.

But at the same time never try to catch falling oil barrel ;-). Market can stay irrational longer than you can stay solvent.

Also strange and suspicious is that most MSM peruse suspiciously similar and questionable, or outright false, if we look at the facts, stories:

  1. Quicker depletion of a valuable and irreplaceable national resource due to low prices does not matter.  Existing wells deplete 5-8% per year (tight oil more that that) so you need to discover, drill and put on line at least the same amount in order to maintains the same volume of oil production. That costs money, and if money are not here nobody will drill. So natural tendency of production at low oil price (which now man below $70-$80 per barrel) is down, not up. 
     
  2. Saudis are fighting for their market share and flooding the world with oil.  This hypothesis is advanced despite the fact that their exports are stagnant and had grown in 2015 only by around 0.2-0.3 Mb/d (see Saudi Arabia oil production and forecast for 2016). Which is a miserable amount. What fight for market share: they can sell all theoil they produce.  In 2014 they exported around 7.1 Mb/d and in 2015 around 7.3 Mb/d. Plus/minus 0.1 Mb/d. So nothing essentially changed as for the level of their exports taking into account that the growth of world consumption for 2015 is over 1 Mb/d.   Their real strategy is dumping their exports at low price undercutting other producers to bring the price down.  In other words they are using what is called "predatory pricing" and to achieve that they tapped into their currency reserves to the tune of $100 billion a year. They are burning their currency reserves at the speed at which they can exhaust them from six years to decade, losing the investment grade in three.  Also most of their fields are old and semi-exhausted, so maintaining high production might even damage them, cutting short their useful life and the total amount of oil Saudis can recover from them. 

    Saudi shipments rose to 7.364 million barrels a day in October, 2015, according to the latest figures from the Joint Organizations Data Initiative (JODI).  Shipments averaged 7.11 million barrels a day in 2014, down from an 11-year high of 7.54 million barrels a day in 2013 and the lowest in three previous years. So Saudis failed even match their 2013 exports in 2015.

  3. Iran is able and willing to throw on the market another 0.5-0.7 Mb/d in 2016 further depressing prices. This hypothesis is advanced despite explicit statements from the Iran leadership that they will not give any future customer additional discounts above those that exist today.  while Iran leadership is definitely irrational, blocking the temporary freeze agreement, and willing to hurt the county future by increasing oil production as much as they can in low oil price environment (hurting their ally Russia in the process), they are not completely stupid and they do not have much money to drill anyway.  As they now have access to their previously frozen foreign reserves they definitely can wait a year or two before coming to the market with the new supply.  also increase of supply is not instant, it requires time and money, even taking into account that Iran has some underdeveloped fields that can be profitably put into production even at low prices that exist to today. This is a better strategy then coming with new supply at the point of ridiculously low prices. Although everything can happen. Middle Eastern nations are unpredictable.
     
  4. A very conservative estimate of the decline of non-OPEC production for the next year. Most assume that it will be limited to roughly 0.5 Mb/d. But the rate of natural decline of existing conventional oil wells is 3-6% and reduced capital expenses mean less new production is coming online in 2016 and 2017. Assuming 1% depletion that's around 1MB/d that should disappear in 2016. Add to this hard crash that is possible for the US shale producers and the estimate 1.5 Mb/d drop does not look outrageously high. But those consideration somehow disappeared from all considerations from MSM and they operate under assumption that supply from existing wells is indefinite and decline is a rounding error.  Only increase in supply is material and eminent (again Iran supply story get the most prominence). 
     
  5. The US MSM propagate the following bogus narrative: "there is an oil glut in the USA market in particular despite the fact that the USA increasing their import of oil. To cry about glut on oil in the country which imports each month in 2015 more and more oil is something new to me.  This is something from Orwell novel Nineteen Eighty-Four and is called doublespeak. If you are an oil producer, you don’t pump oil unless you have orders for it.  If you pump oil without orders, then you need your own storage to store it. In no way you ship it to Cushing, Oklahoma with their 80 Mb storage capacity as your customers can be in completely different part of the USA and it's you who need to pay for storage. That's the privilege used by refineries to regulate their input in case of maintenance, seasonal peaks, etc.  You don’t ship any oil without getting paid for it. So oil glut theory claim that they are producers which have oil shipped to customers and customers did not use it. Putting it in storage instead. And this bogus "theory" is propagated by MSM for more then 18 month now. It' time for MSM to stop to propagate this nonsense. 
     
  6. Cheap oil is here to stay and current situation will last to 2017 in worst case or to 2020-2040 in the best. IEA forecasts are viewed as facts, despite clear interest in lower oil prices.  In reality just cutting capital investment along with depletion of  existing fields (almost 6% for conventional wells, around 20% per year but very unevenly spread for shale/tight oil wells) guarantee diminishing supply. To compensate for 5% depletion the world now needs to find and put into production approximately 5 Mb/d of oil. In other words the world is losing approximately 1 Mb/s of supply per quarter. This loss a very difficult to stop, although it was possible for the last several years because huge capital investments in oil industry caused by high oil prices. 2010-2014 has shown that with high oil prices the decline can be stopped and reversed.  The problem is that adequate capital investments are thing in the past and now most oil companies need to adapt to starvation mode as for capital investment in the oil industry. That spells huge trouble for Norway, Russia, GB,  and other nations with mostly conventional wells.  It will be a miracle if they can maintain they level of production at prices below $40 for more then one-two years (there is some inertia here and new projects are continuing to come online for around 18 months since the start of the price drop; that means till mid, or last quarter of 2016, depending were you put the start of oil price drop). 
     
  7. MSM instantly forgot about previous concerns and the reversal of efficiency of the US car fleet. In 2015 SUVs again became the most popular category of personal car with sales of large SUVs booming. This deterioration of the US fleet efficiency happens along with slow down of sales of hybrids and, especially, electrical cars.
     
  8. Growth of demand during the current period of below $2 per gallon gas for some, unexplained reason will be slower then the explosive growth of demand in 2015. for some reason is is expected to be  limited to around 1% or 1.3-1.4 Mb/d worldwide.
     
  9. China slowed down and her oil consumption will be stagnant or down despite boom in car sales, as if the number of cars of the road is disconnected with oil use. In reality transportation is around 60% of country oil use. Right, but China oil consumption is still growing and will continue to grow in 2016. Those trends can co-exist for a while. So electrical consumption decline does not mean that the oil consumption decline is eminent.

    The same situation can exist in other countries such as the USA - slowing of the economy along with growth of oil consumption. All those new SUVs on the road need fuel to run.
     
  10. The assumption that the destruction of shale/tight oil companies with excessive debt loads in the USA  will be gradual and slow. Despite the fact that they currently produce at a loss  each barrel of oil they sell.  Also it will be orderly without major disruption of production -- just a gradual decline despite dramatically lower capital expenses. The assumption of most US MSM is that US production will stay close to current levels due to Gulf production or due to by waiving some magic wand by Obama administration.
     
  11. Junk bond problem does not exist or is of minor importance despite the fact that there are over 100 billions of shale oil book related junk bonds on the market. Similarly losses of financial sector from hedges in 2015 are non-existent as well (only Mexicans got several billions or additional revenue due to hedges).

The question is from where all those MSM deceptive and false  "talking points" originate.

The end of cheap oil hypothesis

The "end of cheap oil" hypothesis can be simplified to several postulates:

  1. Mankind demand for oil will continues to grow, although the pace of growth slows down with the increase of the price of oil as well as due to stagnation of world economy caused by high oil prices. That does not exclude temporary (often multiyear) oil price slumps or highs: instability is the nature of financial system under neoliberalism. 
  2. The supply of oil profitably extractable at any given price point below $100 (such $40, $50, $60 per barrel) will continue to shrink. Total extractable supply of oil can grow only by adding more and more expensive source of oil, sources with lower EROEI. New technology of extraction (especially horizontal drilling) can somewhat offset decline of EROEI but can't reverse it.  Simple calculation by dividing "proven world reserves" by annual consumption suggest that at prices below $100 in 2014 dollars they will be exhausted in approximately half a century (assuming $50 a barrel price point) peakoilbarrel.com, comment 12/11/2015 at 7:34 am)
    Proved oil reserves at 1700.1 billion barrels, 52.5 years of supply.

    Reference:

    http://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy/oil-review-by-energy-type/oil-reserves.html

    At 50 USD per barrel, the value is 50×1,700,100,000,000=85,005,000,000,000 usd

    Not enough, 100 USD per barrel will be better. 85 trillion dollars to spend so 1700.1 billion barrels of oil can be extracted and burned in 52.5 years. An absolute bargain. Current consumption at 32.85 billion per year, 365×90,000,000, 1700.1/32.85=51.75 years.

  3. The search for new sources of hydrocarbons by G7 countries will intensify over time and will likely generate resources wars. At least two resource wars already happened: Iraq and Libya. Wars are fought over access to and control of oil resources with high EROEI as well as other vital natural resources. With rising human population, competition for these resources might increase triggering conflicts, large and small. Industrialized nations already started to invade weaker countries to secure access to oil which is essential to the survival of modern industrial civilization (Iraq and Libya, and if we think about pipelines to Europe, Syria). 
  4. Very high price of oil (let's say above $100 per barrel)  leads to stagnation in all major industrialized countries and first of all the USA as well as eventual debt collapse of neoliberal economies and slow down or reverse of neoliberal globalization.
  5. The current "Race to burn what's left" is irrational.  Low oil prices destroy and delay investment in new supplies, slow down efficiency gains, encourage consumption and sow the seeds of the next big boom in prices.  If we assume that at each price point only a finite amount of oil can be profitably extracted from Earth (which is a planet, that is now well researched for oil), the current year and a half slump in oil prices looks extremely suspicious. It means robbing future generations, as conservation efforts are now derailed. Sales of SUVs and small trucks in the USA are up.  Trillions in equity and bond losses, hundred thousands of ruined retirement accounts and there is a severe recession knocking on the door for the US economy. The US are selling their last drops of oil at prices below production cost. In my opinion it would be wiser to save the oil that is currently  produce in strategic reserves and sell it when prices are much higher.

Please note that the US government patiently observes the current situation and does not try to influence the price by buying oil for their strategic oil reserve, although in the past it used to do such things. MSM coverage of oil also suggests strong establishment bias toward lower prices. As if this is the last "Heil Mary" pass in geostrategic game for the USA dominance.  So there are higher priorities in play here then the destiny of the US shale industry and more rapid exhaustion of national oil reserves. At the same time oil price slum is equivalent to a huge stimulus  to the USA economy, but it does have some significant side affects. If we assume $93.17-49.08=44.09 price drop for 2015 and the daily consumption of around  19.58 Mb/s that comes to 222 billions a year.

The current drop of oil prices also represent huge stimulus to EU,  China, Japan and other all other industrialized countries without or with little own oil reserves. If this were organized as a part of Russian sanctions package, this was a brilliant strategy. All industrialized countries in which own consumption far exceeds own production, are essentially isolated from negative affect of countersanctions   by the low price of oil.  In other worlds this is a huge global economic stimulus to the "masters of the universe" and at the same time stern warning to one of the last "resource nationalists" which try to pursue independence from Washington foreign policy.

The key question here: was it engineered by neoliberal strategists in Washington, DC and their masters in major Wall Street banks (in this case this was a really brilliant move)? Or is this ugly side effect of unhinged capitalism known as neoliberalism where oil companies overinvested in new projects due to greed and many new projects are coming simultaneously  online, while demand for oil grows more slowly then they expected. In any case at one point Saudi Arabia decided to dump its oil on the market and fun started. Was it the order from Washington or thier own initiave is unclear.

In recent years oil consumption was growing at slower pace dur to high oil prices. Per Michael Klare 2005 projection of oil consumption in 2015 was 105 Mb/d (millions of barrels per day); actual in 2015 was around 93 Mb/d as high price of oil stimulated investment in energy saving technologies. That includes not only small and hybrid cars (which actually did not improve much from, say, 1990 level, as the size of small car in the USA had grown considerably, but also cars and trucks working on natural gas, blending gas with alcohol (up to 10%), tax breaks for electrical cars ($7500 currently on many "pure electrical" models of small passenger cars, half of that on hybrids). Now this positive trend is partially reversed.  

But there were other signs of introduction of energy saving technologies which indirectly cut oil consumption, especially in chemical industry which will stay:     

For example the energy cost to major chemicals of running their plants is significant in the united states this about 6% of the national energy consumption. Since 1994, Dow has reduced its energy intensity by 22 percent through a structured program targeting process improvements. This has saved 1.6 quadrillion BTUs, equivalent to the energy required to generate all of the residential electricity used in California for one year. The savings have totaled $8.6 billion on an investment of $1 billion.

Note on the term "conspiracy theories"

Conspiracy theory was the term invented by CIA to whitewash their participation in JFK assassination, which got a wider use and became a common term in English language.  Here is how the term is defined in Wikipedia:

A conspiracy theory is an explanatory hypothesis that suggests that two or more persons, a group, or an organization of having caused or covered up, through secret planning and deliberate action, an event or situation which is typically taken to be illegal or harmful. Although the existence of a proven conspiracy involving United States President Richard Nixon and his aides in the Watergate scandal of the 1970s has been claimed as validation of conspiracy theories in general,[1] the term "conspiracy theory" has acquired a derogatory meaning and is often used to dismiss or ridicule beliefs in conspiracies.[2]

Such things as the current oil slump probably could never happen purely due to market forces (and notion of "free market" is another neoliberal lie; neoliberal markets are neither free nor fair). Oil is not a regular commodity. Oil is a strategic resource. So I think it is naïve to analyze it strictly in supply-demand terms.  Geopolitics plays very important role in oil prices and always was. Remember how the USSR was brought to its knees by dropping the oil prices in late 80th.

Remember Iraq war with one million of Iraqis dead. Was not this a blatant attempt to secure oil resources for the USA majors? Remember Libyan color revolution and Hillary reaction to the horrible death of poor colonel. Is not this about collision of French desire to secure oil supplies and Washington desire to get rid on a dictator who was an obstacle to neoliberal agenda?

And Syria war unleashed to achieve what ? It all about remapping Middle East by toppling "not friendly enough" to Washington regimes. It took longer then "seven countries in five years"  as Rumsfeld promised (https://www.youtube.com/watch?v=9RC1Mepk_Sw) but it looks like the plan itself is still current: 

“We’re going to take out seven countries in 5 years, starting with Iraq, and then Syria, Lebanon, Libya, Somalia, Sudan and, finishing off, Iran”

General Wesley Clark. Retired 4-star U.S. Army general,
Supreme Allied Commander of NATO during the 1999 War on Yugoslavia .

It is clear that recent "petro wars" in the Middle East were about execution of a  US strategy which was not only about globalism and the USA world dominance, but also about oil.

The oil market has always been driven by geopolitics, and it was a factor that contributed to unleashing both WWI and WWII. Or, if you want, geopolitics has been very strongly influenced by the supply and distribution of crude oil for at least a century. To talk in pure supply/demand terms about such a strategic, vital for human civilization commodity is absurd.
and the whole idea the Kingdom of  Saudi Arabia, a vassal state completely dependent in its survival on the USA unleashes a price war against the USA shale production looks very suspect. nevertheless it is propagated by major MSM like 100% true.

In other words oil was and is a major weapon of economic war. And dumping oil prices is especially potent weapon against countries with significant oil exports such as Russia, Venezuela, Iran, Iraq, etc.  You can kill several birds with one stone.

The key question here is classic cue bono ? Which country is the major beneficiary of the current oil prices crash. The answer is -- the USA (despite some troubles of shale producers which started in late 2015 when most hedges expired). So  it is plausible to suggest that the USA elite including Wall Street banks played an important role in slamming oil prices to reach some important geopolitical goal, significance of which supersede the value of destruction of the USA shale industry.  After all the US financial industry can for a short time distort price of any commodity to any desired level.  HFT is a perfect tool for that and that was explicitly mentioned on Aleynikov trial  by Goldman officials.

It might well be that the current low price is playing double role: to stimulate Western economies and simultaneously serve as the most important part of package of sanctions against Russia. Obama actually hinted that this is true. And Saudi Arabia did play similar role in the past -- crash of oil prices did  facilitated the dissolution of the USSR, which lost the major part of its export revenue).

I would like to stress it again that the idea that Saudi Arabia is engaged in price war against the USA to defend its market share is extremely questionable. By all measures KSA is a satellite state, vassal of the USA if you like. How vassal state can act in such a way without the USA blessing ?  Economic conditions are now not equal to 2008 so the current drop of oil prices can't be explained by panic.  And without using the power of US-controlled financial markets it id doubful that it is possible to accomplish such a quick and sustained drop. 

The USA has long history of using oil as a geopolitical tool. Not only to crash the USSR but also to lure Japan into WWII. Oil embargo against imperial Japan served essentially as a declaration of war and it was read by Imperial Japan leadership exactly this way  (the leadership, which actually has little or no illusions that Japan will lose, but decided not to surrender without armed struggle). There is some evidence that Perl Harbor was not defended specifically to make entrance into the war with Japan more dramatic and more acceptable to the population of the USA, as a reaction on the clear act of aggression by Japan (although air carriers were sent to sea to save them).

And population of Earth still grow, as well as the number of cars and, especially tracks on the road. Similarly the number of airplanes and ships.  Until that trend stops the "long term"  trend for oil price should be up as chances of finding large deposit of "cheap oil" are not close to zero.  Of course "In a long run we all are dead" maxim applies.

But as of 2015 the planet is pretty well explored for this vital commodity. That means that the cost of oil extraction rises with time because the cheapest to extract oil is removed first. Actually this is now true for most commodities, including metals.

To get oil now deeper wells are needed, or fracking equipment and fracking sand and liquids, or you get oil that is too heavy or oil which contains too much sulfur. That means that  special refineries need to be build. In any case more resources are need to produce the same amount of petrol and diesel for transportation and other purposes. It is natural to think that price will gradually rise due to diminishing returns on capital used for extraction.  According to Barclays Capital (cited by  Steven Kopits),  the costs of extracting oil began increasing by 10.9% per year, since 1999 from $5 to almost $25 per barrel.  Add to this transportation cost to refineries, interest on debt, etc and we are probably talking about "magic" figure of $60 per barrel.  So in 2015 any price below it is strongly suspect and probably is temporary. Although the4 rule is "never to say never" and for investors in oil ETNs (such USO, OIL, etc) Keyes saying that market can be irrational longer the you can stay solvent fully applies.  The same saying is now looming over the heads of shale companies executives. As of December 2015 bloodbath has began.

So the question is really about how long the current low oil prices (oil slump) will last. One year is definitely enough to eliminate hedges. And in December of 2015 they are mostly gone (two year hedges do exist but are a rarety)  Capital expenses are now slashed to the bones, but project that take several years to complete will still come into production and that will support the level of oil production at least for one year till Jan 2017. We also can probably see some consolidation of the oil industry. Weak players start being eliminated.

Three years are enough to eliminate most new capital investment and to finish projects which started before slump. Capital investment goes to a screeching halt. After that much depends on the speed of decline of existing wells and pace on increasing of global consumption. that actually includes growth of internal consumption in three major oil producing nations such as USA, Russia and Saudi Arabia. Of those three Saudi Arabia experiences especially quick rise in internal oil demand.

In any case since mid 2015 the price of oil on spot market dropped almost to one third of max price previously achieved. As of Aug 8, 2015 the spot price for October, 2015 delivery was around $44 per barrel. This is a dramatic drop from over $100 per barrel price peak achieved earlier. 

"Cheap oil" is the cornerstone of the current neoliberal world order; it's end means end of US dominated world

We need to understand that "cheap oil" is the cornerstone of the current neoliberal social system including the level of neoliberal globalization that is underway since late 80th. So for the USA elite a lot is in stake if price of oil consistently stays, say, over $100. The USA world domination which is so cherished by neocons and for which they are ready to fight endless wars is in stake.  Also countries that "do not deserve it in view of neoliberal elite (and are only partially controlled by the USA), such as Iran and Russia, can became fabulously rich. And they understand that "the end of cheap oil" might bring great socio-economic changes within the USA itself as neolibel fairy tale about "tricke down" prosperity will be exposed as a fraud. and American people can became rightfully angry, despite all efforts to brainwash them and to fond external target for their anger. In this sense we can view the current oil slump as a brave attempt, "The Last Hurrah" attack of the old neoliberal guard  which came to power in 1980th to postpone inevitable social changes (and first of all demise of neoliberalism and by extension the USA role as a global hegemon). the important of oil for the US as the center or global neoliberal empire was well described in 2002 article by Bill Christison (Oil and the Middle East)

April 5, 2002

Back in March CounterPunch published Christison's devastating critique of the strategies and conduct of the US war of terrorism. (See our archive by scrolling down to "Search CounterPunch.)) These new remarks, which he has made available to CounterPunch were delivered to various peace groups in Santa Fe, New Mexico on early April.Bill Christison joined the CIA in 1950, and served on the analysis side of the Agency for 28 years. From the early 1970s he served as National Intelligence Officer (principal adviser to the Director of Central Intelligence on certain areas) for, at various times, Southeast Asia, South Asia and Africa. Before he retired in 1979 he was Director of the CIA's Office of Regional and Political Analysis, a 250-person unit His wife Kathy also worked in the CIA, retiring in 1979.Since then she has been mainly preoccupied by the issue of Palestine.

I've been asked to talk today about the topic, "U.S. Oil Policy as a Juggernaut in U.S. Foreign Policy." That's a great title. When you hear the word "juggernaut," what you think of--at least what I think of--is a monster machine of some sort, maybe the heaviest heavy tank you can imagine, rumbling down a city street, unstoppable, crushing everything in its way, and even destroying the paving of the street as it goes. Well, that comes pretty close to describing what I believe about the long-term effects of our oil, and other, foreign policies in the Middle East. But if we look ahead, rather than at the past or the present, my hope is that, by changing some of our own foreign policies, U.S. oil policy will in the future no longer be a destructive juggernaut.

It's worth spending a minute to talk about why oil is so important to the United States. The world's total use of energy from all sources--from petroleum, natural gas, coal, wood, hydropower, nuclear, geothermal, solar, and wind power--has increased in recent years roughly as the global population has also increased. Petroleum contributes the greatest single amount -- about two-fifths of the world's total energy output, and natural gas (which is in some ways related to oil) more than another one-fifth. The United States alone uses about one-quarter of the world's total energy output, but has less than five percent of the world's population. The U.S. itself does not produce anywhere near the amount of energy that it consumes. According to statistics of the U.S. Department of Energy, the United States used in the year 2000 almost 100 quadrillion Btu's--or British Thermal Units--of energy. But of those 100 quadrillion Btu's, the U.S. had to import close to 30 percent. The United States is, hands down, the most profligate user of energy, by far, on this whole globe.

With respect to oil alone, the U.S. imported in the year 2000 almost two-thirds of the oil that it used. The importance of Saudi Arabia as a supplier of the U.S., needs to be emphasized, but not just because the Saudis hold the largest known but still untapped oil reserves in the world. What is even more important to the U.S. at the moment is that Saudi Arabia has the largest installed but unused rapid production capacity--that is, oil wells, pumping equipment and so forth already there but not used to meet current, or "normal," production needs. In any emergency that cut off oil supplies from anywhere else in the world, Saudi Arabia would one of very few, and maybe the only, nation that could easily and quickly increase its oil production without a waiting period measured in months rather than a few days. This obviously adds to what any general or admiral would call the strategic value of Saudi Arabia to the United States.

There is another characteristic of the global oil industry that we should all understand. It is an industry dominated by a half-dozen extremely large, global corporations--including ExxonMobil (these two firms merged in 1999), British Petroleum, Shell, Texaco, Gulf and Socal. Fifty to 75 years ago these companies might have been swashbuckling, unregulated corporations seeking to maximize profits and avoid the controls of any governments by all means fair or foul. Today, however, these companies by no means have the same personalities that they had years ago. In the Middle East, at least, the governments of the area have nationalized practically all oil production, and the companies or their subsidiaries have gradually worked out mutually supportive relationships with the local governments, under which the companies continue to manage most of the oil production and global oil trade, while the governments, and OPEC, make the basic decisions on how much oil to produce. The companies continue to make large profits, which keep them happy enough.

In their relations with the U.S. and other advanced nations, the companies no longer shun government regulation, because most of the regulations imposed on them are supportive of, and increase the profits of, the companies themselves. The regulations fall more into the area of corporate welfare than into the area of inducing the corporations to become better citizens. In the U.S., the ties of the oil companies with both of the major political parties are close and mutually profitable. Up to a few months ago, these same comments would have applied to Enron, which was clearly one of the world's largest energy companies, even though it was not one of the largest global oil companies.

I started out by comparing the long-term effects of U.S. oil policies to a juggernaut. To show you why, I want to go back almost 60 years, to February 1945. In that month, President Franklin D. Roosevelt, while returning from the Yalta Conference, met with King Ibn Saud of Saudi Arabia on a U.S. warship in the middle of the Suez Canal. Two months later, Roosevelt was dead, but this meeting was probably one of his most important acts as a world leader The actual records of the conversations between these two men have never been released by either of their governments, but it is quite clear that an agreement was reached under which the United States guaranteed for the indefinite future the security and stability of the Saudi monarchy. In return, the Saudi King guaranteed U.S. access to, and joint development of, the massive Saudi oil reserves, also for the indefinite future. These mutual guarantees were later, implicitly at least, extended to apply to the other, and smaller, Gulf state monarchies, from the Arab Emirates to Bahrain and Kuwait. All of these guarantees were reinforced by the U.S. war against Iraq in 1990-1991, and these guarantees still today form the basis of U.S. oil policies in the Middle East.

So for close to 60 years now, the U.S. has continued to prop up and support these authoritarian governments. I'd like to give you an example of how this has worked in the case of Saudi Arabia. This is from an article that appeared in The Nation magazine last November, written by a British expert on world security affairs. Here are a few lines from this article. "To protect the Saudi regime against its external enemies, the United States has steadily expanded its military presence in the region. [T]o protect the royal family against its internal enemies, US personnel have become deeply involved in the regime's internal security apparatus. At the same time, the vast and highly conspicuous accumulation of wealth by the royal family has alienated it from the larger Saudi population and led to charges of systemic corruption. In response, the regime has outlawed all forms of political debate in the kingdom (there is no parliament, no free speech, no political party, no right of assembly) and used its US-trained security forces to quash overt expressions of dissent. All these effects have generated covert opposition to the regime and occasional acts of violence"

The United States pursued policies like these not only in Saudi Arabia and the smaller Gulf States, but elsewhere in the Middle East as well. When the U.S. overthrew Mossadegh in Iran in 1953, and reinstalled the Shah in power, Washington began carrying out precisely the same policies in Iran as it employed in Saudi Arabia. The Shah's secret police, known as SAVAK, and the Iranian military forces both grew markedly stronger. For 26 years the Shah's repressive regime succeeded in smothering internal dissent. In 1979, however, major internal dissent did erupt, supported by radical Islamic clerics who wanted all U.S. influence out of their land. The Shah was quickly overthrown. U.S. experiences in Iran since that date should have suggested to people in Washington that just perhaps the strong U.S. support for repressive regimes in the Middle East was not the ideal long-term policy for us to pursue. No reexamination of U.S. foreign policy ever got started, however, because the United States was immediately consumed by the horrible insult Iranians imposed on us when they held over 50 Americans from the U.S. Embassy hostage for more than a year.

Then, in the 1980s, the U.S. spent the decade quietly cozying up to Saddam Hussein, the dictatorial ruler of Iraq, which was and is another big oil producer of the Middle East. Since Iran was now a U.S. enemy, the U.S. supported Iraq in its war against Iran. The U.S. did not criticize Saddam Hussein even when he employed chemical warfare to gas sizable numbers of Kurdish people in his own country. The United States only abandoned him in 1990, when he crossed the U.S. over Kuwait. Even here, the diplomatic signals Saddam received from the U.S. until shortly before he invaded Kuwait were very unclear. Once again, when the break finally came, the U.S. administration gave no thought to reappraising its own policies throughout the region. A decision was made in favor of going to war to end this threat to U.S. hegemony and U.S. access to oil, and that was that.

Now, in the year 2002, this almost-60-year-old Middle East oil policy of the United States is showing signs of even more fraying at the edges. Beyond any question in my opinion, one of the root causes behind the terrorism of September 11 was this very U.S. policy of supporting for the past half-century and more these authoritarian and often corrupt Arab and Muslim governments. There exists a high degree of anger among many Muslims with their own governments, which have for so long been supported by the U.S.

Osama bin Laden is a good example of this particular root cause behind the September 11 terrorism. His wrath was directed as much against the Saudi government, for example, as it was against the United States. His opposition to what used to be his own government was probably the main reason why he had the support of a majority of the young men under 25 in Saudi Arabia. He received similar support from many young men in other Arab and Muslim states as well. Right now these groups of angry young men obviously no longer have a viable leader in Osama bin Laden, but other extremist leaders are almost sure to arise. In addition, the next generation of leaders in at least some of these states may well emerge from among these young men. If any of them do come into power, their future governments will likely be more anti-American than the present governments, which Washington likes to call "moderate," but which are really nothing of the sort. If we have not reduced our energy dependence on oil in the meantime, we may face serious trouble.

The U.S. should therefore adopt quite draconian measures immediately to reduce its overall energy usage, including its dependence on Mideast oil. It is unlikely, for the near future at least, that the U.S. will solve a future energy crunch through alternative power sources or by "clean" coal, nuclear power, or Alaskan oil usage. The U.S. also should not count on oil supplies from Central Asia as a way to ignore the need for conservation.

The U.S. should also, over time and gradually, reduce its ties with the present governments in many Muslim states, and try to develop improved relations with opposition elements there, actively seeking out democratically inclined groups. Such steps will be necessary if there is to be any hope of reducing support for future Osama bin Ladens that arises from the anger of Arabs and Muslims with their own governments.

I want to turn now to another foreign policy problem that the U.S. faces in the Middle East, one that has become more tightly intertwined with U.S. oil policies since September 11. Ever since shortly after World War II, the U.S. has had not one but two fundamental foreign policies in the Middle East. The first policy, which I've already talked about, has been to support authoritarian and undemocratic governments in the oil nations in an effort to guarantee the long-term easy access to Middle East oil at "reasonable" prices. The other policy, equally important, has been to provide strong support to Israel and to guarantee the security of Israel as a Jewish state, also for the long term.

Over the last fifty-plus years, there has been a fair amount of tension and conflict between these two policies. The United States under President Harry Truman was, as I'm sure you all know, instrumental in helping to establish the state of Israel in 1948. But even then, one of the reasons for the opposition to Truman's desires by many other U.S. officials, including the Secretary of State, General George Marshall, was that it might endanger the west's access to oil from the Arab nations.

As it has turned out, for most of the period since World War II, the U.S. has managed to keep its two basic policies in the Middle East pretty much apart from each other--in separate boxes so to speak--and to keep the tensions between them in check. The very existence of the Cold War, which provided the bogey-man of a common enemy, helped in this regard. The one obvious time when the U.S. proved unable to keep the tensions between its two policies under control was the OPEC oil embargo against the west in late 1973 and early 1974. The Arab-Israeli war of 1973, and specifically the U.S. response of resupplying Israel with large amounts of new military equipment, precipitated the embargo, and many of us here can remember the gas lines that resulted in this country. But the gas lines only lasted a few months, and then we all went back to normal. But we should remember those months as a perfect example of the fact that there are indeed real conflicting interests involved in the two basic U.S. foreign policies in the Middle East.

Overall, though, because the United States has been able to hold these conflicting interests in check for most of the past half century, I think that Washington has allowed the tensions to grow, more or less ignored by U.S. policymakers, to a point where they are going to be exceedingly difficult to deal with in the future. Since September 11, a number of things have happened that make it more impossible than ever to separate the effects of the Israel-Palestine problem from the effects of the continuing U.S. support for most authoritarian governments of the oil nations in the area.

In Saudi Arabia and most of the small Gulf States, the position of the monarchies has become more precarious, as these monarchies have been subjected to more criticism since September 11 from public opinion in the United States than has been the case for years. In normal circumstances, when these monarchies are confident that the U.S. guarantee of their security is strong and unbreakable, most of them will not worry too much about other issues that might further weaken their domestic position. The George W. Bush administration is undoubtedly reassuring them that the U.S. security guarantee is still in effect, but they cannot help but be worried about its permanence when they see public opinion in this country changing. This puts pressure on the monarchies to pay more attention to the opinion of their own Arab "street." And the opinion of this Arab "street" is today more intensely critical than ever of Israel's policies on Palestine and the continued occupation of the West Bank and Gaza.

The U.S. government, from September 11 right up to the present, has made it clearer than ever to the world at large that it will unilaterally decide what actions around the world constitute "terrorism," and what actions do not. Specifically, in the minds of Arabs and Muslims everywhere, the U.S. seems to have accepted all actions by Palestinians against Israelis, including acts against Israeli soldiers as well as those against innocent civilians, as being terrorism. At the same time, however, the U.S. appears to believe that no acts by Israelis against Palestinians constitute terrorism. Arabs see this as a double standard. When, also at the same time, Arabs see their own rulers expressing support for the "war on terrorism" as it is defined by the U.S., their antagonism toward their own rulers intensifies. And the rulers themselves, recognizing this antagonism, feel greater concern for their own positions.

I'd like to express a note of caution here. I certainly do not know for sure whether any, or some, or all of the governments in Arab oil nations--the dictatorial governments whose stability and security the U.S. has guaranteed for almost 60 years--will collapse in the near future. Of course change can happen rapidly and without warning. The best minds in the U.S. government had no inkling that the Shah of Iran was going to be ousted a week before it happened in 1979. But even governments that seem to be falling apart can sometimes last for years, until some totally unforeseen shove comes along that pushes them over the edge.

What I am more sure of is that these Arab oil governments are now under greater pressure to change than they have been for years, because of developments since September 11. Therefore the U.S. should be actively encouraging--though never using military force to do so--a gradual movement toward greater political democracy in these nations. And in order to reduce the importance of one major factor leading to greater instability in the region, the U.S. should immediately begin to play a far more active role than it has recently in pressing for a solution to the Israel-Palestine problem based on two truly sovereign nations, with strong treaty guarantees from the United States of the future security of both of these nations.

Simultaneously,  wars for access to cheap oil (Iraq, Libya) can  be viewed as desperate attempts to find a way out of "secular stagnation", in which advanced economies found themselves after 2008 (or, more correctly, after 2000). And history proves that war is not always necessary. Sometimes other mechanisms work as well. So lowering of oil price for a considerable perios can also be viewed as a  clever "Hail Mary" pass to save Western economies which suffer from stagnation (aka "new normal") characterized by low economic growth, high level of debt,  and high unemployment rate --  along with deflationary tendencies at the end of debt expansion super cycle. 

And this precious product then is by-and-large wasted. In most Western countries population uses a lot more energy than they absolutely have to use, burning lion share of it in personal transportation.  Industries produce a lot of unnecessary or outright harmful crap, which sell only by the power of marketing.  Some industries produce crap exclusively and can be eliminated ;-). Most people in the USA could probably cut their private gas consumption by 50% or more with little or no harful effects (less car trips, sharing of cars, use of hybrid and electrical cars for commute, telecommuting, etc).

But this is not true of major industries, air and sea transport.  Those are areas where the limits set by "end of cheap oil" strike hard. At $4 per gallon and higher some (heavy/bulky) goods produced in China are already uneconomic to ship to the USA. That already started to affect  furniture industry. And we need get serious about planning, and the subsequent modifications in our energy usage pattern. Transition to the world with less "cheap oil" takes a lot of time and money to implement.

It might well be possible to replace around 20% of today’s oil consumption with renewable. Hybrid and electrical cars don't save much energy (lithium battery production consumes a lot of energy and rare metals which are very expensive to mine and refine) but they allow to substitute burning of oil to burning coal to produce electricity. 

Just the fact that oil industry now resorted to two  ecologically dangerous methods of extraction of shale oil and tar sands oil indirectly proves "top cheap oil" hypothesis. Why bother if cheap oil is plentiful? It's simply stupid to invest money in such extraction schemes unless you really believe in the "end of cheap oil".  If you object to this that means that you can't think clearly an dispassionately.

In both cases the size of ecological damage will be certain only decades later. it might be something like destroying America to save it. IMHO in no way the US shale production could be the decisive factor in spot prices drop of this magnitude (to closer $30 in 2015 dollars which so 30/2.4 in 1983 dollars ). And in 2014-2015 economic contraction did not reached 2008 levels to justify it from this point of view. EROEI of shale oil is way too low for shale oil to be competitive at current prices:  it is a complex and not very efficient process of conversion of energy and junk bonds into oil. It is far from just drilling a hole  and collecting oil which  flows under internal pressure  like in old good times.  Horizontal drilling greatly helps (and is the essence of most new methods of oil extraction with one (upper) well used to inject stream or chemicals and the other below it to collect oil) , but does not change the whole picture or lower EROEI of those methods. According to Wikipedia:

A 1984 study estimated the EROEI of the various known oil-shale deposits as varying between 0.7–13.3[75] although known oil-shale extraction development projects assert an EROEI between 3 to 10. According to the World Energy Outlook 2010, the EROEI of ex-situ processing is typically 4 to 5 while of in-situ processing it may be even as low as 2. However, according to the EIA most of used energy can be provided by burning the spent shale or oil-shale gas.[76]

Same problem of low EROEI is true about tar sands. Simplifying you can think about extraction of oil from tar sands as the industrial process of converting energy of  natural gas and junk bonds into oil. Approximately  280–350 kWh of energy is needed to extract a barrel of bitumen and upgrade it to synthetic crude. Most of this energy is produced by burning natural gas. Assuming $.1 per kilowatt we will get energy cost alone around 28-$35 a barrel. You probably should double this number to account for capital expenses and other costs.  

Is oil commodity or under neoliberalism this is another currency subject to standard currency attacks

A commodity currency is a name given to currencies of countries which depend heavily on the export of certain raw materials for income. These countries are typically developing countries, e.g. countries like Burundi, Tanzania, Papua New Guinea; but also include developed countries like Canada and Australia.

Befor assendance of neoliberalism in 1980th world oil prices were determined largely by real daily supply and demand. It was the province of oil buyers and oil sellers. Then Goldman Sachs decided to buy the small Wall Street commodity brokerage, J. Aron in the 1980th They had their eye set on transforming how oil is traded in world markets.

It was the advent of “paper oil,” oil traded in futures, contracts independent of delivery of physical crude, easier for the large banks to manipulate based on rumors and derivative market skullduggery, as a handful of Wall Street banks dominated oil futures trades and knew just who held what positions, a convenient insider role that is rarely mentioned inn polite company. It was the beginning of transforming oil trading into a casino where Goldman Sachs, Morgan Stanley, JP MorganChase and a few other giant Wall Street banks ran the crap tables. Essentially they invented another commodity currency. In the foreign exchange market, commodity currencies generally refer to the Australian dollar, Canadian dollar, New Zealand dollar, Norwegian krone, South African rand, Brazilian real, Russian ruble and the Chilean peso.

It looks like oil also became not pure commodity, but a new commodity currency. New York really trades overwhelmingly on a non-physical oil basis these days. Nobody checks if sellers of the futures have actual oil to settle. All settmenta are in dollar. In other words oil was virtualized.

In addtionan there are multiple oil ETFs (which are prefect way to rob lemmings -- naive investors who decided that oil is more reliable store of value then stocks)

Symbol  Name  Assets*  Avg Vol  YTD  1 Year  3 Year  5 Year  Inception  ER  ETF Home Page  Liquidity  Expenses 
USO United States Oil Fund $2,578,400.00 25,967,785 -28.05% -57.77% -59.14% -56.62% 2006-04-10 0.45% View A+ A+
OIL S&P GSCI Crude Oil Tot Ret Idx ETN $866,760.90 4,389,938 -33.41% -63.17% -64.50% -62.10% 2006-08-15 0.75% View A B
DBO DB Oil Fund $513,040.00 331,095 -27.39% -58.67% -58.24% -53.53% 2007-01-05 0.78% View A B-
BNO United States Brent Oil Fund $91,324.50 128,165 -26.08% -57.43% -59.34% -35.66% 2010-06-02 0.90% View A- C+
USL United States 12 Month Oil $70,752.00 84,619 -22.71%

As with futures, several questions arise about OIL ETFs. In any case as dollar finance is unlimited (via printing press) that creates completely new environment for commodities, when the price can be completely detached from reality.  In a way, oil ETFs are not that different then gold EFT which became pure "virtual currency" called "gold"  -- yet another financial speculation vehicle (Something Just Snapped At The Comex Zero Hedge):

As of Friday the comex gold "coverage" or amount of paper claims on every ounce of physical, was literally off the chart, soaring to a mindblowing 207 ounces of paper gold claims for every ounce of deliverable gold. This also means that the dilution ratio between physical gold and paper gold has hit a new all-time low of just 0.48%!

Similarly to games with gold we see "naked" shorting of oil:

United States Oil Fund LP (ETF) Short Interest Down 6.7% in July (USO) by Max Byerly

Aug 18th, 2015 | Ticker Report

Shares of United States Oil Fund LP (ETF) (NYSE:USO) were the target of a significant decline in short interest in the month of July. As of July 31st, there was short interest totalling 45,855,306 shares, a decline of 6.7% from the July 15th total of 49,139,106 shares, AnalystRatings.NET reports. Based on an average trading volume of 23,230,679 shares, the short-interest ratio is currently 2.0 days.

United States Oil Fund LP (NYSE:USO) opened at 13.89 on Tuesday. United States Oil Fund LP has a 52 week low of $13.86 and a 52 week high of $35.83. The company’s 50-day moving average is $16.41 and its 200 day moving average is $18.44.

United States Oil Fund, LP (NYSE:USO) is a commodity pool that issues limited partnership interests (shares) traded on the NYSE Arca, Inc. The investment objective of USO is for changes in percentage terms of its shares’ per share net asset value (NAV) to reflect the changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the changes in the price of the futures contract for light, sweet crude oil traded on the New York Mercantile Exchange (the NYMEX). The Company’s general partner is United States Commodity Funds LLC. The net assets of USO consist primarily of investments in futures contracts for light, sweet crude oil, other types of crude oil, diesel-heating oil, gasoline, natural gas and other petroleum-based fuels that are traded on the NYMEX, ICE Futures or other the United States and foreign exchanges.

Here is an interesting graph of money manager positions on NYMEX WTI (only NYMEX and only WTI):

The key question here is: "To what extent oil is still a commodity, and to what extent it is now yet another "virtual currency" subject to standard currency attacks ?" Naked selling of oil futures via shorting of OIL ETFs is not only possible, but highly profitable path for such attacks (4 Ways to Short Oil with ETFs - May 16, 2013 - Zacks.com).  All those tricks are possible due to free convertibility to US dollars, which unlike oil do not have any Earth-based limitations as for quantity and, what is more important, quality (gas liquids and shale oil are not equivalent to "classic' oil and refining of them produce mainly gasoline, instead of full spectrum of products; they should be considered "oil substitutes" and counted separately). And small amount injected in ETF can move spot oil market vary efficiently. So tail can wag the dog.

Who finance such attacks as losses can be substantial is an interesting question the answer on which I do not know, but recent behaviour of oil prices is typical for a currency attack as data about real oil extraction does not produce any optimism as for elimination of "peal cheap oil" phenomenon. But for speculators and gulling retail investors this does not matter. Casino is a casino. What is interesting the US MSM produce highly deceptive and well coordinated picture suggesting that there is government involvement in the whole scheme ( see below Russia sanctions section).

All those talks about crisis of overproduction are suspect. To a certain extent this might be a factor  due to slowing down of China economy and perma recession in the USA along with better small cars efficiency. But it is impossible to hide the fact that it was Saudi Arabia that decided to lower the oil prices and started to move in this direction ( An Oil Price 'Cold War' With Saudi Arabia Experts Disagree - US News) much like that did to economically crash the USSR in late 80th, early 90th.  I think that talk about attack on the USA shale industry does not make much sense, as Saudi Arabia is a vassal state and such move is punishable for a vassal:

Some experts declared it the start of a “cold war” with Saudi Arabia, as described by two University of Texas professors in an op-ed in the Dallas Morning News. Other analysts, however, contend that the Saudis are merely trying to defend against other exporters to the U.S.

“There’s another conflict brewing in the Middle East — the intensifying oil battle between Saudi Arabia and Texas,” Isaac Barchas and Michael Webber, who teach at the University of Texas at Austin, wrote in the op-ed.

As Webber, deputy director of the university's Energy Institute, describes to U.S. News, "Ford versus GM, Dell versus Apple: these are big companies duking it out for market share. Why would it be any different for oil. Is it a military war? No. But it's a market share war."

There are three main parts to his and Barchas' argument:

  1. Hydraulic fracturing, or fracking, has unleashed an energy boom here in the U.S., reducing net crude oil and petroleum product imports to their lowest levels since 1987.
  2. With more oil now available on the market, combined with a sluggish global economy that’s reduced demand in Europe and China, benchmark Brent crude oil prices have fallen by roughly 27 percent since June – their lowest point in four years.
  3. Saudi Arabia, the U.S's.second-largest source of imported oil behind Canada, is trying to retain its market share by undercutting American producers. The goal: drive down prices far enough to scare away Wall Street investors or simply make fracking unprofitable, forcing U.S. companies to take their drill rigs offline to reduce supply and clearing the way for more Saudi oil imports.

As Chip Register, managing director of consulting firm Sapient Global Markets asserted in a blog post on Forbes, “The Saudis have put a bull’s-eye on the U.S. shale industry.”

Other experts, however, expressed strong skepticism with this view.

“It’s not a personalized attack,” Steven Kopits, managing director of the consulting firm Princeton Energy Advisors, says of the Saudi discount. “Saudi Arabia is looking out for its own interests, not trying to undermine other people’s interests.” 

Jan Kalicki, public policy scholar and energy lead at The Wilson Center, a nonpartisan think tank, agrees.

“Any real impact on shale in the U.S. is going to require more than a price adjustment of this kind," he says.

U.S. shale fields can start and stop production relatively quickly. Technological advances, meanwhile, have sharply lowered the break-even point – no longer does fracking rank as one of the most expensive forms of oil production. It can still turn a profit at current prices of $80 a barrel, but depending on the type of well, fracking operations might even be able make money at prices as low as $55 a barrel.

Hence, “trying to apply predatory pricing in the oil business will only work in the very short run, if at all,” says Paul Sullivan, economics professor at National Defense University.

I think here the target is probably Russia. Telegraph reported  that Saudis offer Russia secret oil deal if it drops Syria - Telegraph

The revelations come amid high tension in the Middle East, with US, British, and French warship poised for missile strikes in Syria. Iran has threatened to retaliate.

The strategic jitters pushed Brent crude prices to a five-month high of $112 a barrel. “We are only one incident away from a serious oil spike. The market is a lot tighter than people think,” said Chris Skrebowski, editor of Petroleum Review.

Leaked transcripts of a closed-door meeting between Russia’s Vladimir Putin and Saudi Prince Bandar bin Sultan shed an extraordinary light on the hard-nosed Realpolitik of the two sides.

Prince Bandar, head of Saudi intelligence, allegedly confronted the Kremlin with a mix of inducements and threats in a bid to break the deadlock over Syria. “Let us examine how to put together a unified Russian-Saudi strategy on the subject of oil. The aim is to agree on the price of oil and production quantities that keep the price stable in global oil markets,” he said at the four-hour meeting with Mr Putin. They met at Mr Putin’s dacha outside Moscow three weeks ago.

“We understand Russia’s great interest in the oil and gas in the Mediterranean from Israel to Cyprus. And we understand the importance of the Russian gas pipeline to Europe. We are not interested in competing with that. We can cooperate in this area,” he said, purporting to speak with the full backing of the US.

Oil futures

Oil ETNs such USO or OIL does not have any intrinsic value. They are based on oil futures. Like is that case with currency future contracts, empirical studies suggest, not only is the oil futures price a biased estimate of the future spot price, but more often  it even gets the direction wrong. If the futures price suggests the oil will depreciate, it can well appreciate instead. In addition you can buy or sell options on oil making this commodity a real paradise for speculators.

Speculators definitely have expectations about the future oil spot price.  But often they demonstrate herd behavior driving the price to extremes as trading futures is trading "virtual oil" (futures are settled in dollars, never in actual commodity). This is especially true about short selling which can drive oil to really unprofitable for all major producers price. Recently they manage to drive it to less then $40 a barrel, the price at which only selected low cost producers can get the oil form the ground (to say nothing to invest in additional exploration or pay the cost of infrastructure and such). You ability to see oil short via specialized ETF or other means is limited only by your dollar reserves and the availability of counter party (and you can play certain games with this counterparty issue). 

Here is example of prices on Aug 31, 2015 (which also is a nice demonstration of dramatic dynamics that is possible in a single day) :

Chart Current Session Prior Day Opt's
Open Time Set Chg Vol Set Op Int
Oct'15 45.00 19:28
Aug 31
49.20
3.98 719704 45.22 440212 Call Put
Nov'15 45.69 19:28
Aug 31
49.93
3.95 137067 45.98 215025 Call Put
Dec'15 46.57 19:29
Aug 31
50.77
3.91 162736 46.86 243840 Call Put
Jan'16 47.50 19:28
Aug 31
51.63
3.91 57430 47.72 102471 Call Put
Feb'16 47.50 19:28
Aug 31
52.38
3.93 38475 48.45 50167 Call Put
Mar'16 48.25 19:29
Aug 31
52.98
3.92 38170 49.06 73615 Call Put
Apr'16 48.75 19:29
Aug 31
53.47
3.86 14106 49.61 25925 Call Put
May'16 48.99 19:28
Aug 31
53.85
3.76 7934 50.09 23357 Call Put
Jun'16 49.86 19:28
Aug 31
54.16
3.64 44230 50.52 103798 Call Put
Jul'16 50.29 19:28
Aug 31
54.38
3.53 3938 50.85 21832 Call Put
Aug'16 50.03 19:28
Aug 31
54.61
3.42 2511 51.19 16337 Call Put
Sep'16 50.72 19:28
Aug 31
54.87
3.31 8091 51.56 42572 Call Put
Oct'16
-
19:28
Aug 31
55.16
3.20 1164 51.96 17226 Call Put
Nov'16
-
19:28
Aug 31
55.48
3.11 1038 52.37 17809 Call Put
Dec'16 52.59 19:28
Aug 31
55.81
3.02 56618 52.79 133005 Call Put
Jan'17
-
19:28
Aug 31
56.05
2.94 598 53.11 14894 Call Put
Feb'17
-
19:29
Aug 31
56.31
2.87 277 53.44 8034 Call Put
Mar'17 55.45 19:29
Aug 31
56.59
2.81 988 53.78 9195 Call Put
Apr'17
-
19:28
Aug 31
56.85
2.75 465 54.10 3543 Call Put
May'17
-
19:29
Aug 31
57.08
2.69 435 54.39 2930 Call Put
Jun'17 53.69 19:29
Aug 31
57.34
2.64 5669 54.70 21475 Call Put
Jul'17 56.32 19:28
Aug 31
57.55
2.60 143 54.95 3120 Call Put
Aug'17
-
19:29
Aug 31
57.81
2.57 48 55.24 1760 Call Put
Sep'17
-
19:28
Aug 31
58.11
2.56 71 55.55 3982 Call Put
Oct'17
-
19:28
Aug 31
58.41
2.54 15 55.87 1184 Call Put
Nov'17
-
19:28
Aug 31
58.73
2.53 15 56.20 1270 Call Put
Dec'17 55.75 19:28
Aug 31
59.05
2.51 9588 56.54 44135 Call Put
Jan'18
-
19:28
Aug 31
59.21
2.49
-
56.72 1532 Call Put
Feb'18
-
19:28
Aug 31
59.38
2.46
-
56.92 312 Call Put
Mar'18
-
19:28
Aug 31
59.57
2.43
-
57.14 2688 Call Put
Apr'18
-
19:29
Aug 31
59.77
2.40
-
57.37 63 Call Put
May'18
-
19:28
Aug 31
59.98
2.37
-
57.61 516 Call Put
Jun'18
-
19:29
Aug 31
60.21
2.34 226 57.87 3700 Call Put
Jul'18
-
19:28
Aug 31
60.35
2.30
-
58.05 296 Call Put
Aug'18
-
19:28
Aug 31
60.52
2.27
-
58.25 61 Call Put
Sep'18
-
19:28
Aug 31
60.69
2.23
-
58.46 461 Call Put
Oct'18
-
19:28
Aug 31
60.87
2.20
-
58.67 61 Call Put
Nov'18
-
19:28
Aug 31
61.05
2.16
-
58.89 311 Call Put
Dec'18 58.54 19:28
Aug 31
61.24
2.12 2002 59.12 19416 Call Put
Jan'19
-
19:28
Aug 31
61.35
2.10
-
59.25 204 Call Put
Feb'19
-
19:28
Aug 31
61.48
2.08
-
59.40 4 Call Put
Mar'19
-
19:28
Aug 31
61.62
2.06
-
59.56 454 Call Put
Apr'19
-
19:28
Aug 31
61.78
2.04
-
59.74 4 Call Put
May'19
-
19:28
Aug 31
61.96
2.02
-
59.94 4 Call Put
Jun'19
-
19:28
Aug 31
62.15
2.00
-
60.15 1185 Call Put
Jul'19
-
19:28
Aug 31
62.20
1.98
-
60.22 5 Call Put
Aug'19
-
19:28
Aug 31
62.29
1.96
-
60.33 4 Call Put
Sep'19
-
19:28
Aug 31
62.41
1.94
-
60.47 4 Call Put
Oct'19
-
19:28
Aug 31
62.55
1.92
-
60.63 4 Call Put
Nov'19
-
19:28
Aug 31
62.72
1.90
-
60.82 104 Call Put
Dec'19
-
19:28
Aug 31
62.93
1.88 158 61.05 6628 Call Put
Jan'20
-
19:29
Aug 31
63.00
1.86
-
61.14
-
Call Put
Feb'20
-
19:29
Aug 31
63.08
1.84
-
61.24
-
Call Put
Mar'20
-
19:28
Aug 31
63.17
1.82
-
61.35
-
Call Put
Apr'20
-
19:28
Aug 31
63.28
1.80
-
61.48
-
Call Put
May'20
-
19:28
Aug 31
63.41
1.78
-
61.63
-
Call Put
Jun'20
-
19:28
Aug 31
63.56
1.76
-
61.80
-
Call Put
Jul'20
-
19:28
Aug 31
63.57
1.74
-
61.83
-
Call Put
Aug'20
-
19:28
Aug 31
63.62
1.72
-
61.90
-
Call Put
Sep'20
-
19:29
Aug 31
63.70
1.70
-
62.00
-
Call Put
Oct'20
-
19:29
Aug 31
63.83
1.68
-
62.15
-
Call Put
Nov'20
-
19:28
Aug 31
63.97
1.66
-
62.31
-
Call Put
Dec'20 64.00 19:28
Aug 31
64.14
1.64 14 62.50 1935 Call Put
Jun'21
-
19:28
Aug 31
64.59
1.57
-
63.02
-
Call Put
Dec'21
-
19:28
Aug 31
65.04
1.50 1 63.54 440 Call Put
Jun'22
-
19:28
Aug 31
65.34
1.50
-
63.84
-
Call Put
Dec'22
-
19:28
Aug 31
65.64
1.50
-
64.14 180 Call Put
Jun'23
-
19:29
Aug 31
65.64
1.50
-
64.14
-
Call Put

Is this  the mixture of overproduction crisis and intelligence operation with unforeseen side effects (blowback)

If we assume that the current event are a complex mixture of overproduction crisis, secular stagnation and intelligence operation with the goal to squeeze Russia (and as a side effect hurt Iran revenues)  that we should expect it lasting for several years, enough to destroy the opponents economically. So changes of recovering of oil prices in 2016 from this point of view are slip. For Russia this is a double blow as oil prices also affect natural gas prices. And it is true that Russian leadership were completely unprepared to this course of events, so the damage is great and real. As noted "Obama’s foreign policy goals get a boost from plunging oil prices" (Washingtonpost, Dec 23, 2015):

Plunging crude oil prices are diverting hundreds of billions of dollars away from the treasure chests of oil-exporting nations, putting some of the United States’ adversaries under greater stress.

After two years of falling prices, the effects have reverberated across the globe, fueling economic discontent in Venezuela, changing Russia’s economic and political calculations, and dampening Iranian leaders’ hopes of a financial windfall when sanctions linked to its nuclear program will be lifted next year.

At a time of tension for U.S. international relations, cheap oil has dovetailed with some of the Obama administration’s foreign policy goals: pressuring Russian President Vladi­mir Putin, undermining the popularity of Venezuelan President Nicolás Maduro and tempering the prospects for Iranian oil revenue. At the same time, it is pouring cash into the hands of consumers, boosting tepid economic recoveries in Europe, Japan and the United States.

https://www.washingtonpost.com/business/economy/as-crude-oil-prices-plunge-so-do-oil-exporters-revenue-hopes/2015/12/23/ed552372-a900-11e5-8058-480b572b4aae_story.html?hpid=hp_hp-top-table-main_oil-910pm%3Ahomepage%2Fstory

But there are some visible side effect, with some probably not well anticipated:

All that means that dramatic drop in oil prices is a mixed blessing. Mike Whitney lists several other factors( Oil Price Blowback , Jan 6, 2015, Counterpunch)

Up to now, of course, Russia, Iran and Venezuela have taken the biggest hit, but that will probably change as time goes on. What the Obama administration should be worried about is the second-order effects that will eventually show up in terms of higher unemployment, market volatility, and wobbly bank balance sheets. That’s where the real damage is going to crop up because that’s where red ink and bad loans can metastasize into a full-blown financial crisis. Check out this blurb from Nick Cunningham at Oilprice.com and you’ll see what I mean:

“According to an assessment from the Federal Reserve Bank of Dallas, an estimated 250,000 jobs across eight U.S. states could be lost in 2015 if oil prices don’t rise. More than 50 percent of those job losses would occur in Texas, which leads the nation in oil production.

There are some early signs that a slowdown in drilling could spread to the manufacturing sector in Texas… One executive at a metal manufacturing company said in the survey, “the drop in crude oil prices is going to make things ugly… quickly.” Another company that manufactures machinery told the Dallas Fed, “Low oil prices will drive reductions in U.S. drilling rigs, which will in turn reduce the market for our products.”

The sentiment was similar for a chemical manufacturer, who said “lower oil prices will adversely impact margins. Energy volatility will cause our customers to keep inventories tight.”

States like Texas, North Dakota, Oklahoma, and Louisiana have seen their economies boom over the last few years as oil production surged. But the sector is now deflating, leaving gashes in employment rolls and state budgets.” (Low Prices Lead To Layoffs In The Oil Patch, Nick Cunningham, Oilprice.com)

Of course industries lay-off workers all the time and it doesn’t always lead to a financial crisis. But unemployment is just one part of the picture, lower personal consumption is another. Take a look:

“Falling oil prices are a bigger drag on economic growth than the incremental “savings” received by the consumer…..Another way to show this graphically is to look at the annual changes in Personal Consumption Expenditures (PCE) in aggregate as compared to the subsection of PCE spent on energy and related products. This is shown in the chart below.

Lower Energy Prices To Lower PCE (Personal Consumption Expenditures):

unnamed

(The Gasoline Price Myth, Lance Roberts, oilprice.com)

See? So despite what you might have read in the MSM, lower gas prices do not translate into greater personal consumption or more robust growth. Quiet the contrary, they tend to intensify deflationary pressures and reduce activity which is a damper on growth.

Then there’s the knock-on effects that crashing prices and layoffs have on other industries like mining, manufacturing and chemical production. Here’s more from Oil Price:

“Oil and gas production makeup a hefty chunk of the “mining and manufacturing” component of the employment rolls. Since 2000, when the oil price boom gained traction, Texas has comprised more than 40% of all jobs in the country according to first quarter data from the Dallas Federal Reserve…

The majority of the jobs “created” since the financial crisis have been lower wage paying jobs in retail, healthcare and other service sectors of the economy. Conversely, the jobs created within the energy space are some of the highest wage paying opportunities available in engineering, technology, accounting, legal, etc. In fact, each job created in energy related areas has had a “ripple effect” of creating 2.8 jobs elsewhere in the economy from piping to coatings, trucking and transportation, restaurants and retail….

The obvious ramification of the plunge in oil prices is that eventually the loss of revenue will lead to cuts in production, declines in capital expenditure plans (which comprise almost 1/4th of all capex expenditures in the S&P 500), freezes and/or reductions in employment, and declines in revenue and profitability…

Simply put, lower oil and gasoline prices may have a bigger detraction on the economy than the “savings” provided to consumers.” (The Gasoline Price Myth, Lance Roberts, oilprice.com)

None of this sounds very reassuring, does it? And yet, all we hear from the media is how the economy is going to reach “escape velocity” on the back of cheap oil. Nonsense. This is just more “green shoots” baloney wrapped in public relations hype. The fact is, the economy needs the good-paying jobs more than it needs low-priced energy. But now that prices are tumbling, those jobs are going to disappear which is going to be a drag on growth.

Now check out these headlines I picked up on Google News that help to show what’s going on off the radar:

Measuring oil production and consumption: BBL,  MMbbl and Mb/d

In a way the USA (along with Canada) is an exceptional (read backward) country which still was unable (or more correctly unwilling) to switch to metric system.  In the USA oil production and  consumption by volume is usually measured in  barrels (BBL). One BBL equals 42 US gallons  or approximately 159 liters; 6.29 barrels equal one cubic meter and (on average) 7.33 barrels weigh one metric ton (1000 kilograms). Energy-wise one barrel of crude approximately equals 5604 cubic-feet of natural gas, 1.45 barrels of liquefied natural gas (LNG), or about one barrel of gas condensate.

When converting volume measures into weight measures a coefficient based on so called API gravity  is used. The latter is a measure of how heavy or light a petroleum liquid is compared to water: if its API gravity is greater than 10, it is lighter and floats on water; if less than 10, it is heavier and sinks. In other words this is a measure that is inverse of density. Although mathematically, API gravity is a dimensionless value,  for historical reasons it is measures in 'degrees' like angles. In this case this is degrees on a hydrometer instrument. API gravity values of most petroleum liquids fall between 10 and 70 degrees. From Wikipedia:

Crude oil is classified as light, medium, or heavy according to its measured API gravity.

Crude oil with API gravity less than 10° is referred to as extra heavy oil or bitumen. Bitumen derived from oil sands deposits in Alberta, Canada, has an API gravity of around 8°. It can be diluted with lighter hydrocarbons to produce diluted bitumen, which has an API gravity of less than 22.3°, or further "upgraded" to an API gravity of 31 to 33° as synthetic crude.[7]

Oil companies that are listed on American stock exchanges typically report their production in thousand or million barrels. Abbreviations like Mbbl (one thousand barrels), or MMbbl (one million barrels) are used. Often Mb/d is used instead of MMbbl per day.  This actually preferable notation that is used in this page.

As density of the oil varies it is not that easy to convert one metric into another for example volume into weight  as the following quote illustrates (Open Thread, Oil and Gas - Peak Oil Barrel ):

One problem is the estimate of Russian average barrels per metric ton, often it is assumed that this is 7.3 or 7.33 barrels per metric ton. If 7.33 barrels per ton is correct the average API gravity would be 33.4 degrees.

The Urals blend is about 31.7 degrees API or 7.25 barrels per metric ton.

On political motives for reporting less Russian output, possibly the US government wants the sanctions to affect Russian oil output and has some influence on what is reported by the EIA. Likewise the Russian government wants to show that sanctions are not affecting them and might influence the Russian oil ministry to report higher output.

Possibly this could happen or the average API gravity of Russian output may be different than we think, if API gravity is 31.7 degrees (Urals blend) then output in April would have been 10.55 Mb/d, JODI had about 10.1 Mb/d in April.

AlexS showed that the NGL numbers reported by the EIA and Jodi may be about 350 kb/d too high (perhaps some condensate is being included in NGL that should be part of C+C output). If we added 350 kb/d to JODI’s April 2015 estimate of C+C output we get about 10.45 Mb/d for Russia, now the difference is only 100 kb/d, take the average and call it 10.5 Mb/d+/- 50 kb/d. That is a better explanation than “politics” in my opinion.

Great Condensate Con: What liquids are counted as oil in statistical reports such as EIA

There are several different liquids that are usually counted as oil.  Three major are crude, condensate and Natural Gas Liquids. The total all three is often counted as would oil production which now is over 90 Mb/d. But by how much nobody knows. The EIA reports crude plus condensate  as "oil".  EIA has total world production of Crude Oil, NGPL, and Other Liquids at 93,770,000 barrels per day in June 2015.  This type of reporting provides oil traders with wrong data and was called "Great condensate con" :

Lease condensate consists of very light hydrocarbons which condense from gaseous into liquid form when they leave the high pressure of oil reservoirs and exit through the top of an oil well. This condensate is less dense than oil and can interfere with optimal refining if too much is mixed with actual crude oil. The oil industry's own engineers classify oil as hydrocarbons having an API gravity of less than 45--the higher the number, the lower the density and the "lighter" the substance. Lease condensate is defined as hydrocarbons having an API gravity between 45 and 70. (For a good discussion about condensates and their place in the marketplace, read "Neither Fish nor Fowl – Condensates Muscle in on NGL and Crude Markets.")

Refiners are already complaining that so-called "blended crudes" contain too much lease condensate, and they are seeking out better crudes straight from the wellhead. Brown has dubbed all of this the great condensate con.

Brown points out that U.S. net crude oil imports for December 2015 grew from the previous December, according to the U.S. Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy. U.S. statistics for crude oil imports include condensate, but don't break out condensate separately. Brown believes that with America already awash in condensate, almost all of those imports must have been crude oil proper.

Brown asks, "Why would refiners continue to import large--and increasing--volumes of actual crude oil, if they didn’t have to--even as we saw a huge build in [U.S.] C+C [crude oil plus condensate] inventories?"

Part of the answer is that U.S. production of crude oil has been declining since mid-2015. But another part of the answer is that what the EIA calls crude oil is actually crude plus lease condensate. With huge new amounts of lease condensate coming from America's condensate-rich tight oil fields -- the ones tapped by hydraulic fracturing or fracking -- the United States isn't producing quite as much actual crude oil as the raw numbers would lead us to believe. This EIA chart breaking down the API gravity of U.S. crude production supports this view.

Exactly how much of America's and the world's presumed crude oil production is actually condensate remains a mystery. The data just aren't sufficient to separate condensate production from crude oil in most instances.

Brown explains: "My premise is that U.S. (and probably global) refiners hit in late 2014 the upper limit of the volume of condensate that they could process" and still maintain the product mix they want to produce. That would imply that condensate inventories have been building faster than crude inventories and that the condensate is looking for an outlet.

That outlet has been in blended crudes, that is heavier crude oil that is blended with condensates to make it lighter and therefore something that fits the definition of light crude. Light crude is generally easier to refine and thus more valuable.

The trouble is, the blends lack the characteristics of nonblended crudes of comparable density (that is, the same API gravity), and refiners are discovering to their chagrin that the mix of products they can get out of blended crudes isn't what they expect.

So, now we can try to answer our questions. Brown believes that worldwide production of condensate "accounts for virtually all of the post-2005 increase in C+C [crude plus condensate] production." What this implies is that almost all of the 4 million-barrel-per-day increase in world "oil" production from 2005 through 2014 may actually be lease condensate. And that would mean crude oil production proper has been nearly flat during this period -- a conjecture supported by record and near record average daily prices for crude oil from 2011 through 2014. Only when demand softened in late 2014 did prices begin to drop.

Here it is worth mentioning that when oil companies talk about the price of oil, they are referring to the price quoted on popular futures exchanges -- prices which reflect only the price of crude oil itself. The exchanges do not allow other products such as condensates to be mixed with the oil that is delivered to holders of exchange contracts.

But when oil companies (and governments) talk about oil supply, they include all sorts of things that cannot be sold as oil on the world market including biofuels, refinery gains and natural gas plant liquids as well as lease condensate. Which leads to a simple rule coined by Brown: If what you're selling cannot be sold on the world market as crude oil, then it's not crude oil.

The glut that developed in 2015 may ultimately be tied to some increases in actual, honest-to-god crude oil production. The accepted story from 2005 through 2014 has been that crude oil production has been growing, albeit at a significantly slower rate than the previous nine-year period--15.7 percent from 1996 through 2005 versus 5.4 percent from 2005 through 2014 according to the EIA. If Brown is right, we have all been victims of the great condensate con which has lulled the world into a sense of complacency with regard to actual oil supplies--supplies he believes have been barely growing or stagnant since 2005.

"Oil traders are acting on fundamentally flawed data," Brown told me by phone. Often a contrarian, Brown added: "The time to invest is when there's blood in the streets. And, there's blood in the streets."

He explained: "Who of us in January of 2014 believed that prices would be below $30 in January of 2016? If the conventional wisdom was wrong in 2014, maybe it's similarly wrong in 2016" that prices will remain low for a long time.

Brown points out that it took trillions of dollars of investment from 2005 through today just to maintain what he believes is almost flat production in oil. With oil companies slashing exploration budgets in the face of low oil prices and production declining at an estimated 4.5 and 6.7 percent per year for existing wells worldwide, a recovery in oil demand might push oil prices much higher very quickly.

That possibility is being obscured by the supposed rise in crude oil production in recent years that may just turn out to be an artifact of the great condensate con.

 

But counting such a diverse group of liquids is impossible without substantial errors in each category. That mean that the error margin of and global production figure has margin or error around  +- 0.5% or even 1% or one Mb/d.  for example amount of oil produced and pumped to the surface at wellhead is different and greater that amount of oil that got to refineries (which along with chemical plants are major consumers) because of losses during transportation and evaporation or light fractions in case weather is hot during the period before oil is processed at refinery or chemical plant.  Also there are differences in reporting and errors in measuring oil density by various countries, difficulties of converting weight into volume and vice versa, etc.  There are also large differences in reporting between agencies ( aspofrance.viabloga.com)

Reporting of small producers (and small producer countries) is often very fuzzy and here various games can be and often are played with those report with compete impunity, if you have some agenda.  So any analyst who take published by agencies figures  as precise amount produced accuracy equal to five meaningful digits is iether idiot or crook. Only first three digits  probably can be countered as meaningful. In no way the forth digit is.  If the analyst is talking about "oil glut" based on those figures he/she is definitely a crook ;-). 

Now you understand that all talk about 1Mb/d glut is very suspect.

Que Bono and Wall Street HFT games with oil futures

Low oil prices are essentially a crime against humanity as oil is exhaustible resources and burning it now in oversized SUVs means depriving of fuel and extremely important important for chemical industry commodity future generations. So the question is "que bono"

From this point if view (which is a standard starting point of any crime investigation) the origin of low oil prices lies probably in Wall Street  which capitalized on the US government desire to hurt Russian economy, Saudi machinations (with Saudis as a partner in this crime ;-) related to thier declining market share in oil market.

It is not that difficult on the level of Wall street cguant to play the short game for a long time,  skillfully dropped the market prices by exploiting rumores, and with the help of MSM distorting statistics (just read a typical CNBC article to feel the level of crap they are trying to infuse in readers), exploiting Saudi desire to preserve market share combined with temporary oil overproduction. Temporary overproduction due to the period of oil prices over $100, when everybody and his brother in the USA were trying to discover and drill new shale well and convert junk bonds into flow of oil trying to get rich in such supposlydly lucrative market. 

World production at the same time stagnated. Russia exports are actually in decline for many years. After all Libya production now is off the market, due to destruction of their country and subsequent civil war caused by French intervention in alliance with the USA, Qatar and several other mid-eastern countries. If you analyze the US press the bias toward lower oil prices is  evident. 

 

Production by country and total world production

Estimated average world daily production of 95.71  Mb/d for 2015 ( (Jan 12, 2016 forecast) exceeds EIA’s Annual Energy Outlook 2015 forecast (April 2015) by 2.6 Mb/d! so much for EIA forecasting abilities.

For 2016 IEA predicts 95.93 (Jan 12, 2016 forecast) and for 2017 96.69 (also  Jan 12, 2016 forecast)

OPEC predictions were 94.5 Mb/d for 2015 (December 2015  forecast) with growth in 2020 to 97.6 (it presupposes investment of  around $250 billion each year in non OPEC countries and $40 billions annually by OPEC countries; money that with current oil prices are nowhere to come by):

In the downside supply scenario, 3.3 mb/d from non-OPEC supply is assumed to be lost by 2040 with respect to the Reference Case.

Oil production is highly concentrated.  The top dozen of out of 100 oil-producing countries accounted for over 73% of the world's oil production. The top three (Russia, Saudi Arabian and the USA) account for almost 40%. 

Here is a chart from  Bloomberg Business

Iraq and Iran are also large and important players but currently  they are definitely the second tier players.  That might change in the future.

Now what will (most probably) happen in 2016 with the major players

Now let's discuss Iran and Iraq

All three major oil producers (troika) are severely affected by the oil price slump, but for the USA as one of the largest world oil importers it is a mixed blessing (destruction of shale  industry and connected with it jobs is just a collateral damage for approximately $200 billion stimulus due to lower prices.

For the Russia and Saudis this is a huge negative development which  leads to unbalanced budgets (especially for Saudies who need $100 oil to balance the budget and  lost $100 billions of their foreign reserves in 2015) and depletion  of currency reserves (more for Saudis then Russia, but Saudis had bigger currency reserves and can benefit from being a vassal of the USA by commanding a higher prices for state assets in fire sale). 

All-in-all around 100 countries produce oil with top three producing around 40%,  and the top ten over 63% of the world's oil production.

According to International Energy Agency (EIA), in 2011 the top ten oil-producing countries accounted for over 63% of the world's oil production.[2] As of November 2012, Russia produced 10.9 million barrels of crude per day, while Saudi Arabia produced 9.9 million barrels.[3]

Top oil producers: According to EIA top 10 oil producer countries produced over 64 % of the world oil production in 2012. The top oil producers in 2012 were: Russia 544 Mt (13 %), Saudi Arabia 520 Mt (13 %), United States 387 Mt (9 %), China 206 Mt (5%), Iran 186 Mt (4 %), Canada 182 Mt (4 %), United Arab Emirates 163 Mt (4 %), Venezuela 162 Mt (4 %), Kuwait 152 Mt (4 %) and Iraq 148 Mt (4 %). In 2012 total oil production was 4,142 Mt. [4] In 2011 the world oil production was 4,011 Mt demonstrating an annually rising trend in oil production.[5]

  Country Production (bbl/day) Production (MT) Share of
World %
Date of
Information
 World 84,951,200 10,194 100% 2014 est. Peak Production
1 Russia 10,107,000 1212 14.05% 3/2015.[6] 10,107,000 (3/2015)
2 Saudi Arabia 9,735,200 1168 13.09% 12/2014.[6] 9,900,000 (1/1980)
3 United States 9,373,000 1124 12.23% 4/2015.[6] 9,610,000 (6/2015)
4 China 4,189,000 502 5.15% 5/2015.[6] 4,189,000 (5/2015)
5 Canada 3,603,000   4.54% 12/2014.[6] 3,603,000 (1/2015)
6 Iraq 3,368,000   4.45% 5/2015.[6] 3,368,000 (5/2015)
7 Iran 3,113,000   4.14% 12/2014.[6] 6,060,000 (1/1974)
8 United Arab Emirates 2,820,000   3.32% 12/2014.[6] 2,820,000 (1/2013)
9 Kuwait 2,619,000   2.96% 12/2014.[6] 2,650,000 (1/2013)
10 Mexico 2,562,000   3.56% 12/2014.[6] 3,476,000 (1/2004)
11 Venezuela 2,501,000   3.56% 12/2014.[6] 3,280,000 (1/1997)
12 Nigeria 2,423,000   2.62% 12/2014.[6] 2,627,000 (1/2005)
13 Brazil 2,255,000   3.05% 12/2014.[6] 2,255,000 (1/2015)
14 Angola 1,831,000   2.31% 12/2014.[6] 1,946,000 (1/2008)
15 Kazakhstan 1,573,000   1.83% 12/2014.[6]
16 Qatar 1,553,000   1.44% 12/2014.[6]
17 Norway 1,539,000   2.79% 12/2014.[6]
18 Algeria 1,462,000   2.52% 12/2014.[6]
19 Colombia 1,003,000   1.19% 12/2014.[6]
20 Oman 940,000   0.95% 12/2014.[6]
21 Azerbaijan 871,000   1.20% 12/2014.[6]
22 Indonesia 828,000   1.66% 12/2014.[6]
23 United Kingdom 801,000   1.78% 12/2014.[6]
24 India 772,000   1.04% 12/2014.[6]
25 Malaysia 570,000   0.82% 12/2014.[6]
26 Argentina 540,000   0.93% 12/2014.[6]
27 Ecuador 526,000   0.58% 12/2014.[6]
28 Egypt 514,000   0.80% 12/2014.[6]
29 Libya 470,000   0.85% 5/2015.[6]
30 Australia 338,000   0.70% 12/2014.[6]
31 Vietnam 337,000   0.36% 12/2014.[6]
32 Equatorial Guinea 270,000   0.41% 12/2014.[6]
33 Congo, Republic of the 265,000   0.33% 12/2014.[6]
34 Sudan 259,000   0.13% 12/2014.[6]
35 Thailand 241,000   0.45% 12/2014.[6]
36 Gabon 239,000   0.29% 12/2014.[6]
37 Turkmenistan 229,000   0.22% 12/2014.[6]
38 Denmark 175,000   0.31% 12/2014.[6]
39 Yemen 131,000   0.34% 12/2014.[6]
40 Brunei 112,000   0.17% 12/2014.[6]
41 Italy 106,000   0.17% 12/2014.[6]
42 Ghana 105,000   0.01% 12/2014.[6]
43 Chad 98,000   0.13% 12/2014.[6]
44 Romania 85,000   0.14% 12/2014.[6]
45 Trinidad and Tobago 81,000   0.18% 12/2014.[6]
46 Pakistan 81,000   0.16% 12/2014.[6]
47 Cameroon 81,000   0.09% 12/2014.[6]
48 Timor-Leste 79,000   0.11% 12/2014.[6]
49 Peru 69,000   0.17% 12/2014.[6]
50 Uzbekistan 65,000   0.08% 12/2014.[6]
51 Tunisia 55,000   0.11% 12/2014.[6]
52 Germany 52,000   0.19% 12/2014.[6]
53 Bolivia 51,000   0.06% 12/2014.[6]
54 Bahrain 50,000   0.06% 12/2014.[6]
55 Cuba 50,000   0.06% 12/2014.[6]
56 Turkey 48,000   0.06% 12/2014.[6]
57 Ukraine 41,000   0.12% 12/2014.[6]
58 New Zealand 40,000   0.07% 12/2014.[6]
59 Ivory Coast 36,000   0.07% 12/2014.[6]
60 Papua New Guinea 34,000   0.04% 12/2014.[6]
61 Belarus 30,000   0.04% 12/2014.[6]
62 Netherlands 28,000   0.07% 12/2014.[6]
63 Syria 23,000   0.48% 12/2014.[6]
64 Philippines 21,000   0.02% 12/2014.[6]
65 Albania 21,000   0.01% 12/2014.[6]
66 Mongolia 21,000   0.01% 12/2014.[6]
67 Burma 20,000   0.02% 12/2014.[6]
68 Congo, Democratic Republic of the 20,000   0.02% 12/2014.[6]
69 Poland 19,000   0.04% 12/2014.[6]
70 Austria 17,000   0.03% 12/2014.[6]
71 France 15,000   0.08% 12/2014.[6]
72 Suriname 15,000   0.07% 12/2014.[6]
73 Serbia 12,000   0.01% 12/2014.[6]
74 Hungary 11,000   0.03% 12/2014.[6]
75 Guatemala 10,000   0.02% 12/2014.[6]
76 Croatia 10,000   0.03% 12/2014.[6]
77 Chile 7,000   0.01% 12/2014.[6]
78 Mauritania 7,000   0.02% 12/2014.[6]
79 Spain 6,000   0.03% 12/2014.[6]
80 Japan 5,000   0.16% 12/2014.[6]
81 South Africa 4,000   0.22% 12/2014.[6]
82 Bangladesh 4,000   0.01% 12/2014.[6]
83 Czech Republic 3,000   0.01% 12/2014.[6]
84 Lithuania 2,000   0.01% 12/2014.[6]
85 Belize 2,000   0.00% 12/2014.[6]
86 Bulgaria 1,000   0.00% 12/2014.[6]
87 Georgia 1,000   0.00% 12/2014.[6]
88 Kyrgyzstan 1,000   0.00% 12/2014.[6]
89 Barbados 1,000   0.00% 12/2014.[6]
90 Greece 1,000   0.00% 12/2014.[6]

Global oil production has been split into three geo-political categories: 1) USA and Canada, 2) OPEC and 3) the Rest of the World (RoW). RoW production bears the hallmarks of having peaked in the period 2005 to 2010 and this has consequences for oil prices, demand and prosperity in parts of the world, especially the OECD. Most of the growth in oil supply has been in the USA and Canada where the market has been flooded with expensive oil.

Here are the data for crude oil + condensate + natural gas liquids (C+C+NGL) and exclude biofuels and refinery gains that are included by the EIA in their total liquids number.

The 1.1 million bpd gain in US oil production was the largest year over year gain for any country in 2013, and the largest gain in US history. Mostly due to shale oil. The US remained the world’s third-largest oil producer at 10 million bpd in 2013, trailing Saudi Arabia’s 11.5 million bpd and Russia’s 10.8 million bpd. Rounding out the top five were China (4.2 million bpd) and Canada (3.9 million bpd).

Just to put the current US oil boom into further perspective, over the past five years global oil production has increased by 3.85 million bpd. During that same time span, US production increased by 3.22 million bpd — 83.6 percent of the total global increase.

If the current “low oil price crisis”  does indeed destroy high cost production capacity then this will raise the question if the high cost sources can  be brought back? And at what cost?  Especially interesting is the question: "Can the shale industry can come back from the near death experience?"

What MSM do not discuss: depletion rates

Low oil prices are suicidal for mankind in a long run. Oil is too valuable and irreplaceable resource  for chemical industry to be burned in excessive qualities in transport due to low prices, especially when hybrid and all electrical cars is a reality and price differential with ordinary cars for small card is not that great (less then twice). Electricity unlike oil can be produced from renewable resources such as nuclear (breeder reactors are a reality), wind and solar (solar panels improved dramatically in the last ten years).  At the same time in the USA (and probably elsewhere) sales of SUVs and light trucks are again booming.  That say something about level of intelligence of the USA government. 

With producers in the US and across the world pumping as much as they can, they are doing it at a cost of running into diminishing production rates (depletion) on those existing wells sooner. The 2008 IEA survey of ~800 major fields (including all giants and supergiants) which produced over 60% of that year crude showed an average annual decline rate of 5.1%.

Most countries in the world now face depletion of their reserves. Some face acute depletion (Indonesia, Mexico, etc), some still manage to maintain plato (Russia, Saudi Arabia) or even increase production (the USA, Canada, Iraq, Iran, in the future probably Libya and Syria),  But generally around 4% of total world capacity is depleted per year and without adequate investment can't be replaced. in 2008 IHS estimated global oil field decline rates to be around 4.5%. EIA did a study estimated the worldwide decline rates to be around 6.7%.

When peak oil has been discussed decades ago it was considered a 3% decline rate in production was manageable -- 5% would considered extremely difficult to deal with  (The Guardian)

Now depletion rates are higher (source: IHS, Deloitte & Touche and USGS databases; other industry sources; EIA estimates and analysis)

Outside a couple of countries such as Iran, Iraq and Venezuela offshore production grows faster the onshore production. Shale production growth in the past was the fastest, especially in the USA.  That means a switch to more expensive sources of oil.

Given the increasing decline rates, the oil industry needs considerable capex investments. In the absence of them it slide into irreversible decline.  New technologies greatly help but there are natural limits of what you can achieve with them. they are not substitute to finding new fields which is a very expensive activity.

US oil production and forecast for 2016

Among three major oil producing nations (USA, Russia and Saudi Arabia) the USA is the most dynamic nation, and the most difficult to predict due to large share of shale oil in the USA output. Gradual destruction of the US shale industry ability to pump oil  due to low prices is now established fact. That only discussable item is how quick it will proceed. The first 12 months were cushioned by hedges, but at the and of 2015 most companies are now  "swimming naked". 

Still there are signs that the US oil production peaked in 2015. Decimation of shale can't be compensated by offshore drilling. The sinking shale that could easily lose 1 Mb/d in 2016

At the same time in 2015 total US oil production remained remarkably stable, bank loans were extended or refinanced and bankruptcies were few and does not look like an epidemic. So forecaster of "doom and gloom" were wrong by at least one year. There are no signs of panic in view of drop of oil prices below the level of sustainable production. After all oil is the strategic industry and to leave to market forces is extremely unwise. Wall Street probably has other opinion. As John Kenneth Galbraith said “The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil.” (The Great Crash of 1929). They live by the next quarter results.

Dec 8, 2015 EIA data  can be found http://www.eia.gov/forecasts/steo/tables/?tableNumber=29#

EIA estimates that total U.S. crude oil production declined by about 60,000 b/d in November 2015 compared with October. That decline will accelerate in December. Crude oil production will probably gradually decrease through the third quarter of 2016 before growth resumes late in 2016, it higher oil prices (at least above $50) materialize. 

Projections of the U.S. crude oil production

Saudi Arabia oil production and forecast for 2016

Oil production

There are signs that Saudi Arabia oil production peaked or close to a peak. A terror attack in 2016 Saudi Arabia is not very likely. Shiite organizations have not resorted to terrorism in many years and they seem now focused on fighting ISIS. which although sponsored by Saudis is a distinct organization.

Saudi Arabia produced 10.28 million barrels a day in October, 2015,  up from 9.69Mb/done year ago.   Chances that production will reach 11 Mb/d are slim. There are strong signs that they have huge difficulties in increasing oil extraction volume.  All their efforts to increase production led to increase of less then 1Mb/d  increase in 2015 (7% increase in production). Which is partially offset by  increase in internal consumption (In 2015 Saudi Arabia oil demand rose by a notable 0.21 mb/d, which equates to a nearly 8% rise y-o-y, )  Here is relevant quote (OilPrice.com, Dec 21, 2015)

Crude exports from Saudi Arabia rose from an average of 7.111 million barrels per day in September to 7.364 million per day in October, according to the latest data from the Joint Organizations Data Initiative (JODI), which monitors the oil industry. The report said this quantity was the most oil exported from Saudi Arabia since June and 7 percent higher than in October 2014.

And those doubts about Saudis ability to increase production exist for some time. When U.S. president George W. Bush asked the Saudis to raise production on a visit to Saudi Arabia in January 2008 they declined. After that Bush questioned whether they had the ability to raise production any more.

But they did managed to achieve temporary production peak: in April 2015, the Saudi oil minister Ali Al-Naimi said that Saudi Arabia produced 10.3 million barrels per day in March that year, which was the highest figure based on records since the early 1980s.  The previous peak in production was in August 2013 at 10.2 million barrels per day.

Theoretically as its own population and internal consumption is growing and depletion of its wells reached critical level, they should concentrate of providing the standard of living for future generations, not dump the oil at the lowest price.  In three decades if the current annual increase in internal consumption continues at, say, 5% and production stays flat Saudi Arabia paradoxically may became oil importing county.

Still Saudi are known to use the most advanced (and most expensive) technologies of boosting the extraction rate to counter the natural decline curve.   They now are exploring shale technology and reportedly are trying to hire workers from the USA who became unemployed during the downturn of shale industry started in mid 2014.

Exports

Contrary to MSM coverage about Saudis flooding world with their oil, year over year increase in exports is slim. Basically they are flat (due to rapidly increasing population and domestic consumption): 

Net exports were around 7.111 Mb/d (September, 2015). But with current low prices this is an economic suicide, even if this is an economic war against Iran -- attempt to hurt its major competitor when  sanctions are lifted.

The net revenue dropped more then a half and the country is burining its currency reserves (which are substantial and at current burn rate will last for more then three years)  So there is something fishy in this propagated by Western MSM idea of Saudis defending their market share. The cost of defending their market share proved to be in hundred billions of lost revenue, which far exceeds their losses from rise of the US shale oil production (if the prices remained above $100 per barrel).  Also the question arise, why now. Shale was a long story in the USA and reached present size around decade ago (2005).

This is definitely a declation of war. But if the target is not the USA (and it can't be the target as Saudis are the USA vassal state), then war of whom ?  The USA is actually a beneficially of this  war (like most wars in this region) and  got a half trillion subsidy due to lower price of oil.  And  "corrupt and atheistic" Western Europe also got similar subsidy.

Business Insider

A report by Citigroup has warned that Saudi Arabia could run out of oil to export by 2030, raising fears that oil prices may rise significantly in coming years.

... ... ...

Its export capacity could steadily reduce and, “if nothing changes, Saudi may have no available oil for export by 2030”, Citi analyst Heidy Rehman wrote.

Saudi Arabia consumes 25pc of its oil output and oil accounts for about 50pc of its electricity production. With peak power demand rising by about 8pc per year, the nation is aiming to more than double its power capacity by 2032 through new nuclear and solar instalations.

Internal consumption

Saudi Arabia produced 10.28 million barrels a day in October 2015 and exported  7.364 million barrels a day. the difference  is less then 3 Mb/d

In September figure were 10.28 and 7.111. The difference is above 3 Mb/d.

So we can assume that 2015 internal consumption is approximately 3 million barrel a day.  In 2015 Saudi Arabia oil demand rose by a notable 0.21 mb/d, which equates to a nearly 8% rise y-o-y, driven by transportation fuels such as jet/kerosene, gasoline and diesel oil, which grew at high rates. The higher consumption of jet fuel reflects the increase in travel activity towards the end of the summer vacation, which coincided with the Hajj season.

Internal consumptions rapidly growing year over year with some years (2009) close to 10% growth (Saudi Arabia Crude Oil Consumption by Year (Thousand Barrels per Day)):

2005 1,963.64 4.20 %
2006 2,020.02 2.87 %
2007 2,094.33 3.68 %
2008 2,236.99 6.81 %
2009 2,436.12 8.90 %
2010 2,579.73 5.90 %
2011 2,760.91 7.02 %
2012 2,861.00 3.63 %
2013 2,925.00 2.24 %

Russia oil production and forecast for 2016

Russian oil production considered to be at "over peak" stage with increases mainly due to offshore drilling. In 2014 total petroleum and other liquids production in 2014 were 10.8 Mb/d  (EIA). Russia crude oil production in late 2015 was around 10.20M, up from  10.08Mb/done year ago. That's was an unanticipated, even by Russian Ministry of Energy result of activities of small companies. which managed to increase of  production by  1.12% from one year ago, when most analysts expected a slight decline (Russia Crude Oil Production (Monthly, Barrels per Day).

Despite severe depreciation of ruble and sanctions, in 2015 Russia managed to reach the level of production that exceed the level of former USSR period. At the same time most of Russia's fields are mature fields and the production from them is declining for long time,  offset only by new more expensive projects with less total volume. Unless Arctic oil and other expensive oil are economical to produce (which requires over $100 bbl price) the national path for Russian production is iether long plato or down. 

Russian oil extraction (red) and oil exports (green) in metric tons

 

In 2015 Russia managed to increase exports the first time in six years, but that does not change general situation: internal consumption is growing pretty robustly with growth of car fleet and decline of production due to national depletion of oil conventional wells became more and more difficult to compensate with new discoveries. And new fields, even if such exist, can't be now tapped because capital expenditures by most Russian oil companies now are slashed to the bone (russia is more like the USA in this respect with over dozen of major oil companies producing   oil).

At current oil prices Arctic oil now is out of reach and only existing platforms will remain in production. All of them are losing money. conventional wells are still profitable with same remaining profitable up to $20 per barrel. Still for the next several years Russia probably will be able to keep the current level of production due to huge previous investments dome in 2010-2014 in a few new fields (Bloomberg Business, December 20, 2015):

The other big boosts to Russian production this year have come from a few mid-sized new fields like those of Severenergia in the Arctic Yamal region. Co-owners Novatek OJSC and Gazpromneft PJSC invested in the $9.2 billion project back when oil prices were high. With most of the capital already committed, operating costs now are relatively low and output of gas condensate, a light and especially valuable form of crude, is up five-fold this year.

One side effect of falling oil prices -- the 52 percent plunge in the ruble over the last two years -- has helped Russian oil producers, chopping their costs in dollar terms since between 80 and 90 percent of their spending comes in rubles.

... ... ...

To be sure, few in the industry expect Russia to be able to sustain the current performance for more than a few years. Tax hikes and lack of financing have cut deeply into exploration drilling, which is down 21 percent this year, and handicap the larger new projects that are needed to replace the country’s older fields as they run dry.

... ... ...

In some parts of the Russian oil patch, low prices are already causing pain. At $40 a barrel, “half of our fields could be stopped. Heavy oil, low horizons, mature horizons are all unprofitable at a price of $40-45. We are waiting for better times,” Russneft OJSC Board Chairman Mikhail Gutseriev said in an interview on state television early this month.

Unfortunately just before the oil prices crush Russia was engaged in several high cost drilling projects in Arctic and was caught naked when oil price dropped. ( see Petroleum industry in Russia - Wikipedia).  Timing can't be more bad as this is a really expensive oil, probably around $60 per barrel or higher at wellhead.  Which are now sold at a huge discount.  Igor Sechin proved to be a weak leader of the Russia major state owned oil company Rosneft.  Government refused to bail out the company which faces large external debt and it was saved by some "white knife" billionaire.

Moscow Exile, December 19, 2015 at 11:19 am

Undeterred by OPEC’s decision to keep pumping and drive out U.S. shale rivals, Russian oil output continued to grow, in October setting a new monthly record for the post-Soviet era. Explorers have remained profitable under a friendly tax system and low production costs.

Mystery Benefactor

Rosneft assuaged concerns over the sustainability of Russia’s biggest corporate debt load after the company received a $15 billion advance payment for oil supplies from a source the company didn’t identify, according to quarterly reports published Nov. 13. The inflow of cash will help Rosneft meet $2.5 billion in debt due in the fourth quarter, $13.7 billion in 2016 and $11.3 billion in 2017, according to a presentation on its website.

See: One Year Into New OPEC Era, You Made 12% Buying These Oil Bonds

It looks like the board is in denial of the blunder with overinvest they made:

18 December 2015
Rosneft Holds Board of Directors Meeting

On December 18, Rosneft Board of Directors considered in Vladivostok interim results of its 2015 operations, the business-plan for 2016-2017, the Long-term development program and the energy efficiency program of the Company.

The following decisions were taken:

1. The Board of Directors considered and acknowledged 2015 Rosneft interim results and the intermediate results of the implementation of the long-term development program of the Company. The Board of Directors welcomed the results of the implementation of programs aimed at raising efficiency in challenging economic environment: the Company maintained low levels of OPEX and eased its debt burden.

2. The Board of Directors considered and acknowledged the business-plan for 2016-2017, structured in accordance with a conservative macroeconomic scenario and focused on the implementation of the Long-term development program of the Company, approved by the Government of the Russian Federation.

Within the ambit of delivering strategic goals of boosting production, securing deliveries of oil and oil products, maintaining a market share (both in Russia and abroad), the Company plans to increase capital expenditures by a third (compared to 2015 levels). The investment development program envisages the achievement of strategic goals of hydrocarbon production growth by means of accelerated commencement of oil and gas greenfields whilst exercising a balanced external financing program. After the completion of transition to Euro-5 motor fuels production in December 2015, refineries’ modernization program will be focused on increasing processing depth. Also, the program of cutting operating costs and enhancing operating and financial efficiency will be continued. Hence the leadership in the industry by the operating costs and capital costs will be guaranteed.

... .... ...

Commenting on the results of the Board meeting, Rosneft Chairman of the Management Board Igor Sechin said: “Measures taken by the Company for strengthening its oilfield services business dimension in 2015 enabled Rosneft to increase production in order to guarantee supplies to its traditional markets while keeping operating and capital expenditures at the record-low levels. The Company consistently generates free cash flow, providing funding sources for its investment decisions in accordance with 2015-2016 business plan approved by the Board of Directors and the Long-term Development Program”.

In August 2014, it was announced that preparations by the Russian government to sell a 19.5 percent stake in the company were underway and would most likely be sold in two tranches. So far this chunk of the company was not sold, probably because of low oil prices. 

Russia oil internal consumption is generally more or less stable and growling at a very slow page outside several 'abnormal" years. In 2016 it will not probably grow much as the economy remain is conditions close to recession. Lukoil chairman has said that he  expects Russia to produce less oil  in 2016 than in 2015

Russia internal oil consumption is currently around 3.3 Mb/d, up from 3.2 Mb/d one year ago. This is a change of 3.15% from one year ago.

2005 2,785.14 1.25 %
2006 2,803.47 0.66 %
2007 2,885.10 2.91 %
2008 2,981.92 3.36 %
2009 2,888.53 -3.13 %
2010 3,081.82 6.69 %
2011 3,352.11 8.77 %
2012 3,395.11 1.28 %
2013 3,320.00 -2.21 %

It is expected that it will continue to grow by around 0.1 Mb/d per year as car fleet is rapidly growing.. Also Russia will process more raw oil in 2016 then in 2015 which also negatively influence export of raw oil

Oil producing countries with civil wars/sanctions/military conflicts  

This is a very complex topic that is beyond the scope of this analyses. But paradoxically such countries are the "last hurrah" for increasing the oil production, as they do have reserve that can't be tapped at reasonable costs now but at the same time represent the last spot of "cheap oil" deposits. Some facts:

Oil consumption

Mankind dependency on oil is hardwired into fabric of our civilization.  It is an irreplaceable product. But as much as  2/3 of this extremely valuable chemical industry resource is burned in transportation. That actually means that sales of cars and trucks are instrumental to predicting future demand at least one year ahead.  And they are growing especially fast in China and India. They also accelerated in the USA.

World oil consumption is often given in millions barrels per day (mbpd or Mb/d). BP stated that in 2014 global oil demand increased by 1.4 Mb/d over 2012 to 91.3 Mb/d.  Assuming on average $60 per barrel this is 5.5 trillion dollars a year of additional expenses on energy.   Here are actual figures of world consumption for the last decade ( World Crude Oil Consumption by Year (Thousand Barrels per Day))

2005 84,668.04 1.79 %
2006 85,586.39 1.08 %
2007 86,700.09 1.30 %
2008 86,027.86 -0.78 %
2009 84,953.36 -1.25 %
2010 87,839.10 3.40 %
2011 88,657.70 0.93 %
2012 89,668.91 1.14 %
2013 90,354.27 0.76 %

As BP noted in February 2015 "Global demand for energy is expected to rise by 37% from 2013 to 2035, or by an average of 1.4% a year".  So it is reasonable to assume that oil demand will rise approximately the same rate, which taking into account the current rate of consumption is above 1Mb/d.

The oil consumption proved to be extremely resilient  to economic conditions (that only drop in the last decade happened in 2009) and is growing globally each year by rate about 1 Mb/d due to increase of population and cars and trucks on the road. ( Peak oil - Wikipedia )

The table above does not contain data for 2014 and 205. Here they are:

As for the forecast of 2015, the growth of consumption is predicted in the range of 1.2-1.4 MB/d:

According to IEA "an annual $630 billion in worldwide upstream oil and gas investment – the total amount the industry spent on average each year for the past five years – is required just to compensate for declining production at existing fields and to keep future output flat at today’s levels" (iea.org). It is easy to see that such amount is difficult to come by when prices of oil are in $30-$40 range,  do the decline of world oil output might happen faster then growth of consumption.

OPEC forecast is usually more reliable then EIA but generally very similar, despite having different set of biases (G7 bias in case of IEA and Saudi Arabia bias for OPEC forecast) They predict higher growth of demand in 2015 and lower growth in 2016:

World oil demand is expected to grow by 1.50 mb/d in 2015 to average 92.86 mb/d, ...  In 2016, world oil demand growth is seen reaching 1.25 mb/d ...  to average 94.14 mb/d.

India is set to become the world’s third largest oil importer after the US and China before 2025, according to the International Energy Agency (IEA). India’s energy needs would overtake Japan as the third largest net importer of oil before 2025. EIA predict stable consumption level until 2040 only 1.1% growth on average (EIA)

The bulk of that demand growth is expected to come from developing countries in Asia. With U.S. supply falling, where are the new oil supplies coming from ? There simply isn’t enough to go around.

Double-digit percentage increases in oil consumption were recorded by Pakistan, Venezuela, and Azerbaijan from 2012 to 2013, and over the past five years double-digit percentage consumption increases were recorded by Central and South America (15.2 percent), the Middle East (18.3 percent), Africa (12 percent), Asia Pacific (17.4 percent), and the former Soviet Union (12.8 percent). World Sets New Oil Production and Consumption Records

Per country picture: not all countries are created equal

The most significant factor affecting petroleum demand has been human population growth. Large countries that previously were dirt poor and consumed minuscule amount of oil now now rapidly growing (India and China) are primary drivers of consumption. Arab countries also experience rapid population growth (Saudi Arabia is one example). The United States Census Bureau predicts that world population in 2030 will be almost double that of 1980. Oil production per capita peaked in 1979 at 5.5 Giga barrels/year but then declined to fluctuate around 4.5 Giga barrels/year since. In this regard, the decreasing population growth rate since the 1970s has somewhat ameliorated the per capita decline.

Not all consumers of oil are created equal.

Source: CIA World Factbook - Unless otherwise noted, information in this page is accurate as of January 1, 2014

See also: Oil consumption per capita bar chart

Country Name Oil consumption per capita
 (bbl/day per 1000 people)
Year of Estimate
Singapore 202 2012
Nauru 139 2012
Kuwait 134 2012
Luxembourg 119 2012
Bahamas, The 111 2012
United Arab Emirates 103 2012
Saudi Arabia 100 2012
Falkland Islands (Islas Malvinas) 96 2008
Seychelles 89 2012
Qatar 85 2012
Greenland 69 2012
Canada 64 2012
United States 61 2012
Netherlands 60 2012
Belgium 60 2012
Cayman Islands 57 2012
Antigua and Barbuda 56 2012
Iceland 56 2012
New Caledonia 54 2012
Libya 51 2012
Norway 47 2012
Malta 46 2012
Oman 46 2012
Korea, South 45 2012
Australia 44 2012
Taiwan 43 2012
Hong Kong 42 2012
Brunei 42 2012
Finland 41 2012
Puerto Rico 41 2012
Saint Kitts and Nevis 39 2012
Sweden 39 2012
Bahrain 38 2012
Japan 35 2012
New Zealand 35 2012
Greece 34 2012
Austria 34 2012
Trinidad and Tobago 33 2012
Slovenia 32 2012
Israel 31 2010
Barbados 31 2012
Germany 31 2012
Spain 31 2012
Switzerland 31 2012
Ireland 30 2012
Macau 29 2012
France 28 2012
Panama 28 2012
Grenada 28 2012
Suriname 27 2012
Venezuela 27 2012
Portugal 26 2012
United Kingdom 26 2012
Lebanon 26 2012
Denmark 25 2012
Italy 25 2012
Turkmenistan 25 2012
Estonia 24 2012
Iran 23 2012
Iraq 22 2012
Jamaica 22 2012
Belize 21 2012
Saint Vincent and the Grenadines 19 2012
Czech Republic 19 2012
Malaysia 19 2012
Lithuania 19 2012
Saint Lucia 18 2012
Mexico 18 2012
Chile 18 2012
Mauritius 18 2012
Armenia 18 2012
Belarus 17 2012
Fiji 17 2012
Cuba 16 2012
Djibouti 15 2012
Russia 15 2012
Brazil 10 2012
Turkey 8 2012
China 7 2012
India 3 2012
Pakistan 2 2012
Bangladesh 1 2012

Consumption in net oil exporting countries is limited to the volume of production and price while consumption in net oil importing countries by the price of oil and the oil that is left for export after internal consumer got their share (which depends on price of oil).  In other words, to paraphrase “Animal Farm,”  all pigs are equal but some pigs are more equal then others.

Of course pigs with strong military (read G7) are also more equal then others and can change this equation in their favor by force and already started doing this (USA in Iraq, France in Libya).

While demand for oil continues to increase globally, oil producing countries also increase their internal consumption rapidly. For example increase in internal consumption of Saudi Arabia led to a situation when since 2005 their exports are essentially flat despite increase of production.

Having noted Steven Kopits’ continuing track record of being remarkably prescient regarding global oil supply and demand analysis, I do have one issue with global supply & demand analysis -– consumption in net oil exporting countries versus consumption in net oil importing countries, to -- wit, to paraphrase “Animal Farm,” in my opinion some consumers are more equal than others.

Let’s assume a scenario where all oil production and refining operations are in oil exporting countries and let’s ignore things like refinery gains. Total petroleum liquids production is 80 mbpd and consumption in the oil exporting countries is 40 mbpd, and they therefore net export 40 mbpd to oil importing countries.

Production rises by 2.5 mbpd in the oil exporting countries, so total supply increases from 80 mbpd to 82.5 mbpd. However, consumption in the oil exporting countries rose by 5 mbpd. So, Net Exports = Production – Consumption = 82.5 mbpd – 45 mbpd = 37.5 mbpd.

My point is that a global supply and demand analysis would not accurately represent the situation in the net oil importing countries, i.e., a 6.25% decline in the supply available to net importers (40 mbpd to 37.5 mbpd), although global supply is up by 3.125%, 80 mbpd to 82.5 mbpd.

Of course, the crux of what I call “Export Land Model” or ELM, is that for a number of reasons (subsidies, proximity to production, legal restrictions, etc.), consumption in oil exporting countries tends to be satisfied before oil is exported.

Interesting enough, the case histories tend to show that regardless of how oil exporters treat internal consumption, given an ongoing production decline, the net export decline rate tends to exceed the production decline rate and the net export decline rate tends to accelerate with time.

For example, Indonesia subsidizes petroleum consumption and the UK heavily taxes petroleum consumption, but both former net oil exporters showed accelerating rates of decline in their net exports (in excess of their respective production decline rates).

Here are the ELM Mathematical Facts of Life:

Given an ongoing production decline in a net oil exporting country, unless they cut their domestic oil consumption at the same rate as the rate of decline in production or at a faster rate, the resulting net export decline rate will exceed the production decline rate and the net export decline rate will accelerate with time. Furthermore, a net oil exporter can become a net oil importer, even with rising production, if the rate of increase in consumption exceeds the rate of increase in production, e.g., the US and China.

The (2005) Top 33 net exporters showed a slight increase in production from 2005 to 2013, from about 62 mbpd to 63 mbpd (total petroleum liquids + other liquids, EIA), but their rate of increase in consumption exceed their rate of increase in production and their combined net exports (what I call Global Net Exports, or GNE) fell from 46 mbpd in 2005 to 43 mbpd in 2013.

Furthermore, China and India (“Chindia”) consumed an increasing share of a post-2005 declining volume of GNE. What I call Available Net Exports (ANE, or GNE less Chinidia’s Net Imports, CNI) fell from 41 mbpd in 2005 to 34 mbpd in 2013.

Here’s the Available Net Exports problem:

Given an ongoing decline in GNE–and it’s when, not if–then unless the Chindia region cuts their oil consumption at the same rate as the rate of decline in GNE, or at a faster rate, the resulting rate of decline in ANE will exceed the GNE decline rate and the ANE decline rate will accelerate with time.

From 2005 to 2013, GNE fell at 0.8%year. From 2005 to 2013, ANE -- the supply of Global Net Exports of oil available to importers other than China & India -- fell at 2.3%/year.

The USA consumption

The United States remains the world's largest consumer of petroleum. The United States uses most of oil per capita in the world.  Between 1995 and 2005, US consumption grew from 17.7 Mb/d (2,810,000 m3/d) to 20.7 Mb/d (3,290,000 m3/d), a 3,000,000 barrels per day (480,000 m3/d) increase. According to EIA Jan 12, 2016 report (eia.gov):

In other words the USA consumption is approximately equal to total Saudi export capacity. 

The U.S. Energy Information Administration (EIA) includes volumes of biofuels in data on total petroleum consumption. Per capita consumption of oil in the USA is one of the highest in the worlds and exceeds, for example, Russian per capita consumption four times.

Looking forward, both the EIA and the EIA project that U.S. oil demand will oscillate around 20 Mb/d mark. That might change if oil price stays low for several years.

The USA consumption is highly concentrated on transportation sector and in private cars sector is quite wasteful. The same population in Germany, Great Britain, France, Poland, the low countries and Scandinavia use 10 Mb/d.

Peter, 12/21/2015 at 4:33 pm
Watcher

1)US consumption is besides a couple of small countries the highest in the world.

http://www.indexmundi.com/map/?v=91000

compared to other western industrial countries it’s consumption is totally unjustifiable.

2) Driving a Ford F150 or an ampera to work has nothing to do with GDP and everything to do with needless oil consumption. So stop saying things which even an 8 year old would find obvious

US consumers will not cut consumption out of the goodness of their hearts, they will be forced to do so when prices make cuts necessary.

China consumption

China, by comparison, increased consumption from 3,400,000 barrels per day (540,000 m3/d) to 7,000,000 barrels per day (1,100,000 m3/d), an increase of 3,600,000 barrels per day (570,000 m3/d), in the same time frame.

China surpassed the United States as the world’s largest crude oil importer in 2015. As China’s economic growth is predicted to decrease from the high rates of the early part of the 21st Century that level might grow more slowly, but still China is so far behind the USA in consumption of gasoline per capita the trend toward more equal consumption clearly will increase china figures dramatically. Much depends how quickly china will grow middle class, which owns individual cars.

India consumption

India is burning over 4 mbpd now. India's oil imports are expected to more than triple from 2005 levels by 2020, rising to 5 million barrels per day.  Look at Energy Export Databrowser to see the consumption line for each country. 45 degree slope for India, just a few degrees less than China’s slope. KSA’s slope looks early exponential. No reason why it shouldn’t be. It’s their oil.

Russian consumption

Russian internal consumption grows rapidly and that means that in the future Russia will export less oils. Russian leadership have found itself unprepared to the dramatic drop of oil prices and now will take moves to refine more oil at home, and selling less raw oil. The fact that Russia sells mostly unprocessed oil was a blunder that costs Russia billions and Putin had shown ability to learn from mistakes. 

Russia's Key Energy Statistics world rank
Total Primary Energy Production
2012
55.296
Quadrillion Btu
3
Total Primary Energy Consumption
2012
31.522
Quadrillion Btu
3
Dry Natural Gas Production
2011
22,213
Billion Cubic Feet
2
Total Petroleum and Other Liquids Production
2014
10,853
Thousand Barrels Per Day
3
Total Primary Coal Production
2013
388,013
Thousand Short Tons
6

Compare that with the USA

United States' Key Energy Statistics world rank
Total Primary Energy Production
2012
79.212
Quadrillion Btu
2
Total Primary Energy Consumption
2012
95.058
Quadrillion Btu
2
Dry Natural Gas Production
2011
22,902
Billion Cubic Feet
1
Total Petroleum and Other Liquids Production
2014
13,973
Thousand Barrels Per Day
1
Total Primary Coal Production
2013
984,842
Thousand Short Tons
2

India

India's existing domestic production of about 0.86 Mb/d is only about 25% of its current consumption of 3,47 Mb/d.  According to the EIA, its production peaked at 996,000 barrels per day in 2011. Energy consumption in India is likely double by 2031.   The CAGR (compound annual growth rate) for the ten years ending in March 2014 is above 3.5%.

Domestic production of  oil is relatively stable. The EIA (US Energy Information Administration) estimates that India had close to 5.7 billion barrels of proven oil reserves at the beginning of 2014. About 44% of the reserves are onshore resource.

 Imports is likely to rise  from current 75 percent to 80 percent by the end of the 12th five year plan (2016-17). According to the Directorate General of Commercial Intelligence and Statistics, crude oil and refined products made up over 28 percent and 30 percent of India's import of principal commodities in 2010-11 and first half of 2011-12 respectively.

India is a major crude oil refiner. India petroleum refining capacity has outstripped demand consistently. Since 2002, the country's export of petroleum products has risen from 10 million tones to around 60 million tones in 2011-12, an average annual growth of over 20%.

Analyzing India’s oil consumption

According to IES (International Energy Statistics) presented by the EIA (US Energy Information Administration), the CAGR for total petroleum consumption for the world was 0.8% from 2005 to 2013. This consumption has been measured in thousand barrels per day. In the same period, China saw its consumption increase by 5.1%. In CAGR terms, India’s consumption increased by 4.1%. In contrast, the US saw its consumption decrease by 1.2%.

Per sector consumption

Oil consumption is distributed amongst four broad sectors: transportation, residential, commercial, and industrial. In terms of oil consumption, transportation is the largest sector and the one that has seen the largest growth in demand in recent decades. This growth has largely come from new demand for personal cars. In the USA it accounts for approximately 68.9% of all the oil used. Globally it is close to 55%

There are also "shadow" consumers of oil. For example military is important but often underreported or unreported consumer. So in no way published figured of consumption can be taken at face value. 
 

Consumption by transportation sector

Approximately two-thirds of U.S. oil consumption is due to the transportation sector. Slightly less for the world. 

In the USA consumption is depicted on the following picture

Private transportation is gradually became more efficient in miles per gallon metric (so energy consumption is shifted to the production of battery and electrical motors).  Most of the efficiently is already obtained on cars such as Toyota Prius which averages probably 40 miles per gallon and can run on electrical engine at low speeds/city traffic which is killing regular car efficiency.  Further substantial improvement is unlikely as traffic jams are the most important feature of morning commute in the USA. Traffic congestion, especially at rush hour, is a problem in most of the USA large cities. A 2009 study found that traffic congestion costs the United States almost $87.2 billion. The economic costs of traffic congestion have increased 63% over the past decade, and despite the declining traffic volumes caused by the economic downturn, Americans still waste more than 2.8 billion US gallons (11,000,000 m3) of fuel each year as a result of traffic congestion. Motorists also waste 4.2 billion hours annually, or one full workweek per traveler.

Private transportation sector oil consultation with gradually rise with the growth of population.

It's not only car and trucks burn fuel on the roads. Maintaining road surface is pretty fuel-intensive activity as well. With the development of the  Eisenhower Interstate Highway System in the 1950s, the road system in the USA, as of 2010, has a total length of 47,182 miles (75,932 km), making it the world's second longest after China's, and the largest public works project in US history. A large number of multilane roads while improving peak hours traffic is considerably more expensive to maintain. A Federal Highway Administration report saying the number of roads in good condition each year is going up.  As the same time roads and surface transportation will only get about half their projected $1.7 trillion need for capital projects.  The high cost of America's bad roads and bridges - Feb. 12, 2013

Industrial transportation use efficient diesel engines and improving efficiently on such engines is a very difficult task. So it will approximately consume the same amount of fuel per ton per mile of transported goods as now. Some improvement are possible by increasing of usage of railways. for maritime transportation saving are possible by lowing the speed of vessels, which was already done when price of oil was high.

In air transportation larger planes, more efficient engines can improve fuel efficiency. Between 1960 and 2000 there was a 55% overall fuel efficiency gain. Optimal amount of passengers/cargo  and fuel are also important factors. As over 80% of the fully laden take-off weight of a modern aircraft such as the Airbus A380 is craft and fuel (Fuel economy in aircraft - Wikipedia )

Pilots of turbine airplanes actually have less control over the fuel efficiency of their flights because there are so many variables, first among them being air traffic control. Turbine engines are at their least efficient down low where the air is dense. As the airplane climbs up and the air thins, the turbine produces less power and thus consumes less fuel, but the drag of the thinning air on the airplane decreases faster than the power from the engine drops, so the airplane speeds up and the fuel flow goes down. Takeoff delays really cut into fuel efficiency in a jet compared to a piston engine.

Military aviation also consumes large amount of fuel and is known for very low fuel efficiency.

Chemical industry consumption

Chemical industry consumes approximately 30% of oil.

Residual Fuel Oil Consumption By Chemical Industry - By Country - Data from Quandl

Military consumption

Also we should not forget that one of the largest consumer of oil is military which will get oil at any price. And we have the recent trend in re-armament. So the consumption of oil by military grows again. Here are some 2007 data (US military energy consumption- facts and figures)

As the saying goes, facts are many but the truth is one. The truth is that the U.S. military is the single largest consumer of energy in the world. But as a wise man once said, don't confuse facts with reality. The reality is that even U.S. Department of Defense (DoD) does not know precisely where and how much energy it consumes. This is my Fact Zero.

Below I give some facts and figures on U.S. military oil consumption based mostly on official statistics.[1] If you want to reproduce them make sure you read every footnote even if you need to put on your glasses. Also read the footnotes in this article.

According to the DoD's Federal Energy Management Report for FY2006, the DoD spent approximately $3.5 billion on facility energy and $16.5 billion on energy for tactical vehicles. To this we should add 238 million spent on non-tactical vehicles.[6] Overall, total actual cost[7] for DoD energy consumption is over $20 billion. By the way, remember that a billion has nine zeros.

According to Pentagon spokesman Chris Isleib a $10 increase per barrel of oil increases Defense Department costs by $1.3 billion per year.

Hurting Russian economy

Oil is a strategic resource using which countries pursue geostrategic interest. So manipulation on oil price is a war by other means. As Patrick J. Buchanan  noted in his article America Regains the Oil Weapon The American Conservative in American Conservative (Nov 14, 2014)  "...price, Adam Smith notwithstanding, is something we can control and manipulate"  although strangely enough he consider Saudis to be an independent player, as if they are not a vassal state dependent on Washington:

In July of 1941, after Japan occupied French Indochina, the Roosevelt administration froze Japan’s assets in the United States. Denied hard cash, Japan could not buy the U.S. oil upon which the empire depended for survival. Seeing the Dutch East Indies as her only other source, Japan prepared to invade.

But first she had to eliminate the sole strategic threat to her occupation of the East Indies—the U.S. battle fleet at Pearl Harbor. FDR’s cutoff of oil to Japan was thus a primary cause of WWII in the Pacific, which led to hundreds of thousands of U.S. war dead, the destruction of Japan, Mao’s triumph in China and a U.S. war in Korea.

A second stunning use of the oil weapon came in 1973. Arab members of OPEC imposed an embargo in retaliation for Nixon’s rescue of Israel with an airlift in the Yom Kippur war. Long gas lines helped to bring Nixon down.

Now the oil weapon appears to be back in America’s hand.

Due to the substitution of natural gas for oil in heating homes and buildings, horizontal drilling, and hydraulic fracking, which enables us to bring oil and gas out of shale rock in places like North Dakota, U.S. production has exploded. We now produce more oil than Saudi Arabia and the benefits are not only economic, but geostrategic.

... ... ...

What is Riyadh’s game?

Is the Saudi strategy to let prices fall to where it is no longer profitable for Americans to begin new fracking? Are the Saudis thinking of doing to the new oil-producing champion, USA, what we are doing to Venezuela, Russia, and Iran? Riyadh may want to let the price of oil sink below where it makes sense for energy companies to prospect for new sources of oil or invest more billions in expanding production.

Are the Saudis out to cripple us with an oil glut?

Today, not only are Iran and Iraq producing below potential, so, too, is Libya. And we have been bombing ISIS’ oil facilities in Syria.

A contrarian’s question: Would we not be better off if these countries not only restored oil production, but also expanded production and put more oil on the market than they do today? Demand creates supply, and a world oil market where there is more supply than demand would seem to be to America’s benefit. For we remain the world’s largest consumer of petroleum products. And surely it is to our benefit to enlarge both the reserves and production of oil and gas in North America.

Price pays a huge role in creating, and shrinking, supply. And price, Adam Smith notwithstanding, is something we can control and manipulate, even as China manipulates its currency.

In “America’s New Oil Weapon” in National Review, Arthur Herman of the Hudson Institute urges the United States to take bold steps to increase our supplies of oil and gas.

We should relax the rules on drilling in Alaska’s Arctic National Wildlife Refuge, which has 10 billion barrels of oil locked up. We should use as an economic weapon against OPEC the 700 million barrels in the Strategic Petroleum Reserve. We should allow the export of oil from the United States to enable us to cope with OPEC cutbacks. We should build the Keystone XL pipeline, and the other oil and gas pipelines between us and Canada now sitting in limbo.

What Herman is urging upon us is a new nationalism, a new way of thinking about international economics that puts the U.S. and its allies first, and uses our economic leverage to advance national rather than global interests.

High oil prices pressured the US economy and its perennially-undercapitalized banking system. US economy health depends on low oil prices.   But there is geopolitical dimension of the current drop of oil prices. In is not unconceivable to think that Washington reused Reagan plan of hurting Russian economy (which catalyzed dissolution of the USSR) by pushing down oil prices.

Among the many threats facing Russia’s economy, cheap oil could be the biggest of all. Low crude are depressing the ruble (at some point in early 2015 ruble  dropped to 69 per dollar from 30-35 or so; in August 24, 2015 it reached 69.96) and knocking export on which Russia depends due to its integration in the global economy: the direction Russian neoliberal pushed for since 1991. And Russian elite was taking high oil prices for granted. For example,  Russia’s draft budget for 2015 was based on $100-a-barrel oil (Oil Prices Are Hurting Russia's Economy - Businessweek, October 13, 2014)

Because of Russia’s outsize dependence on oil and gas, which account for more than two-thirds of its exports, lower energy prices can easily tip its $2 trillion economy into recession. “Growth is likely to remain positive only with oil prices above $92 to $93 a barrel,” says economist Charles Robertson of Renaissance Capital. At $90 a barrel, the economy would contract 0.4 percent next year, and at $80 a barrel it would shrink 1.7 percent, he predicts.

Do the US tried to subdue Russia the second time via decimating oil prices and thus cutting dramatically the stream of revenue from oil exports?  It is difficult to say.   But now this strategy is better understood by Russians, which created certain difficulties in its implementation despite the huge power of the US financial sector. The sector which can allow itself to play with oil futures the way it wants due to unlimited supply of the US dollars -- the world reserve currency.  The Fed remains a monetary superpower controlling the world's main reserve currency and xUSSR  and emerging countries currencies are formally or informally pegged to dollar. Therefore, its monetary policy is exported across the globe. The Fed was exporting its easy monetary policy to the rest of the world in the early-to-mid 2000s. Now  the attempt of normalization of monetary policy creating huge tightening of monetary conditions for the rest of the world.  It also dramatically devalue large export oriented Russian companies:

How Russian energy giant Gazprom lost $300bn  Justin Burke for  the New East network

Aug 07, 2015  |  The Guardian

annamarinja airman23 8 Aug 2015 09:09

Poor airman23. Have you ever heard about Dick Cheney? Have you ever looked at the Wolfowitz Doctrine? If not, then you are very much behind the nowadays understanding of fascism and fascists. On the other hand, you are such a concrete success of Mrs. Nuland-Kagan' (and likes) travails.

yemrajesh  -> psygone 8 Aug 2015 07:36

Difficult to say. If the costs are true'ly low it would have reflected at the Pump. But it hasn't. Another flaw is how can oil pumped from deeper well ( Fracked Oil) is cheaper than conventional oil. It looks more like US flexing its muscles to subdue Russia. Besides its not Just Gazprom , shell, BP, Exxon , Gulf, Mobil etc also many of US vassal states are affected. It would be interesting to see how long this artificial price drop continue with zero benefit to the customers.

Kaiama 8 Aug 2015 06:07

Since the Russians haven't rolled over the first time, the US is trying again. These days, the price of oil is determined by activity in the futures market impacting the spot price. Likewise, I expect for shares and wouldn't be surprised if someone is shorting the stock. Any oil and gas not pumped today is available to be pumped tomorrow - possibly at higher prices. Gazprom isn't going bankrupt. Neither are any of the other major oil companies.

AlbertEU  -> alpamysh 7 Aug 2015 17:09

The crisis of one industry necessarily will hurt other sectors. Hard-hit banking sector, which is credited US shale industry. The effect can be like an avalanche. Especially if it is strengthened by additional steps. I think for anybody is not a secret the existence of a huge number of empty weight of the dollar, which is produced by running the printing press. Oil trade is in the dollar, which in turn keeps the volume of the empty weight of the dollar. Now imagine a situation where part of the oil market has not traded more in dollars. It is equally affected, the USA and Russia.

But there is one important detail. Russia has never in its history, was a rich country (if you count all the inhabitants of Russia, not individuals). In the country there is no cult of consumption. The traditional religions of Russia, that is, those that have always existed in Russia (Orthodox Christianity, Islam and Buddhism) did not contribute to the emergence of such a cult.

Orthodoxy says plainly that material wealth is not important for a man. Wealth is only supplied in addition to achieve the main goal in the life of an Orthodox Christian. Therefore, to be poor in Russia is not a problem. This is a normal way of life. Hence the stoic resistance to any hardship, challenges, wars and so on. Expectations of great social upheaval in Russia, caused by the lowering of the standard of living is a little naive. Russia used to run in the marathon. Who would have more strength, intelligence and endurance is a big question. Geopolitics is a very strange science...

If this is a deliberate maneuver, an economic war on Russia, it can became very costly and might have made sense only on a short or medium-term basis (three-five years), to shock Russian elite into submission and depose Putin and his faction of "resource nationalists" which are like a bone in the throat of US multinationals.  This time Washington managed to catch  Putin's government completely  unprepared to such development of event, which increased the chances of success.

And they really took Russian elite by surprise. That's why the USA oil Blitzkrieg initially enjoyed such a huge success and immediately crashed the ruble (100% devaluation happened) as well as put Russian economy in recession. But Russians quickly realized what's going on and the game in the second part of  2015 became more complicated as those futures and shale industry junk bonds now also weight on the USA financial sector.  It this was a deliberate maneuver, it does has unanticipated side effects.

Those who sell futures for 2017 for $58 can be hit with $30 loss per barrel, if the game turn bad.  So the current low oil price movements should be viewed as  yet another neoliberal financial casino gambling session, in which stakes are really high.  It is completely counter productive from the point of view of future of mankind, but the last thing the USA elite care about is the future of mankind. They are preoccupied with the desire to preserve and enhance their global neoliberal empire and that requires crashing all potential competitors, including Russia and China. The paradox is that while they weaken Russia they really strengthen China (although they try to compensate this with playing Chinese stock market to their advantage). But Putin severely underestimated the damage West can inflict to Russian economy:

Opportunities for the West to hurt the Russian economy are limited, President Vladimir Putin said Thursday. Europe cannot stop buying Russian gas without inflicting pain on itself, and if the US tries to lower oil prices, the dollar will suffer.

If the West tries to damage Russia’s influence in the world energy market, efforts will likely backfire, the Russian President said during his twelfth annual televised question and answer session.

To really influence the world oil market a country would need to increase production and cut prices, which currently only Saudi Arabia could afford, Putin said.

The president added he didn’t expect Saudi Arabia, which has “very kind relations” with Russia, will choose to cut prices, that could also damage its own economy.

If world oil production increases, the price could go down to about $85 per barrel. “For us the price fall from $90 to $85 per barrel isn’t critical,” Putin said, adding that for Saudi Arabia it would be more sensitive.

Also the President said that being an OPEC member, Saudi Arabia would need to coordinate its action with the organization, which “is very complicated.”

Meanwhile, Russia supplies about a third of Europe's energy needs, said Putin. Finland, for example, is close to Russia economically, as it receives 70 percent of its gas from Russia.

“Can Europe stop buying Russian gas? I think it's impossible…Will they make themselves bleed? That's hard to imagine,” the Russian president said.

Since oil is sold internationally on global markets cutting the price would mean lower dollar circulation, diminishing its value in the global currency market.

"If prices decrease in the global market, the emerging shale industry will die,” Putin said.

The US shale industry has boosted domestic production, but President said that the so-called "shale revolution" was expensive and not quick to come.

Russia’s economy largely relies on energy. In 2013 more than 50 percent of the national budget was funded by gas and oil revenues. The main revenue comes from oil, as last year, oil revenues reached $191 billion, and gas $28 billion.

“Oil and gas revenues are a big contribution to the Russian budget, a big part for us when we decide on our government programs, and of course, meeting our social obligations,” the president said.

As Reuters reported:

“The Obama administration has opened a new front in the global battle for oil market share, effectively clearing the way for the shipment of as much as a million barrels per day of ultra-light U.S. crude to the rest of the world…

The Department of Commerce on Tuesday ended a year-long silence on a contentious, four-decade ban on oil exports, saying it had begun approving a backlog of requests to sell processed light oil abroad.

The action comes at a critical juncture for the global oil market. World prices have halved to less than $60 a barrel since the summer as top exporter Saudi Arabia, once a staunch defender of $100 oil, refused to cut production in the face of surging U.S. shale output and tempered global demand…

With global oil markets in flux, it is far from clear how much U.S. condensate will find a market overseas.”
(Analysis – U.S. opening of oil export tap widens battle for global market, Reuters)

Why would the oil producers, who have over the years raised the price of oil  suddenly agree to drop the price from roughly $120 a barrel to lower then $60  a barrel (Want To Hurt Russia Lower The Price Of Oil OilPrice.com?).

Let us look first at who the major oil producers are today: Saudi Arabia, Qatar, the United Arab Emirates and the United States, as well as Russia, Iran and the Islamic State.

Of those, we can make a clear distinction between the first four countries who have solid economies and ample amounts of cash reserves and who can sustain a sharp drop in revenue when oil is sold at a lower price...

The big losers in this case will clearly be the last three countries on that list: Russia, Iran and the Islamic State.

Coincidentally, these countries are currently engaged in highly controversial conflicts and are facing opposition from the United States and the West.

Russia is involved in Ukraine’s civil war, supporting the separatists in a highly criticized move condemned by the United States and its Western allies. In response, the allies began to impose sanctions as punishment and, given the ruble’s recent downturn, Russia’s credit rating being slashed and desperate gas deals in the Asian markets, it seems that the sanctions have, thus far, been highly successful.

CNN reported that Russian is Russia losing $140 billions from sanctions and low oil price according to estimates from Russia's finance minister Anton Siluanov. For every $10 drop in the per-barrel price of oil, Russia loses up to $14.6 billion a year in revenues, according to Alfa Bank. This is a real economic war (Russia has just lost the economic war with the west Business The Guardian)

The phrase “perfect storm” is over-used, but the combination of a collapsing currency, a collapsing economy and punitive interest rates make it apposite. The question now is how Putin responds. If he softens his line over Ukraine, the west’s gamble will have paid off and it will be mission accomplished. But there are hardliners in Moscow who will argue that the response to the crisis should be a siege economy and the ratcheting up of military pressure on Ukraine. If economic agony makes a wounded Russian bear more belligerent, it will prove a hollow victory.

Here’s a clip from an NPR interview with the president just last week. About halfway through the interview, NPR’s Steve Inskeep asks Obama: “Are you just lucky that the price of oil went down and therefore their currency collapsed or …is it something that you did?

“Are you just lucky that the price of oil went down and therefore their currency collapsed or …is it something that you did?

Barack Obama:

If you’ll recall, their (Russia) economy was already contracting and capital was fleeing even before oil collapsed. And part of our rationale in this process was that the only thing keeping that economy afloat was the price of oil. And if, in fact, we were steady in applying sanction pressure, which we have been, that over time it would make the economy of Russia sufficiently vulnerable that if and when there were disruptions with respect to the price of oil — which, inevitably, there are going to be sometime, if not this year then next year or the year after — that they’d have enormous difficulty managing it.” (Transcript: President Obama’s Full NPR Interview)

Obama just admit that he wanted “disruptions” in the “price of oil” because he figured Putin would have “enormous difficulty managing it”?

Isn’t that the same as saying that it was all part of Washington’s plan; that plunging prices were just the icing on the cake for their asymmetrical attack on the Russian economy? It sure sounds like it. And that would also explain why Obama decided to allow domestic producers to dump more oil on the market even though it’s going to send prices lower. Apparently, none of that matters as long as the policy hurts Russia.

So maybe the US-Saudi oil collusion theory isn’t so far fetched after all. Maybe Salon’s Patrick L. Smith was right when he said:

“Less than a week after the Minsk Protocol was signed, Kerry made a little-noted trip to Jeddah to see King Abdullah at his summer residence. When it was reported at all, this was put across as part of Kerry’s campaign to secure Arab support in the fight against the Islamic State.

Stop right there. That is not all there was to the visit, my trustworthy sources tell me. The other half of the visit had to do with Washington’s unabated desire to ruin the Russian economy. To do this, Kerry told the Saudis 1) to raise production and 2) to cut its crude price. Keep in mind these pertinent numbers: The Saudis produce a barrel of oil for less than $30 as break-even in the national budget; the Russians need $105.

Shortly after Kerry’s visit, the Saudis began increasing production, sure enough — by more than 100,000 barrels daily during the rest of September, more apparently to come…

Think about this. Winter is coming, there are serious production outages now in Iraq, Nigeria, Venezuela and Libya, other OPEC members are screaming for relief, and the Saudis make back-to-back moves certain to push falling prices still lower?

You do the math, with Kerry’s unreported itinerary in mind, and to help you along I offer this from an extremely well-positioned source in the commodities markets: “There are very big hands pushing oil into global supply now,” this source wrote in an e-mail note the other day.” (“What Really Happened in Beijing: Putin, Obama, Xi And The Back Story The Media Won’t Tell You”, Patrick L. Smith, Salon)

As New York Post tabloid, a mousepiece of Rupert Murdock,   gleefully reported

The price collapse could not have come at a worse time for Bad Vlad Putin. The Russian president needs an oil price around $100 a barrel to prop up what’s become a wartime economy. Oil and gas provide up to a third of budget revenue and compose two-thirds of exports.

Sanctions imposed over Putin’s aggression have gnawed at Russia’s economy, but this price drop bites deep: The ruble has crashed, Russian bonds are pathetic, and foreign reserves are bleeding.

While Russians will put up with harder times than Westerners will, Putin’s made extravagant commitments (bet he’d like to have back the $50 billion he squandered on corrupt Olympic construction). The world’s fave bare-chested bully had embarked on a massive arms buildup, with a hi-tech $5 billion command center just unveiled. But Putin’s visions of military resurgence are becoming unaffordable. He also made election promises to improve Russia’s wretched health-care system. Instead, he’s firing health-care workers and shuttering hospitals.

He promised higher living standards, but now the average Ivan’s feeling squeezed. And Putin faces enormous costs in Crimea and eastern Ukraine, two booby-prize welfare states, with the latter shot to ruins. Putin’s popularity remains high. For now. The gravest worry is that, with his back to the wall, he’ll play the Mother Russia card and attack again.
 

Iraq war was a war for oil

Oil, the U.S.-Middle East Free Trade Area and the Bush Agenda By Antonia Juhasz,

 Antonia Juhasz, a visiting scholar at the Institute for Policy Studies, is the author of The Bush Agenda: Invading the World, One Economy at a Time, on which part of this article is based. She is working on a new book that will make the case for the break-up of the largest American oil companies. Learn more at www.TheBushAgenda.net

Remember oil? That thing we didn’t go to war in Iraq for? Now with his war under attack, even President George W. Bush has gone public, telling reporters last August, “[a] failed Iraq … would give the terrorists and extremists an additional tool besides safe haven, and that is revenues from oil sales.” Of course, Bush not only wants to keep oil out of his enemies’ hands, he also wants to put it into the hands of his friends. 

The President’s concern over Iraq’s oil is shared by the Iraq Study Group, which on December 6 released its much-anticipated report. While the mainstream press focused on the report’s criticism of Bush’s handling of the war and the report’s call for (potential) removal of (most) U.S. troops (maybe) by 2008, ignored was the report’s focus on Iraq’s oil. Page 1, chapter 1 laid out in no uncertain terms Iraq’s importance to the Middle East, the United States and the world with this reminder: “It has the world’s second-largest known oil reserves.” The group then proceeds to give very specific and radical recommendations as to what should be done to secure those reserves. 

Guaranteeing access to Iraq’s oil, however isn’t the whole story. Despite the lives lost and the utter ruin that the war has brought, the overarching economic agenda that the administration is successfully pursuing in the Middle East might be the most enduring legacy of the war—and the most ignored.  Just two months after declaring “mission accomplished” in Iraq, Bush announced his plans for a U.S.-Middle East Free Trade Area to spread the economic invasion well-underway in Iraq to the rest of the region by 2013. Negotiations have progressed rapidly as countries seek to prove that they are with the United States, not against it.

The Bush Agenda

Within days of the 9/11 terrorist attacks, then-U.S. Trade Representative Robert Zoellick announced that the Bush administration would be “countering terror with trade.” Bush reiterated that pledge four years later when he told the United Nations, “By expanding trade, we spread hope and opportunity to the corners of the world, and we strike a blow against the terrorists. Our agenda for freer trade is part of our agenda for a freer world.” In the case of the March 2003 invasion and ongoing occupation of Iraq, these “free trade”—or corporate globalization—policies have been applied in tandem with America’s military forces.

The Bush administration used the military invasion of Iraq to oust its leader, replace its government, implement new economic and political laws, and write a new constitution. The new economic laws have transformed Iraq’s economy, applying some of the most radical—and sought-after—corporate globalization policies in the world and locking in sweeping advantages to U.S. corporations. Through the ongoing occupation, the Bush administration seeks to ensure that both Iraq’s new government and this new economic structure stay firmly in place. The ultimate goal—opening Iraq to U.S. oil companies—is reaching fruition.

In 2004, Michael Scheuer—the CIA’s senior expert on al-Qaeda until he quit in disgust with the Bush administration—wrote, “The U.S. invasion of Iraq was not preemption; it was … an avaricious, premeditated, unprovoked war against a foe who posed no immediate threat but whose defeat did offer economic advantages.”  How right he was. For it is an absolute fallacy that the Bush administration had no post-invasion plan for Iraq. The administration had a very clear economic plan that has contributed significantly to the disastrous results of the war. The plan was prepared at least two months prior to the war by the U.S. consultancy firm, Bearing Point, Inc., which then received a $250 million contract to remake Iraq’s economic infrastructure.

L. Paul Bremer III—the head of the U.S. occupation government of Iraq, the Coalition Provisional Authority (CPA)—followed Bearing Point’s plan to the letter. From May 6, 2003 until June 28, 2004, Bremer implemented his “100 Orders” with the force of law, all but a handful of which remain in place today. As the preamble to many of the orders state, they are intended to “transition [Iraq] from a … centrally planned economy to a market economy” virtually overnight and by U.S. fiat.  Bremer’s orders included firing the entire Iraqi military—some half a million men—in the first weeks of the occupation. Suddenly jobless, many of these men took their guns with them and joined the violent insurgency. Bremer also fired 120,000 of Iraq’s senior bureaucrats from every government ministry, hospital and school. {By removing the Sumi bureaucracy, they removed opposition to globalization.  The U.S. could now shop for support from what would soon be a newly elected factionalized parliament—jk.}  His laws allowed for the privatization of Iraq’s state-owned enterprises (excluding oil) and for American companies to receive preferential treatment over Iraqis in the awarding of reconstruction contracts. The laws reduced taxes on all corporations by 25 percent and opened every sector of the Iraqi economy to private foreign investment. The laws allowed foreign firms to own 100 percent of Iraqi businesses (as opposed to partnering with Iraqi firms) and to send their profits home without having to invest a cent in the struggling Iraqi economy. Iraqi laws governing banking, foreign investment, patents, copyrights, business ownership, taxes, the media, agriculture and trade were all changed to conform to U.S. goals. 

After the U.S. corporate invasion of Iraq

More than 150 U.S. companies were awarded contracts for post-war work totaling more than $50 billion.  The American companies were hired, even though Iraqi companies had successfully rebuilt the country after the previous U.S. invasion. And, because the American companies did not have to hire Iraqis, many imported foreign workers instead. The Iraqis were, of course, well aware that American firms had received billions of dollars for reconstruction, that Iraqi companies and workers had been rejected and that the country was still without basic services. The result: increasing hostility, acts of sabotage targeted directly at foreign contractors and their work, and a rising insurgency.

Halliburton received the largest contract, worth more than $12 billion, while 13 other U.S. companies received contracts worth more than $1.5 billion each. The seven largest reconstruction contracts went to the Parsons Corporation of Pasadena, Calif. ($5.3 billion); Fluor Corporation of Aliso Viejo, Calif. ($3.75 billion); Washington Group International of Boise, Idaho ($3.1 billion); Shaw Group of Baton Rouge, La. ($3 billion); Bechtel Corporation of San Francisco ($2.8 billion); Perini Corporation of Framingham, Mass. ($2.5 billion); and Contrack International, Inc. of Arlington, Va. ($2.3 billion). These companies are responsible for virtually all reconstruction in Iraq, including water, bridges, roads, hospitals, and sewers and, most significantly, electricity.

U.S. Air Force Colonel Sam Gardiner, author of a 2002 U.S. government study on the likely effect that U.S. bombardment would have on Iraq’s power system, said, “frankly, if we had just given the Iraqis some baling wire and a little bit of space to keep things running, it would have been better. But instead we’ve let big U.S. companies go in with plans for major overhauls.”

Many companies had their sights set on years-long privatization in Iraq, which helps explain their interest in “major overhauls” rather than getting the systems up and running. Cliff Mumm, head of Bechtel’s Iraq operation, put it this way: “[Iraq] has two rivers, it’s fertile, it’s sitting on an ocean of oil. Iraq ought to be a major player in the world. And we want to be working for them long term.”

And, since many U.S. contracts guaranteed that all of the companies’ costs would be covered, plus a set rate of profit (known as cost-plus contracts), they took their time, building expensive new facilities that showcased their skills and would serve their own needs should they be runing the systems one day.

Mismanagement, waste, abuse and criminality have also characterized U.S. corporations in Iraq—leading to a series of U.S. contract cancellations. For example, a $243 million contract held by the Parsons Corporation for the construction of 150 health care centers was cancelled after more than two years of work and $186 million yielded just six centers, only two of which are serving patients. Parsons was also dropped from two different contracts to build prisons, one in Mosul and the other in Nasiriyah. The Bechtel Corporation was dropped from a $50 million contract for the construction of a children’s hospital in Basra after it went $90 million over budget and a year-and-a-half behind schedule. These contracts have since been turned over to Iraqi companies.

Halliburton’s subsidiary KBR is currently being investigated by government agencies and facing dozens of charges for waste, fraud and abuse. Most significantly, in 2006, the U.S. Army cancelled Halliburton’s largest government contract, the Logistics Civil Augmentation Program (LOGCAP), which was for worldwide logistical support to U.S. troops. Halliburton will continue its current Iraq contract, but this year the LOGCAP will be broken into smaller parts and competitively bid out to other companies.

The Special Inspector General for Iraq Reconstruction (SIGIR), a congressionally-mandated independent auditing and oversight body, has opened 256 investigations into criminal fraud, four of which have resulted in convictions. SIGIR has provided critical oversight of the U.S. reconstruction, but this fall it nearly fell prey to a GOP attempt to shut down its activities well ahead of schedule. Fortunately, it survived.

SIGIR’s October 2006 report to Congress reveals the failure of U.S. corporations in Iraq. In the electricity sector, less than half of all planned projects in Iraq have been completed, while 21 percent have yet to even begin. Even the term “complete” can be misleading as, for example, SIGIR has found that contractors have failed to build transmission and distribution lines to connect new generators to homes and businesses. Thus, nationally, Iraqis have on average just 11 hours of electricity a day, and in Baghdad, the heart of instability in Iraq, there are between four and eight hours on average per day. Before the war, Baghdad averaged 24 hours per day of electricity.

While there has been greater success in finishing water and sewage projects, the fact that 80 percent of potable water projects are reported complete does little good if there is no electricity to pump the water into homes, hospitals or businesses. Meanwhile, the health care sector is truly a tragedy. Just 36 percent of planned projects are reported as complete. Of 20 planned hospitals, 12 are finished and only six of 150 planned public health centers are serving patients today.

Overall, the economy is languishing, with high inflation, low growth, and unemployment rates estimated at 30 to 50 percent {being part of a militia is providing employment} for the nation and as high as 70 percent in some areas. The International Monetary Fund has enforced a structural adjustment program on Iraq that mirrors much of Bush’s corporate globalization agenda, and the administration continues to push for Iraq’s admission into the World Trade Organization.

Iraq has not, therefore, emerged as the wealthy free market haven that Bush & Co. had hoped for. Several U.S. companies are now preparing to pack up, head home and take their billions of dollars with them, their work in Iraq left undone.  The Bush administration is likely to follow a dual strategy: continuing to pursue a corporate free-trade haven in Iraq, while helping U.S. corporations extricate themselves without consequence. The administration will also focus on the big prize: Iraq’s oil.

Winning Iraq’s oil prize: 

The Bush Agenda does have supporters, especially those corporate allies that have both shaped and benefited from the administration’s economic and military policies.  In the 2000 election cycle, the oil and gas industry donated 13 times more money to Bush’s campaign than to Al Gore’s. The Bush administration is the first in history in which the president, vice president and secretary of state are all former energy company officials. In fact, the only other U.S. president to come from the oil and gas industry was Bush’s father. Moreover, both George W. Bush and Condoleezza Rice have more experience running oil companies than they do working for the government.

Planning to secure Iraq’s oil for U.S. companies began on the tenth day of the Bush presidency, when Vice President Dick Cheney established the National Energy Policy Development Group—widely referred to as “Cheney’s Energy Task Force.” It produced two lists, titled “Foreign Suitors for Iraqi Oilfield Contracts as of 5 March 2001,” which named more than 60 companies from some 30 countries with contracts for oil and gas projects across Iraq—none of which were with American firms. However, because sanctions were imposed on Iraq at this time, none of the contracts could come into force. If the sanctions were removed—which was becoming increasingly likely as public opinion turned against the sanctions and Hussein remained in power—the contracts would go to all of those foreign oil companies and the U.S. oil industry would be shut out.

As the Bush administration stepped up its war planning, the State Department began preparations for post-invasion Iraq. Meeting four times between December 2002 and April 2003, members of the State Department’s Oil and Energy Working Group mapped out Iraq’s oil future. They agreed that Iraq “should be opened to international oil companies as quickly as possible after the war” and that the best method for doing so was through Production Sharing Agreements (PSAs).

PSAs are considered “privatization lite” in the oil business and, as such, are the favorite of international oil companies and the worst-case scenario for oil-rich states. With PSAs, oil ownership ultimately rests with the government, but the most profitable aspects of the industry—exploration and production—are contracted to the private companies under highly favorable terms. None of the top oil producers in the Middle East use PSAs, because they favor private companies at the expense of the exporting governments. In fact, PSAs are only used in respect to about 12 percent of world oil reserves {such as Nigeria}. 

 

Weakness of the propagated by MSM hypothesis about Saudi Arabia fighting for its market share

In 2013 before oil prices slump started Saudies shipped 7.54 million barrels a day on average up from 7.41 million barrels a day in 2012 (JODI website ). Saudi Arabia exported 5.49 million barrels a day in 2002, when the group began collecting oil data. Saudi monthly exports in 2013 peaked at 7.84 million barrels a day in August, the most since April and May of 2003. North Sea Brent, the benchmark for more than half of the world’s oil, averaged $110.82 a barrel during the 2010-2013.

Saudi Arabia produced 10.28 million barrels a day in October, 2015,  up from 9.69Mb/done year ago.   Chances that production will reach 11 Mb/d are slim. There are strong signs that they have huge difficulties in increasing oil extraction volume.  All their efforts to increase production led to increase of less then 1Mb/d  increase in 2015. Which is partially offset by  increase in internal consumption (In 2015 Saudi Arabia oil demand rose by a notable 0.21 mb/d, a nearly 8% annual rise)  Here is relevant quote (OilPrice.com, Dec 21, 2015). All they can achieve is 7% increase of exports.

Crude exports from Saudi Arabia rose from an average of 7.111 million barrels per day in September to 7.364 million per day in October, according to the latest data from the Joint Organizations Data Initiative (JODI), which monitors the oil industry. The report said this quantity was the most oil exported from Saudi Arabia since June and 7 percent higher than in October 2014.

The key question about propagated by MSM hypothesis about Saudi Arabia fighting for its market share is "Why piss yourself without any need?". 

That means that if Saudis withdraw one Mb/s from the market in 2015 and exported the same 7 Mb/d (instead of 7.5 Mb/d, saving around 0.5 Mb/d of their oil reserves, not counting rise in internal consumption)  their revenue would be  125 billions.  While after increasing oil production to maximum (no spare capacities) they got oil revenue $118 billions.  Less money for more effort.  Their proven oil reserves are only 268 billion barrels (EIA)  which at current rate of production (which is around 3.6 billion barrels per year) get them less then a hundred years.

Moreover they need approximately $100 oil to balance budget, so low oil prices mean depletion of their currency reserves, which if prices say on the current level will last less then 10 years.  Saudi Arabia’s record deficit of  $98 billion in 2015 At the end of October, its reserves fell to $644 billion from $732 billion at the end of last year.  The finance ministry has issued bonds worth $20 billion for the domestic market. projected means that dumping oil on the market was a self-destructive action.

The only reasonable explanation for such suicidal actions is that they launched "all-out" economic war against their arch-enemy Iran depriving it of oil revenue after lifting sanctions, hitting simultaneously Russia, Venezuela and couple of other countries they do not like.  In any case such an action should be approved by Washington as Saudis are a vassal state completely dependent on Washington for survival of their monarchic regime.

And it is easy to see huge benefits for Washington from such Saudis-Iran oil war.  Moreover may be lifting sanction itself was a gentle push for Saudis to unleash this war.

Not everybody buy MSM propagated version of Saudis behaviour. For example here is a comment from Yahoo (Saudi to diversify economy away from oil King Salman)

brian  Dec 30, 2015

This oil collapse is engineered by Saudi with the Western media. As the analysts are saying the daily over production is 1.5 million barrels. 1.5 out of 100 million daily production is ONLY 1.5% percent. Why did Saudi keep on over producing and with the media bombarding over production, the future's market is easily manipulated as oil collapsed to $36 per barrel.

This just does not make sense and not fair to the commodity producing nations. If you look at the U.S., Euro, Japan, China all they are doing is QE, printing money to supercharge their economy. On the other hand, the commodity nations are contracting.

Si

Saudi Arabia is in a conundrum, it has propped up its Clergy and kept majority of its population illiterate. This was done to keep the Kingdom under full control of its population, their women folk are even further worst off. The country is run by expatriates from around the world, mostly from Egypt, Pakistan, India, Bangladesh and Malaysia. According to Saudi rules these expatriates can not ever become citizens, even after many generations. Unlike Iran whose population is highly educated (Men and Women), Saudi administrators are afraid if Saudi gets educated there will be a revolution and that will affect how Saudi Arabia is ruled. My bet is Saudi Arabia can not progress beyond oil based economy.

 

And in another Yahoo thread Oil down 3 percent; Brent near 11-year low as oversupply worries return
Old Midwest Geezer
Saudi Arabia is fighting a financial war against Iran, its mortal enemy. Iran's main source of income is oil and SA is putting the screws to them and their Russian buddies. They picked up a perk by squeezing the US shale oil producers.

Hedging and junk debt: shale oil as subprime oil


"There are too many ugly balance sheets," warns one energy industry analyst, adding simply that "the group is not positioned for this downturn." While the mainstream media continues to chant the happy-clappy side of lower oil prices, spewing various 'statistics' about how the down-side of low oil prices is 'contained' and the huge colossal massive tax cut means 'everything is awesome' for America, the data - and now actions - do not bear this out.

Zero Hedge

Shale oil companies were not making as bandits when prices were $100. They operated in a very risky and rather unstable environment and mot of them took substantial amoount of debt.  Many used hedges regularly to make the environment more stable which is double edge sword -- it helps if price drop but deprive you of profits if price surge. Those who did were in better shape in 2015 when oil prices dropped to $35 per barrel (WTI).  Here is a good explanation of hedging from a post in peakoilbarrel.com blog:

shallow sand, 12/20/2015 at 8:56 am
Donn. Companies hedge with counter parties. Those are usually large banks. The there are 3 basic types of hedges.
  1. SWAP. The producer and counter party agree to a fixed price, say $70 per barrel. If the price goes above $70, the producer pays the counterparty the difference. If it goes below $70, the counterparty pays the producer.
  2. Cost less collars. These are like SWAPS, but in a range. Say the parties agree to a collar of $60-80. No money changes hands unless the price goes outside the range.
  3. The third is a floor, or put. The producer pays a premium to the counterparty. Say the producer buys $60 puts. If the price falls below $60, the counterparty pays the producer.

There are various hybrids and modifications of the above.

The price levels and cost of puts are based on the futures market. It is now impossible to hedge anything remotely profitable for the shale industry and a good portion of US conventional.

Furthermore, it is difficult to hedge production past 24 months. This is especially true for shale, with the high declines.

One concern with SWAPS or collars is in the event of a price spike, the producer produces less barrels than that hedged. That can wind of costing the producer a lot of $$. Also, theses types of hedges can result in very large margin requirements of the producers, but they commonly avoid those by allowing a first lien on production.

Another problem with hedges is giving up upside. If it were possible, someone who hedged in 2003 for the next ten years at $30 a barrel would be BK, as the price rocketed up, which caused OPEX to also skyrocket.

Most companies do not hedge past 24 months. Also, they do it in layers so that not as many barrels are hedged n the later years.

Many companies had significant hedge gains in 2015. There will be much less in 2016 and almost none in 2017.

Shale companies debt was typically rated as junk which means that chances for repayment of the load are low.  Just due to this fact the current talk about profitability of certain parts of shale at below then $50 prices looks a little bit suspicious even with some technology advances which were sped up by the price slum as well as lower service companies costs.   To many observers $60-$75 per barrel looks like a more reasonable minimal price for shale oil sustainable extraction, if the amount of junk bond debt is counted.

The current talk about profitability of certain parts of shale at below then $50 prices looks a little bit suspicious.   To many observers $60-$75 per barrel looks like more a reasonable minimal price for shale oil sustainable extraction, if the amount of junk bond debt is counted. 

Some technological improvements can cut costs. Neglecting ecological concerns can cut costs. The strong dollar and crash of other commodities can cut some costs (as steel and some equipment, can be bought at much lower prices). But whether all three factors mentioned can cut 50% of costs is a big multibillion question.   Gail Tverberg, a well known commentator on "end of cheap oil" problem,  thinks that the current drop of prices looks more like a harbinger of the collapse of financial system then oversupply problem on world markets (Deflationary Collapse Ahead?  Aug 28, 2015  Our Finite World )

The entire shale oil industry in America is complex mix of new technological methods and new schemes of creation of  junk bonds by Wall Street (200 billion of this debt might also be securitized like subprime mortgages). There also might be some complex derivative bets  (including but not limited to related to hedging of oil prices by shale producers, airlines, etc).

Shale oil is impossible to understand without  proper context which is the existence of  sophisticated financial system and complex financial products under neoliberalism. Wall Street can be trusted as for its ability to produce exotic financial instrument tailored for particular purpose, which can blow in your face in case of any Black Swan event.  In this case this might be securitization of debt of shale oil companies that could play a role somewhat similar to subprime mortgages but on much smaller scale as the amount of dent is miniscular in comparison with subprime mortgages.  Still, in this sense, we can call shale oil subprime oil (Broken Energy Markets and the Downside of Hubbert’s Peak Energy Matters): 

The second example of a broken energy market I want to explore is the US shale industry.  This shares certain characteristics with the wind industry in that it is a high cost but potentially very large resource. But the mechanism for integration of this resource into the market is rather different. The problem with shale gas is that over-supply has resulted in the US gas price being dumped below the level where many shale operators can make a profit. Consumers in this case benefit through getting both secure and low priced gas. But the shale operators have reportedly racked up large losses that have been covered by expanding debt. These losses may yet come home to roost with the consumer if debt defaults result in a new credit crunch where the debts are socialised via government bailouts of the banking sector.

If it were possible to produce shale gas at $1 / million btus then everyone would be happy. Consumers would be getting secure and cheap energy and producers would be making handsome profits to distribute to shareholders. That is how capitalism is supposed to work. The system as it has operated seems broken.

US Light tight oil (LTO) production appears now to have created the same problem for the liquids plays where the entrance of expensive liquids in the market have contributed to the crash in the oil price. This has created risks for the LTO operators. It remains to be seen if the LTO sector sees mass insolvencies and default on loans that may socialise these losses. The introduction of high cost LTO has also undermined the whole of the higher cost component of the conventional oil sector. If LTO could be produced in large quantities for $20 / bbl then there would be no problem since this source would  go on to substitute for the higher cost conventional sources of supply. But with costs closer to $60-$80 this is not going to happen. The conundrum for capitalism is the introduction of large quantities of higher cost energy to the system.

At this point I have to admit that nuclear power may be subject to similar limitations. It is difficult to view the Hinkley Point new nuclear build in the UK as a triumph for the consumer or the country. A better way to manage such enormous capital expenditure on vital infrastructure is via the state. The costs may eventually be socialised to the tax payer, but at least the energy is reliable and amongst the safest forms of power generation ever developed and the taxation system distributes costs in an equitable way.

A form of society could undoubtedly exist powered by nuclear, wind and shale gas. But it would be a society supported by the state with far larger numbers working in the energy industries than now, producing lower surpluses, the energy production part perhaps running at a perennial loss. Those losses have to be covered by either higher price or via the taxation system. Either way, the brave new world that awaits us will be characterized as the time of less that will be in stark contrast to the time of plenty many of us enjoyed during the 20th Century.

The so-called “shale revolution” in the U.S. was partially powered by innovation in horizontal drilling but  its cornerstone is the junk bond market. Which questions boom’s the long-term sustainability.  As The Wall Street Journal  reported total debt is   almost $200 billion. At 7% that's 14 billion of interest a year. Or at $40 per barrel 350 million barrels per year are needed just to service the debt. That's almost million barrels per day or almost total production of Bakken field (dmr.nd.gov )

And now,  the bankruptcies have begun as financing costs are not just prohibitive, there is no liquidity available at any price for many...

American oil and gas companies have gone heavily into debt during the energy boom, increasing their borrowings by 55% since 2010, to almost $200 billion.

Their need to service that debt helps explain why U.S. producers plan to continue pumping oil even as crude trades for less than $50 a barrel, down 55% since last June.

But signs of strain are building in the oil patch, where revenue growth hasn’t kept pace with borrowing. On Sunday, a private company that drills in Texas, WBH Energy LP, and its partners, filed for bankruptcy protection, saying a lender refused to advance more money and citing debt of between $10 million and $50 million. Neither the Austin-based company nor its lawyers responded to requests for comment.

Energy analysts warn defaults could be coming. “The group is not positioned for this downturn,” said Daniel Katzenberg, an analyst at Robert W. Baird & Co. “There are too many ugly balance sheets.”

...

In 2010, U.S. companies focused on producing oil and gas had $128 billion in combined total debt, according to financial data collected by S&P Capital IQ.

As of their latest quarter, such companies had $199 billion of combined total debt.

Even is "good times", before the start of current oil price slump,  the whole shale industry was financed only via junk bond market:  75 of the 97 energy E&P companies were rated by S&P below investment grade (Shale Boom Built on ‘Junk’ - GE Reports Ideas, May 19, 2014)

Although share prices for most U.S. exploration and production (E&P) companies are at all-time highs, the elephant in the room is an industry financed by the high-yield debt market, better known as “junk bonds.” The S&P says that 75 of the 97 energy E&P companies it rates are below investment grade.

The report cites a recent analysis by Energy Aspects, a commodity research consultancy, of 35 independent companies that shows a steadily worsening financial picture across the last six years. The analysis showed the companies spent as much as they brought in and “net cash flow is becoming negative while debt keeps rising.”
 

Many of the oil-drilling newcomers set up shop in order to take advantage of the low rates and easy money available in the bond market. Now that oil prices have crashed, investors are avoiding energy-related junk bonds. Moreover the whole US bond market started to turn south (in correlation with stocks) in anticipation of rate hikes. Which is making it impossible for the smaller companies to roll over their debt or attract fresh capital. The most indebted companies from Here Are America's Most Levered Energy Companies Zero Hedge are:

Source: CapIQ

When these companies need to refinance their bond they are forced to default or, if they have valuable properties, be acquired by larger companies. The whole situation with junk bonds from shale companies has some analogy with subprime loads and while lesser in scale still can serve as a catalyst for another financial meltdown (WSJ.com)

Energy companies, the fastest-growing segment of the high-yield bond market in recent years, account for nearly 18% of all outstanding high-yield bonds, up from 9% in 2009, according to J.P. Morgan.

Mr. Hamid says that the 40% possible default rate is the upper limit over the next few years, and that energy companies will take steps to avoid falling into bankruptcy, including cutting spending and selling assets.

Still even if companies make smart moves to cut costs, with oil at $65 per barrel or below for the next three years, he estimates that default rates high-yield bonds from the energy sector could still hover around 20% to 25%. “It would become a very dire scenario,” Mr. Hamid said.

After a steep plunge in oil prices last week, WTI crude, the U.S. benchmark, was recently up 3% to $68.14 a barrel in Monday morning trading.

He predicts that not that many companies will default in 2015 because many companies have hedged their exposure. But he expects that energy companies will run into trouble in 2016 as even the most conservative energy companies will see most of their hedges run off.

Energy companies are the largest sector in the high-yield universe by a wide margin. The next largest sector, J.P. Morgan estimates, is the healthcare sector, which accounts for 7.1%.
 

The total size of shale companies junk bond debt is estimated at 200 billions out of which at least 20 billions are not recoverable.

The additional huge problem is that the banks again have bundled a lot of shale companies debt into financially-engineered products like Collateralized Loan Obligations (CLOs) and Collateralized Debt Obligations (CDOs), which much like subprime CLO and CDO are overrated and might fail when borrowers are no longer able to service the loans. The rot can be concealed for a while (may be two-three years -- as long as existing well produce oil in quantity to pay the debt), but eventually, if oil prices don’t recover, a significant number of these companies are going to go under

Vultures start circling shale companies

If low prices persist for all 2016 many shale oil companies are doomed. And vultures already started circling them:

Clueless, 12/19/2015 at 10:40 pm
I would guess that by now, most can see what is happening and therefore, what is going to happen in the future since the model has been established. The banks are not going to take serious hits. Re: Magnum Hunter and New Gulf Resources.

I remember seeing some vulture investor discussions back in 2009. They were stating that they would never buy equity in failing companies: they would take control thru the debt. Much more upside possible. So, a company with $1 billion in debt has its bonds trading at say 70 cents on the $ and it is rated junk. The bond funds that hold the debt [their covenants prohibit them from holding “bankrupt” rated debt] sells to novice speculators. Then the debt plunges to 10- 30 cents on the dollar. The investment/hedge funds step in. They can buy $1 billion of debt for $300 million or less, and the are praying that the company does go belly up. If it does, they get 100% of the equity, and agree to put in another $200 million to ride out the storm. A totally non-contested, prearranged bankruptcy. If things come back [even partially], they might own a company worth $2 billion for their $500 million investment. 

shallow sand, 12/19/2015 at 11:20 pm
Clueless. You are correct. I might add that the vultures do not appear to be just purchasing the debt. They are trading unsecured debt for second lien debt. I am not sure how this works, but from what I have read, the unsecured bonds have very weak covenants. The vultures give the unsecured bond holders the option of taking pennies on the dollar or becoming subordinate the vultures on all the debt the vultures are able to trade out.

The vultures better be pretty sharp, however. 1st, they better have a good handle on the assets they are trying to acquire. Second, they better have a good team put together to operate the assets. Third, they better have a better handle on future oil and gas prices than schmucks like me.

I saw something similar to this up close in the aftermath if the 1998-99 crash. An investor group bought the bad debt from a bank for pennies on the dollar, took assignment of the liens and foreclosed.

The investor group found out in a hurry that they didn’t quite know what they had bought, and that it wasn’t easy to manage from 1000+ miles away. They had a hell of a field superintendent, but of course they thought they were smarter than him, despite him having grown up in the middle of the field.

In any event, after burning several million dollars, the sold the assets and I am sure took a big loss. They also screwed up on timing the sale. Had they held on for about 3 more years they could have at least quintupled the sale proceeds. But they knew about as much as I, or really any of us, know about where oil prices are headed.

I am sure these distressed buyers are real sharks. But sharks can die too.

What is the sustainable minimal oil price with the current oil reserves depletion

As oil is important geopolitical resource there can be no definite answer to it. Still there is a probability that the peak "cheap oil" has already occurred, but we won’t know that until several years after the fact.  There is a large discrepancy in estimates ;-).  Much depends of the type of oil in question with shale, oil sands, as deep water oil as the most expensive.

Shale oil has a break even price around $70-75 / barrel for most shale producers and at below $50, every single well is losing money. There are also pretty expensive oil extracted from  deepwater (around 7 Mb/d). Which at current oil prices will shrink approximately 10% per year.  And there are around 20 MB/d in shallow water with higher staying power but also declining 10% due to lack of investments in current price situation.  Half of oil production from future developments is uneconomic at US$60/bbl (post of AlexS 01/29/2016 at 7:06 pm )

EIA projects that in 2030 the average real price of crude oil is projected to be $72 per barrel in 2006 dollars or about $113 per barrel in nominal dollars. Projected U.S. crude oil production averages 9.3 Mb/d in 2015 and 8.8 Mb/d in 2016.  Decline is 0.5 Mb/d.  EIA is always on optimists side (they were major cheerleaders of shale bubble, which makes them more of propaganda agency then statistical outlet)  so you can probably assume that 2020 prices of oil will be above, especially if low prices will last the whole 2016.  

Pricewise EIA projections are dropping all 2015 (Short-Term Energy Outlook)

EIA short term predictions as of December 3, 2015 suggest that low oil prices might continue to dominate the first quarter of 2016:

Previously common wisdom was around that price will return to $100 per barrel on average in 2016, which the following post from Zerohedge illustrates:

6344498 Magooo

HOW HIGH OIL PRICES WILL PERMANENTLY CAP ECONOMIC GROWTH For most of the last century, cheap oil powered global economic growth. But in the last decade, the price of oil production has quadrupled, and that shift will permanently shackle the growth potential of the world’s economies.  http://www.bloomberg.com/news/articles/2012-09-23/how-high-oil-prices-will-permanently-cap-economic-growth

HIGH PRICED OIL DESTROYS GROWTH According to the OECD Economics Department and the International Monetary Fund Research Department, a sustained $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second years of higher prices.  http://www.EIA.org/textbase/npsum/high_oil04sum.pdf

BUT WE NEED HIGH OIL PRICES:  Marginal oil production costs are heading towards $100/barrel http://ftalphaville.ft.com/2012/05/02/983171/marginal-oil-production-costs-are-heading-towards-100barrel/

The marginal cost of the 50 largest oil and gas producers globally increased to US$92/bbl in 2011, an increase of 11% y-o-y and in-line with historical average CAGR growth.  http://ftalphaville.ft.com/2012/05/02/983171/marginal-oil-production-costs-are-heading-towards-100barrel/

Steven Kopits from Douglas-Westwood said the productivity of new capital spending has fallen by a factor of five since 2000. “The vast majority of public oil and gas companies require oil prices of over $100 to achieve positive free cash flow under current capex and dividend programmes. Nearly half of the industry needs more than $120,” he said http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11024845/Oil-and-gas-company-debt-soars-to-danger-levels-to-cover-shortfall-in-cash.html

Sanford C. Bernstein, the Wall Street research company, calls the rapid increase in production costs “the dark side of the golden age of shale”. In a recent analysis, it estimates that non-Opec marginal cost of production rose last year to $104.5 a barrel, up more than 13 per cent from $92.3 a barrel in 2011.   http://www.ft.com/intl/cms/s/0/ec3bb622-c794-11e2-9c52-00144feab7de.html#axzz3T4sTXDB5

Now all those consideration looks far less plausible in a short term (one year) period. Here are some "post oil price slump" considerations (in 2013 dollars):

Wikipedia article gives a more wide range of prices at wellhead (without cost of servicing the debt and transportation costs) from $35 to $95 for shale oil (Oil shale economics - Wikipedia)

The United States Department of Energy estimates that the ex-situ processing would be economic at sustained average world oil prices above US $54 per barrel and in-situ processing would be economic at prices above $35 per barrel. These estimates assume a return rate of 15%.[6] The International Energy Agency estimates, based on the various pilot projects, that investment and operating costs would be similar to those of Canadian oil sands, that means would be economic at prices above $60 per barrel at current costs. This figure does not account carbon pricing, which will add additional cost.[4] According to the New Policies Scenario introduced in its World Energy Outlook 2010, a price of $50 per tonne of emitted CO2, expected by 2035, will add additional $7.50 per barrel cost of shale oil.[4]

According to a survey conducted by the RAND Corporation, the cost of producing a barrel of oil at a surface retorting complex in the United States (comprising a mine, retorting plant, upgrading plant, supporting utilities, and spent shale reclamation), would range between $70–95 ($440–600/m3, adjusted to 2005 values). This estimate considers varying levels of kerogen quality and extraction efficiency. In order for the operation to be profitable, the price of crude oil would need to remain above these levels. The analysis also discusses the expectation that processing costs would drop after the complex was established. The hypothetical unit would see a cost reduction of 35–70% after its first 500 million barrels (79×10^6 m3) were produced. Assuming an increase in output of 25 thousand barrels per day (4.0×10^3 m3/d) during each year after the start of commercial production, the costs would then be expected to decline to $35–48 per barrel ($220–300/m3) within 12 years. After achieving the milestone of 1 billion barrels (160×10^6 m3), its costs would decline further to $30–40 per barrel ($190–250/m3).[7]

 

Floor for oil prices for 2016

The only function of economic forecasting is to make astrology look respectable.
 ~John Kenneth Galbraith

The most common view is that most US shale producers are highly vulnerable if price falls below $60 and are losing money on each barrel of oil they produce  at prices below $50. With difficulties of junk bond re-financing this figure should be higher. Some Russian sources cite $75 per bbl as a breakeven price for US shale oil.  This estimate is supported by the following detailed report BAKKEN - Single Well Economics  (Jan 4, 2016).

Here is a pretty telling graph from  Scotiabank (they have way too optimistic price for Bakken I think: adding $10 to $47 we get $57 for Bakken, which is probably 10 to 20 dollars low):

 

Source Why oil prices keep falling — and throwing the world into turmoil - Vox

As you can see plausible minimum for shale oil wellhead costs is around $55( $45+$10) per barrel ( and that  does not include the cost of servicing of junk bond debt).  If prices in 2016 remain under $50/bbl (as many forecaster expect), shale oil production in the United States will likely see a substantial decline in output and many shale companies will face merger or pushed into bankruptcy. But as for total US output, this decline will be partially offset by Gulf oil coming into production so for the first six months of 2015 total decline probably will be around 0.5Mb/d or lower. 

In any case, as 2015 has shown low prices became sticky and self reinforcing via Wall Street financial mechanisms. So chances for quick reversal in 2016 are close to zero. That spells real trouble for the US shale oil industry as well as Canada oil sands production  (QE At Work Pouring Cheap Debt Into The Shale Ponzi David Stockman's Contra Corner) as well as speculators in oil futures who will be wiped out via EFN  (outside major banks and those who shorted oil):

There are two pieces of the economic puzzle when it comes to shale. First is that most shale oil deposits are not profitable to extract except at current high prices. This drilling/extraction method is not cheap. Breakeven prices vary by region but it is safe to say that no shale oil deposits are profitable below $50/barrel and most areas require much higher prices. An average might be in the range of $65 and there are plenty of areas where the price needs to be above $80 before anyone makes a nickel.

I would just note that oil traded, albeit briefly, at $34 in the last recession. Second is the production profile of shale wells; production drops off rather precipitously after the first year (in contrast with traditional wells which deplete over much longer time frames). Combine high extraction costs with rapid depletion and the economics of shale become not only dubious but frankly insane.

Usually forecasts of oil prices are not work the paper or electrons. but there are some exceptions to this rule. For example  Bill Connoly in his Oil Price Forecast 2015-2016 - Forbes was one of the few forecasters who proved to be right as for 2015; remains to be seen for 2016.

My price forecast is that today’s $60 price is likely to be the high end for the coming two years. There may be temporary market volatility higher, but don’t expect a higher price to be sustained. At the low end, $50 seems like a floor absent a global recession.

OilPrice.com analysts think that the bankruptcy of shale companies and drastic reduction of the number of new projects and capital expenditures will eventually move the oil price up to $70+ range. And that the production of shell oil in the USA will drop 1 Mb/d in 2016 or even more, while consumption rises as record number of cars was sold in 2015.  But this process in not immediate and can take more then one year as in 2015 oil production defied gloomy forecasts and remains relatively stable (Oil Price Scenarios For 2015 And 2016 OilPrice.com_

The spare capacity data suggests that demand/supply imbalance may last three years, requiring 18 months to work through to the mid-cycle point where over-supply turns to under-supply. It is by no means certain that the market will respond to the same time dynamic when we are now dependent upon natural production capacity wastage to occur as opposed to OPEC simply closing the spigot. But this is all I have to go on.

The downturn in the current price cycle began last July and we are therefore just 6 months in. Another year of pain to go for the producers, that is unless OPEC decides to intervene.

In we count start of mid cycle from December of 2014 then we can see some upward pressure in July of 2016 or so.

Low prices also might mean that only selected shale projects ("sweet spots") with continue to be explored, diminishing of flow of oil from this source to the market ( Oil under US$60 beyond 2016 suggests market rethinking shale - Channel NewsAsia). Those places will be exhausted in two-three years making extraction more expensive on average.

If U.S. shale drillers - the world's new 'swing' producers - can still turn a profit at below US$60 a barrel, then the fall in long-dated oil prices may be rational. If not, as some bullish market analysts worry, then lower prices could be choking off new supplies the world may need as soon as next year.

"If you take the curve at face value, it appears to be saying that U.S. shale can grow ... if WTI stays below US$60 for three years. That doesn’t seem very likely," Paul Horsnell, global head of commodities research at Standard Chartered, said, referring to West Texas Intermediate crude.

"One would guess that all those companies that had been holding back from cutting projects and jobs over the past few months are not going to hold on much longer, and another shakeout will start. And it probably won’t be long before U.S. rig counts start to dive again."

Link to chart: http://link.reuters.com/tef25w 

... ... ...

U.S. oil futures for December 2017 delivery have dropped by as much as US$5 a barrel, or 8 percent, in the past two days, an even deeper retreat than last November when OPEC's surprise decision to maintain oil output despite a global glut sent markets into a deepening tailspin.

CLZ17 Commodity Futures Price Chart for Crude Oil WTI December 2017

[Note that they are close to $58 as of July 24, 2015 -- NNB]

EIA forecasts change with market prices

Short-Term Energy Outlook - U.S. Energy Information Administration (EIA)

In December 2015 EIA predicted average price of oil in 2016 much lower, around $51 a barrel, so EIA forecasts change really fast with future prices and as such are just educated guesses.

  2013 2014 2015 2016
WTI Crude Oila
(dollars per barrel)
97.98 93.17 49.08 50.89
Brent Crude Oil
(dollars per barrel)
108.56 98.89 52.93 55.78

Sustained low oil price will cut capital investment in oil dramatically

An extended period of lower oil prices would benefit consumers but would trigger energy-security concerns by heightening reliance on a small number of low-cost producers, or risk a sharp rebound in price if investment falls short, says the International Energy Agency (EIA) in the 2015 edition of its  World Energy Outlook publication (WEO-2015).We need to distinguish between oil as a chemical substance, a source used by chemical companies to produce all kind of useful things and oil as a source of motor fuel.  Oil is irreplaceable resource and burning it now deprive of oil future generations. As simple as that.

The US government policy of allowing (or, most probably, facilitating/engineering) very low oil prices is extremely unwise (I would use a stronger word) because at least for one segment of transportation (which is around 70% of total oil consumption in the USA) alternative does already exist. Small hybrid and electrical cars with prices of oil over $100 (and gasoline above $4 per gallon) are absolutely viable.

Instead now we have a huge jump in SUVs sales which became No.1 personal car category. To say nothing about light trucks. Which is the last thing we need.

Switch to natural gas in large vehicles such as buses (and small delivery trucks) also experiences a dramatic slow down (transit buses in Europe already are using this fuel on mass scale).

Again I think that it is the US government which is the culprit of destruction of the US shale industry which was build with such great effort and expense and is now on the verge of extinction. By really great people working in very difficult, challenging conditions.

The US government could buy excessive oil into strategic reserve or do something similar to keep prices at least above $70 dollars level. They could also prohibit short oil ETNs and other Wall Street machinations and for good effort jail couple of too aggressive traders for violation of some New Deal era laws(after all this is gambling, plain and simple) which are still on books after all this deregulation efforts by Clinton and Bush II administrations.

My point is that wind and solar might well be not the best choices. Other alternatives of renewable fuels exists. Meanwhile we need to save oil and the best way to do it is to ramp up oil price to above $100 level, which ensure the survival of frackers, which unfortunately became a collateral damage in some larger, possibly geopolitical play.

Actually EIA recognizes the danger of oil price spikes caused by sustained low oil prices and low capex investments Sustained low oil prices could reduce exploration and production investment - Today in Energy - U.S. Energy Information Adminis

Low oil prices, if sustained, could mark the beginning of a long-term drop in upstream oil and natural gas investment. Oil prices reflect supply and demand balances, with increasing prices often suggesting a need for greater supply. Greater supply, in turn, typically requires increased investment in exploration and production (E&P) activities. Lower prices reduce investment activity.

Overlaying annual averages of the domestic first purchase price (adjusted for inflation) on oil and natural gas investment reveals that upstream investment is highly sensitive to changes in oil prices. Given the fall in oil prices that began in mid-2014 and the relationship between oil prices and upstream investment, it is possible that investment levels over the next several years will be significantly lower than the previous 10-year annual average.

Oil production is a capital-intensive industry that requires management of existing production assets and evaluation of prospective projects often requiring years of upfront investment spending on exploration, appraisal, and development before reserves are developed and produced.

Previous investment cycles provide insights into how investment responds to crude oil price changes. In 1981 and 1982, after crude oil prices significantly increased, investment topped out at more than $100 billion (in 2014 dollars) and then averaged $30 billion to $40 billion per year into the early 2000s as crude oil prices fell and remained in the $20-$30 per barrel (b) range. From 2003 to 2014, investment spending increased from $56 billion to a high of $158 billion as crude oil prices increased from $34.53/b to $87.39/b, including several months of prices reaching more than $100/b. EIA's 2015 Annual Energy Outlook Reference case projects real domestic first purchase prices to average about $70/b in 2020. This price level could result in substantially lower annual oil and natural gas investment over the 2015-20 period than the annual average of $122 billion spent during the 2005-14 investment cycle crest period

 

Additional "end of cheap energy" readings

See also my introduction to the topic of "End of cheap energy":


Top Visited
Switchboard
Latest
Past week
Past month

NEWS CONTENTS

Old News ;-)

Home 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 1999

For the list of top articles see Recommended Links section

2017 2016 2015 2014 2013 2012 2011 2010 2009
You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store.

[May 21, 2020] The 'Clean Break' Doctrine OffGuardian

Highly recommended!
Notable quotes:
"... A Clean Break: A New Strategy for Securing the Realm ..."
"... "the right to plunder anything one can get their hands on" ..."
"... "the UK and France in March 2011 which led the international community to support an intervention in Libya to protect civilians from forces loyal to Muammar Gaddafi" ..."
May 21, 2020 | off-guardian.org

n 1996 a task force, led by Richard Perle, produced a policy document titled A Clean Break: A New Strategy for Securing the Realm for Benjamin Netanyahu, who was then in his first term as Prime Minister of Israel, as a how-to manual on approaching regime change in the Middle East and for the destruction of the Oslo Accords.

The "Clean Break" policy document outlined these goals:

Ending Yasser Arafat's and the Palestinian Authority's political influence, by blaming them for acts of Palestinian terrorism Inducing the United States to overthrow Saddam Hussein's regime in Iraq. Launching war against Syria after Saddam's regime is disposed of. Followed by military action against Iran, Saudi Arabia, and Egypt.

"Clean Break" was also in direct opposition to the Oslo Accords, to which Netanyahu was very much itching to obliterate. The Oslo II Accord was signed just the year before, on September 28th 1995, in Taba, Egypt.

During the Oslo Accord peace process, Likud leader Benjamin Netanyahu accused Rabin's government of being "removed from Jewish tradition and Jewish values." Rallies organised by the Likud and other right-wing fundamentalist groups featured depictions of Rabin in a Nazi SS uniform or in the crosshairs of a gun.

In July 1995, Netanyahu went so far as to lead a mock funeral procession for Rabin, featuring a coffin and hangman's noose.

The Oslo Accords was the initiation of a process which was to lead to a peace treaty based on the United Nations Security Council Resolutions 242 and 338, and at fulfilling the "right of the Palestinian people to self-determination." If such a peace treaty were to occur, with the United States backing, it would have prevented much of the mayhem that has occurred since.

However, the central person to ensuring this process, Yitzak Rabin, was assassinated just a month and a half after the signing of the Oslo II Accord, on November 4th, 1995. Netanyahu became prime minister of Israel seven months later. "Clean Break" was produced the following year.

On November 6th, 2000 in the Israeli daily Ha'aretz, Israeli Justice Minister Yossi Beilin, who was the chief negotiator of the Oslo peace accords, warned those Israelis who argued that it was impossible to make peace with the Palestinians:

Zionism was founded in order to save Jews from persecution and anti-Semitism, and not in order to offer them a Jewish Sparta or – God forbid – a new Massada."

On Oct. 5, 2003, for the first time in 30 years, Israel launched bombing raids against Syria, targeting a purported "Palestinian terrorist camp" inside Syrian territory. Washington stood by and did nothing to prevent further escalation.

"Clean Break" was officially launched in March 2003 with the war against Iraq, under the pretence of "The War on Terror". The real agenda was a western-backed list of regime changes in the Middle East to fit the plans of the United Kingdom, the U.S. and Israel.

However, the affair is much more complicated than that with each player holding their own "idea" of what the "plan" is. Before we can fully appreciate such a scope, we must first understand what was Sykes-Picot and how did it shape today's world mayhem.

Arabian Nights

WWI was to officially start July 28th 1914, almost immediately following the Balkan wars (1912-1913) which had greatly weakened the Ottoman Empire.

Never one to miss an opportunity when smelling fresh blood, the British were very keen on acquiring what they saw as strategic territories for the taking under the justification of being in war-time, which in the language of geopolitics translates to "the right to plunder anything one can get their hands on" .

The brilliance of Britain's plan to garner these new territories was not to fight the Ottoman Empire directly but rather, to invoke an internal rebellion from within. These Arab territories would be encouraged by Britain to rebel for their independence from the Ottoman Empire and that Britain would support them in this cause.

These Arab territories were thus led to believe that they were fighting for their own freedom when, in fact, they were fighting for British and secondarily French colonial interests.

In order for all Arab leaders to sign on to the idea of rebelling against the Ottoman Sultan, there needed to be a viable leader that was Arab, for they certainly would not agree to rebel at the behest of Britain.

Lord Kitchener, the butcher of Sudan, was to be at the helm of this operation as Britain's Minister of War. Kitchener's choice for Arab leadership was the scion of the Hashemite dynasty, Hussein ibn Ali, known as the Sherif of Mecca who ruled the region of Hejaz under the Ottoman Sultan.

Hardinge of the British India Office disagreed with this choice and wanted Wahhabite Abdul-Aziz ibn Saud instead, however, Lord Kitchener overruled this stating that their intelligence revealed that more Arabs would follow Hussein.

Since the Young Turk Revolution which seized power of the Ottoman government in 1908, Hussein was very aware that his dynasty was in no way guaranteed and thus he was open to Britain's invitation to crown him King of the Arab kingdom.

Kitchener wrote to one of Hussein's sons, Abdallah, as reassurance of Britain's support:

If the Arab nation assist England in this war that has been forced upon us by Turkey, England will guarantee that no internal intervention take place in Arabia, and will give Arabs every assistance against foreign aggression."

Sir Henry McMahon who was the British High Commissioner to Egypt, would have several correspondences with Sherif Hussein between July 1915 to March 1916 to convince Hussein to lead the rebellion for the "independence" of the Arab states.

However, in a private letter to India's Viceroy Charles Hardinge sent on December 4th, 1915, McMahon expressed a rather different view of what the future of Arabia would be, contrary to what he had led Sherif Hussein to believe:

[I do not take] the idea of a future strong united independent Arab State too seriously the conditions of Arabia do not and will not for a very long time to come, lend themselves to such a thing."

Such a view meant that Arabia would be subject to Britain's heavy-handed "advising" in all its affairs, whether it sought it or not.

In the meantime, Sherif Hussein was receiving dispatches issued by the British Cairo office to the effect that the Arabs of Palestine, Syria, and Mesopotamia (Iraq) would be given independence guaranteed by Britain, if they rose up against the Ottoman Empire.

The French were understandably suspicious of Britain's plans for these Arab territories. The French viewed Palestine, Lebanon and Syria as intrinsically belonging to France, based on French conquests during the Crusades and their "protection" of the Catholic populations in the region.

Hussein was adamant that Beirut and Aleppo were to be given independence and completely rejected French presence in Arabia. Britain was also not content to give the French all the concessions they demanded as their "intrinsic" colonial rights.

Enter Sykes and Picot.

... ... ...

Throughout the 1920s and 1930s violent confrontations between Jews and Arabs took place in Palestine costing hundreds of lives. In 1936 a major Arab revolt occurred over 7 months, until diplomatic efforts involving other Arab countries led to a ceasefire.

In 1937, a British Royal Commission of Inquiry headed by William Peel concluded that Palestine had two distinct societies with irreconcilable political demands, thus making it necessary to partition the land.

The Arab Higher Committee refused Peel's "prescription" and the revolt broke out again. This time, Britain responded with a devastatingly heavy hand. Roughly 5,000 Arabs were killed by the British armed forces and police. Following the riots, the British mandate government dissolved the Arab Higher Committee and declared it an illegal body.

In response to the revolt, the British government issued the White Paper of 1939, which stated that Palestine should be a bi-national state, inhabited by both Arabs and Jews.

Due to the international unpopularity of the mandate including within Britain itself, it was organised such that the United Nations would take responsibility for the British initiative and adopted the resolution to partition Palestine on November 29th, 1947.

Britain would announce its termination of its Mandate for Palestine on May 15th, 1948 after the State of Israel declared its independence on May 14th, 1948.

A New Strategy for Securing Whose Realm?

Despite what its title would have you believe, "Clean Break" is neither a "new strategy" nor meant for "securing" anything. It is also not the brainchild of fanatical neo-conservatives: Dick Cheney and Richard Perle, nor even that of crazed end-of-days fundamentalist Benjamin Netanyahu, but rather has the very distinct and lingering odour of the British Empire.

"Clean Break" is a continuation of Britain's geopolitical game, and just as it used France during the Sykes-Picot days it is using the United States and Israel.

The role Israel has found itself playing in the Middle East could not exist if it were not for over 30 years of direct British occupation in Palestine and its direct responsibility for the construction of the Israeli-Palestinian conflict, which set a course for destruction and endless war in this region long before Israel ever existed.

It was also Britain who officially launched operation "Clean Break" by directly and fraudulently instigating an illegal war against Iraq to which the Chilcot Inquiry, aka Iraq Inquiry , released 7 years later, attests to.

This was done by the dubious reporting by British Intelligence setting the pretext for the U.S.' ultimate invasion into Iraq based off of fraudulent and forged evidence provided by GCHQ, unleashing the "War on Terror", aka "Clean Break" outline for regime change in the Middle East.

In addition, the Libyan invasion in 2011 was also found to be unlawfully instigated by Britain.

In a report published by the British Foreign Affairs Committee in September 2016, it was concluded that it was "the UK and France in March 2011 which led the international community to support an intervention in Libya to protect civilians from forces loyal to Muammar Gaddafi" .

The report concluded that the Libyan intervention was based on false pretence provided by British Intelligence and recklessly promoted by the British government.

If this were not enough, British Intelligence has also been caught behind the orchestrations of Russia-Gate and the Skripal affair .

Therefore, though the U.S. and Israeli military have done a good job at stealing the show, and though they certainly believe themselves to be the head of the show, the reality is that this age of empire is distinctly British and anyone who plays into this game will ultimately be playing for said interests, whether they are aware of it or not.

Originally published by Strategic Culture


Almondson ,

Yossi B said:

Zionism was founded in order to save Jews from persecution and anti-Semitism

Ever heard of Dumbo? He's a flying elephant.

The crusade in the ME will continue, with Israel the top dog until America's military support is no longer there. Even without the Israeli eastern european invaders, the area is primed for perpetual tribal warfare because the masses are driven by tribalist doctrines and warped metaphysics dictated by insane and inhumane parasites (priests). It is the epicenter of a spiritual plague that has infected most of the planet.

paul ,

There is complete continuity between the activities of Zionist controlled western countries and those of the present day.

In the 1930s, there were about 300,000 adult Palestinian males. Over 10% were killed, imprisoned and tortured or driven into exile. 100,000 British troops were sent to Palestine to destroy completely Palestinian political and military organisations. Wingate set up the Jew terror gangs who were given free rein to murder, rape and burn, in preparation for the complete ethnic cleansing of the country.

We see the same ruthless, genocidal brutality on an even greater scale in the present day, serving exactly the same interests. Nothing has ever come of trying to negotiate with the Zionists and their western stooges – just further disasters. It is only resolute and uncompromising resistance that has ever achieved anything. Hezbollah kicking their Zionist arses out of Lebanon in 2000 and keeping them out in 2006. Had they not done so, Lebanon would still be under Zionist occupation and covered with their filthy illegal settlements.

They have never stopped and they never will. The objective is to create a vast Zionist empire comprising the whole of Palestine, Jordan, Lebanon and Syria, and parts of Egypt, Turkey, Iraq, and Saudi Arabia. This plan has never changed and it never will. The Zionist thieves will shortly steal what little is left of Palestine. But the thieving will not end there. It will just move on to neighbouring countries.

The prime reason they have been able to get away with this is not their control of British and US golems. It is by playing the old, dirty colonial games of divide and rule, with the Quisling stooge dictators serving their interests. They have always been able to set Sunni against Shia, and different factions against others. The dumb Arabs fall for it every time. Their latest intrigues are directed at the destruction of Iran, the next victim on their target list after Iraq, Libya and Syria. And the Quisling dictators of Saudi Arabia are openly agitating for this and offering to pay for all of it. Syria sent troops to join the US invasion of Iraq in 1991, though Iraqi troops fought and died in Syria in 1973 against Israel. Egypt allows Israel to use its airspace to carry out the genocidal terror bombing of Gaza.

All this is contemptible enough and fits into racist stereotypes of Arabs as stupid, irrational, corrupt, easily bought, violent and treacherous. This of course does not apply to the populations of those countries, but it is a legitimate assessment of their Quisling dictators, with a (very) few honourable exceptions.

Seamus Padraig ,

Of course, Arab rulers who don't tow the Zionist line generally get overthrown, don't they? And that usually requires the efforts/intervention of FUKUS, doesn't it? So you can't really pretend that 'Arab stupidity' is the main factor.

Richard Le Sarc ,

The fact that, as the Yesha Council of Rabbis and Torah Sages declared in 2006, as Israel was bombing Lebanon 'back to the Stone Age', under Talmudic Judaism, killing civilians is not just permissible, but a mitzvah, or good deed, explains Zionist behaviour. Other doctrines allow an entire 'city' eg Gaza, to be devastated for the 'crimes' of a few, and children, even babies, to be killed if they would grow up to 'oppose the Jews'. Dare mention these FACTS, seen everyday in Israeli barbarity, and the 'antisemitism' slurs flow, as ever.

Julia ,

" is that this age of empire is distinctly British"

.it takes some balls to make such an absurd statement and still expect to be taken seriously. The US of course with its 800 military bases around the world and gifts of 40 billion a year to Israel has no opinion on the future of the Middle East. You would have us believe that they are just humble onlookers, as a small bankrupt country tells them what to do. We are being told that the CIA, the most formidable spy agency and manipulator of countries in history, sits quietly by as the British and Israel tells the US what to do.
Absurd isn't it., Clearly the truth is that Israel is just another military base for the US in the Middle East, easily the most important geopolitical region in the world. They fund it, arm it, and protect it from all attacks, Israel does as it is told by the US for the most part despite the pantomime on the surface.
Many on the far right like to hide US interests behind a wall of antisemitism that likes to paint 'the jews' as an all powerful enemy but this is just cover for Israel's real geopolitical roll as a US puppet.
Time and time again all we are seeing is attempt to write the US, the largest empire in the history out of the news and out of the history books, like it is some invisible benign force that has not interests, no control and does noting to forward it's interests and it's empire.

''To find out who rules over you, simply find out who you are not allowed to criticise."

I don't know about you, but I'm not 10 years old and I know I am looking at Empire and it's power being flexed every day in every part do the world, especial in the parts of the world that it funds with trillions of dollars.

Julia ,

" is that this age of empire is distinctly British"

.it takes some balls to make such an absurd statement and still expect to be taken seriously. The US of course with its 800 military bases around the world and gifts of 40 billion a year to Israel has no opinion on the future of the Middle East. You would have us believe that they are just humble onlookers, as a small bankrupt country tells them what to do. We are being told that the CIA, the most formidable spy agency and manipulator of countries in history, sits quietly by as the British and Israel tells the US what to do.
Absurd isn't it., Clearly the truth is that Israel is just another military base for the US in the Middle East, easily the most important geopolitical region in the world. They fund it, arm it, and protect it from all attacks, Israel does as it is told by the US for the most part despite the pantomime on the surface.
Many on the far right like to hide US interests behind a wall of antisemitism that likes to paint 'the jews' as an all powerful enemy but this is just cover for Israel's real geopolitical roll as a US puppet.
Time and time again all we are seeing is attempt to write the US, the largest empire in the history out of the news and out of the history books, like it is some invisible benign force that has not interests, no control and does noting to forward it's interests and it's empire.

''To find out who rules over you, simply find out who you are not allowed to criticise."

I don't know about you, but I'm not 10 years old and I know I am looking at Empire and it's power being flexed every day in every part do the world, especial in the parts of the world that it funds with trillions of dollars.

Richard Le Sarc ,

The antithesis of the truth. It is US politicians who flock to AIPAC's meeting every year to pledge UNDYING fealty to Israel, not Israeli politicians pledging loyalty to the USA. It is Israeli and dual loyalty Jewish oligarchs funding BOTH US parties, it is US politicians throwing themselves to the ground in adulation when Bibi the war criminal addresses the Congress with undisguised contempt, not Israeli politicians groveling to the USA. The master-servant relationship is undisguised.

Pyewacket ,

In Daniel Yergin's The Prize, a history of the Oil industry, he provides another interesting angle to explain British interest in the region. He states that at that time, Churchill realised that a fighting Navy powered by Coal, was not nearly as good or efficient as one using Oil as a fuel, and that securing supplies of the stuff was the best way forward to protect the Empire.

BigB ,

Yergin would be right. The precursor of the First World War was a technological arms race and accelerated 'scientific' perfection of arsenals – particularly naval – in the service of imperialism. British and German imperialism. The full story involves the Berlin to Cairo railway and the resource grab that went with it. I'm a bit sketchy on the details now: but Churchill had a prominent role, rising to First Lord of the Admiralty.

Docherty and Macgregor have exposed the hidden history. F W Engdahl has written about WW1 being the first oil war.

Andreas Schlüter ,

And don´t forget which of the US Military command regions into which the US Military divided the WHOLE World is named "US CENTCOM"!
„One Thing Must be Clear to the World: The US Power Elite Regards the Whole Globe as Their Colony!": https://wipokuli.wordpress.com/2016/10/26/one-thing-must-be-clear-to-the-world-the-us-power-elite-regards-the-whole-globe-as-their-colony/

Antonym ,

In 1996 a task force, led by Richard Perle, produced a policy document titled A Clean Break: A New Strategy for Securing the Realm for Benjamin Netanyahu

No source link for this!

By the way 1996 was during the Clinton administration. Warren Christopher was secretary of state and John Deutch was the Director of Central Intelligence . George Tenet was appointed the Deputy Director of Central Intelligence in July 1995. After John Deutch's abrupt resignation in December 1996, Tenet served as acting director.

Reg ,

Here you go, sonny boy

http://www.dougfeith.com/docs/Clean_Break.pdf

Richard Le Sarc ,

Antsie, what are you going to deny next? The USS Liberty? Deir Yassin? The Lavon Affair? Sabra, Shatilla? Qana (twice)? The Five Celebrating Israelis on 9/11?Does not impress.

[May 20, 2020] A huge fleet of 117 tankers is bringing super cheap crude to China

May 20, 2020 | www.unz.com

vot tak , says: Show Comment May 20, 2020 at 5:01 am GMT

A huge fleet of 117 tankers is bringing super cheap crude to China

https://www.rt.com/business/488927-china-buys-super-cheap-oil/

"At present, a total of 117 very large crude carriers (VLCCs) -- each capable of shipping 2 million barrels of oil -- are traveling to China for unloading at its ports between the middle of May and the middle of August. If those supertankers transport standard-size crude oil cargoes, it could mean that China expects at least 230 million barrels of oil over the next three months, according to Bloomberg. The fleet en route to China could be the largest number of supertankers traveling to the world's top oil importer at one time, ever, Bloomberg News' Firat Kayakiran says.

Many of the crude oil cargoes are likely to have been bought in April, when prices were lower than the current price and when WTI Crude futures even dipped into negative territory for a day.

Last month, emerging from the coronavirus lockdown, China's oil refiners were already buying ultra-cheap spot cargoes from Alaska, Canada, and Brazil, taking advantage of the deep discounts at which many crude grades were being offered to China with non-existent demand elsewhere. ( https://oilprice.com/Energy/Crude-Oil/Chinese-Bargain-Hunters-Are-Stucking-Up-On-Ultra-Cheap-Crude-Oil.html )

China was also estimated to have doubled the fill rate at its strategic and commercial inventories in Q1 2020, taking advantage of the low oil prices and somewhat supporting the oil market amid crashing demand by diverting more imports to storage, rather than outright slashing crude imports.

China's crude oil imports jumped in April to about 9.84 million barrels per day as demand for fuels began to rebound and local refiners started to ramp up crude processing, according to Chinese customs data cited by Reuters."

Well, now we know who was taking advantage of those pindo negative oil price sales ;-D

The Chinese are at the advantage here, not being neocon/likud bottom rungers. The desperation of zionazia is expressed in choosing the neocon lowlife to run things in the western colonies. Yes, their extremism provides the initiative in getting extreme capitalist policies through and continues the push to the extreme far right in the zionazi-gay colonies. But it is at the cost of intelligent long term strategy. Short term imaginary gain at the cost of real gain. The fast food, face feeding, bum bandit approach. The quick fixers.

[May 17, 2020] Why U.S. Must Be Prosecuted for Its War Crimes Against Iraq by Eric Zuesse

May 16, 2020 | astutenews.com
The reason why the U.S. Government must be prosecuted for its war-crimes against Iraq is that they are so horrific and there are so many of them, and international law crumbles until they become prosecuted and severely punished for what they did. We therefore now have internationally a lawless world (or "World Order") in which "Might makes right," and in which there is really no effective international law, at all. This is merely gangster "law," ruling on an international level. It is what Hitler and his Axis of fascist imperialists had imposed upon the world until the Allies -- U.S. under FDR, UK under Churchill, and U.S.S.R. under Stalin -- defeated it, and established the United Nations. Furthermore, America's leaders deceived the American public into perpetrating this invasion and occupation, of a foreign country (Iraq) that had never threatened the United States; and, so, this invasion and subsequent military occupation constitutes the very epitome of "aggressive war" -- unwarranted and illegal international aggression. (Hitler, similarly to George W. Bush, would never have been able to obtain the support of his people to invade if he had not lied, or "deceived," them, into invading and militarily occupying foreign countries that had never threatened Germany, such as Belgium, Poland and Czechoslovakia. This -- Hitler's lie-based aggressions -- was the core of what the Nazis were hung for, and yet America now does it.)

As Peter Dyer wrote in 2006, about "Iraq & the Nuremberg Precedent" :

Invoking the precedent set by the United States and its allies at the Nuremberg trial in 1946, there can be no doubt that the U.S.-led invasion of Iraq in 2003 was a war of aggression. There was no imminent threat to U.S. security nor to the security of the world. The invasion violated the U.N. Charter as well as U.N. Security Council Resolution #1441.

The Nuremberg precedent calls for no less than the arrest and prosecution of those individuals responsible for the invasion of Iraq, beginning with President George W. Bush, Vice President Dick Cheney, Secretary of Defense Donald Rumsfeld, Secretary of State Condoleez[z]a Rice, former Secretary of State Colin Powell and former Deputy Secretary of Defense Paul Wolfowitz.

Take, for example, Condoleezza Rice, who famously warned "We don't want the smoking gun to be a mushroom cloud." (That warning was one of the most effective lies in order to deceive the American public into invading Iraq, because President Bush had had no real evidence, at all, that there still remained any WMD in Iraq after the U.N. had destroyed them all, and left Iraq in 1998 -- and he knew this; he was informed of this; he knew that he had no real evidence, at all: he offered none; it was all mere lies .)

So, the Nuremberg precedent definitely does apply against George W, Bush and his partners-in-crime, just as it did against Hitler and his henchmen and allies.

The seriousness of this international war crime is not as severe as those of the Nazis were, but nonetheless is comparable to it .

On 15 March 2018, Medea Benjamin and Nicolas J.S. Davies headlined at Alternet "The Staggering Death Toll in Iraq" and wrote that "our calculations, using the best information available, show a catastrophic estimate of 2.4 million Iraqi deaths since the 2003 invasion," and linked to solid evidence, backing up their estimate.

On 6 February 2020, BusinessInsider bannered "US taxpayers have reportedly paid an average of $8,000 each and over $2 trillion total for the Iraq war alone" , and linked to the academic analysis that supported this estimate. The U.S. regime's invasive war, which the Bush gang perpetrated against Iraq, was also a crime against the American people (though Iraqis suffered far more from it than we did).

On 29 September 2015, I headlined "GALLUP: 'Iraqis Are the Saddest & One of the Angriest Populations in the World'," and linked to Gallup's survey of 1,000 individuals in each of 148 countries around the world, which found that Iraq had the highest "Negative Experience Score." That score includes "sadness," "physical pain," "anger," and other types of misery -- and Iraq, after America's invasion, has scored the highest in the entire world, on it, and in the following years has likewise scored at or near the highest on "Negative Experience Score." For example: in the latest, the 2019, Gallup "Global Emotions Report" , Iraq scores fourth from the top on "Negative Experience Score," after (in order from the worst) Chad, Niger, and Sierra Leone. (Gallup has been doing these surveys ever since 2005, but the first one that was published under that title was the 2015 report, which summarized the 2014 surveys' findings.) Of course, prior to America's invasion, there had been America's 1990 war against Iraq and the U.S. regime's leadership and imposition of U.N. sanctions (which likewise were based largely on U.S.-regime-backed lies , though not totally on lies like the 2003 invasion was), which caused massive misery in that country; and, therefore, not all of the misery in Iraq which showed up in the 2015 Global Emotions Report was due to only the 2003 invasion and subsequent military occupation of that country. But almost all of it was, and is. And all of it was based on America's rulers lying to the public in order to win the public's acceptance of their evil plans and invasions against a country that had never posed any threat whatsoever to Americans -- people residing in America . Furthermore, it is also perhaps relevant that the 2012 "World Happiness Report" shows Iraq at the very bottom of the list of countries (on page 55 of that report) regarding "Average Net Affect by Country," meaning that Iraqis were the most zombified of all 156 nationalities surveyed. Other traumatized countries were immediately above Iraq on that list. On "Average Negative Affect," only "Palestinian Territories" scored higher than Iraq (page 52). After America's invasion based entirely on lies, Iraq is a wrecked country, which still remains under the U.S. regime's boot, as the following will document:

Bush's successors, Obama and Trump, failed to press for Bush's trial on these vast crimes, even though the American people had ourselves become enormously victimized by them, though far less so than Iraqis were. Instead, Bush's successors have become accessories after the fact, by this failure to press for prosecution of him and his henchmen regarding this grave matter. In fact, the "Defense One" site bannered on 26 September 2018, "US Official: We May Cut Support for Iraq If New Government Seats Pro-Iran Politicians" , and opened with "The Trump administration may decrease U.S. military support or other assistance to Iraq if its new government puts Iranian-aligned politicians in any 'significant positions of responsibility,' a senior administration official told reporters late last week." The way that the U.S. regime has brought 'democracy' to Iraq is by threatening to withdraw its protection of the stooge-rulers that it had helped to place into power there, unless those stooges do the U.S. dictators' bidding, against Iraq's neighbor Iran. This specific American dictator, Trump, is demanding that majority-Shiite Iraq be run by stooges who favor, instead, America's fundamentalist-Sunni allies, such as the Saud family who own Saudi Arabia and who hate and loathe Shiites and Iran. The U.S. dictatorship insists that Iraq, which the U.S. conquered, serve America's anti-Shiite and anti-Iranian policy-objectives. "The U.S. threat, to withhold aid if Iran-aligned politicians occupy any ministerial position, is an escalation of Washington's demands on Baghdad." The article went on to quote a "senior administration official" as asserting that, "if Iran exerts a tremendous amount of influence, or a significant amount of influence over the Iraqi government, it's going to be difficult for us to continue to invest." Get the euphemisms there! This article said that "the Trump administration has made constraining Iran's influence in the region a cornerstone of their foreign policy." So, this hostility toward Iran must be reflected in Iraq's policies, too. It's not enough that Trump wants to destroy Iran like Bush has destroyed Iraq; Trump demands that Iraq participate in that crime, against Iraq's own neighbor. This article said that, "There have also been protests against 'U.S. meddling' in the formation of a new Iraqi government, singling out Special Presidential Envoy Brett McGurk for working to prevent parties close to Iran from obtaining power." McGurk is the rabidly neconservative former high G.W. Bush Administration official, and higher Obama Administration official, who remained as Trump's top official on his policy to force Iraq to cooperate with America's efforts to conquer Iran. Trump's evil is Obama's evil, and is Bush's evil. It is bipartisan evil, no matter which Party is in power. Though Trump doesn't like either the Bushes or Obamas, all of them are in the same evil policy-boat. America's Deep State remains the same, no matter whom it places into the position of nominal power. The regime remains the same, regardless.

On April 29th, the whistleblowing former UK Ambassador Craig Murray wrote :

Nobody knows how many people died as a result of the UK/US Coalition of Death led destruction of Iraq, Afghanistan, Libya and, by proxy, Syria and Yemen. Nobody even knows how many people western forces themselves killed directly. That is a huge number, but still under 10% of the total. To add to that you have to add those who died in subsequent conflict engendered by the forced dismantling of the state the West disapproved of. Some were killed by western proxies, some by anti-western forces, and some just by those reverting to ancient tribal hostility and battle for resources into which the country had been regressed by bombing.

You then have to add all those who died directly as a result of the destruction of national infrastructure. Iraq lost in the destruction 60% of its potable drinking water, 75% of its medical facilities and 80% of its electricity. This caused millions of deaths, as did displacement. We are only of course talking about deaths, not maiming.

UK's Prime Minister Tony Blair should hang with the U.S. gang, but who is calling for this? How much longer will the necessary prosecutions wait? Till after these international war-criminals have all gone honored to their graves?

Although the International Criminal Court considered and dismissed possible criminal charges against Tony Blair's UK Government regarding the invasion and military occupation of Iraq, the actual crime, of invading and militarily occupying a country which had posed no threat to the national security of the invader, was ignored, and the conclusion was that "the situation did not appear to meet the required threshold of the Statute" (which was only "Willful killing or inhuman treatment of civilians" and which ignored the real crime, which was "aggressive war" or "the crime of aggression" -- the crime for which Nazis had been hanged at Nuremberg). Furthermore, no charges whatsoever against the U.S. Government (the world's most frequent and most heinous violator of international law) were considered. In other words: the International Criminal Court is subordinate to, instead of applicable to, the U.S. regime. Just like Adolf Hitler had repeatedly made clear that, to him, all nations except Germany were dispensable and only Germany wasn't, Barack Obama repeatedly said that "The United States is and remains the one indispensable nation" , which likewise means that every other nation is "dispensable." The criminal International Criminal Court accepts this, and yet expects to be respected.

The U.S. regime did "regime change" to Iraq in 2003, and to Ukraine in 2014 , and tried to do it to Syria since 2009 , and to Yemen since 2015, and to Venezuela since 2012, and to Iran since 2017 -- just to mention some of the examples. And, though the Nuremberg precedent certainly applies, it's not enforced. In principle, then, Hitler has posthumously won WW II.

Hitler must be smiling, now. FDR must be rolling in his grave.

The only way to address this problem, if there won't be prosecutions against the 'duly elected' (Deep-State-approved and enabled) national leaders and appointees, would be governmental seizure and nationalization of the assets that are outright owned or else controlled by America's Deep State. Ultimately, the Government-officials who are s'elected' and appointed to run the American Government have been and are representing not the American people but instead represent the billionaires who fund those officials' and former officials' careers . In a democracy, those individuals -- the financial enablers of those politicians' s'electoral' success -- would be dispossessed of all their assets, and then prosecuted for the crimes that were perpetrated by the public officials whom they had participated in (significantly funded and propagandized for) placing into power. (For example, both Parties' Presidential nominees are unqualified to serve in any public office in a democracy.)

Democracy cannot function with a systematically lied-to public . Nor can it function if the responsible governmental officials are effectively immune from prosecution for their 'legal' crimes, or if the financial string-pullers behind the scenes can safely pull those strings. In America right now, both of those conditions pertain, and, as a result, democracy is impossible . There are only two ways to address this problem, and one of them would start by prosecuting George W. Bush.


Investigative historian Eric Zuesse is the author, most recently, of They're Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST'S VENTRILOQUISTS: The Event that Created Christianity .

[May 16, 2020] "A Seller's Market for Bankruptcy Talent:" The Beginning of the End of Methane-Producing Fracking? by Juan Cole

Mar 17, 2020 | www.truthdig.com
On Monday, the price of West Texas Intermediate petroleum fell below $30 a barrel for the first time in four years. Elliot Smith at CNBC reports that BP CFO Brian Gilvary is braced for petroleum demand actually to contract in 2020.

This prediction is very bad news for US fracking firms, most of which need a price point of from $40 to $60 a barrel to make their hydraulic fracturing method of oil production profitable.

In the Democratic primary debate on Sunday, Bernie Sanders pledged to ban fracking entirely, and even Joe Biden said no new fracking would be allowed. Fracking may be moribund anyway by November, and if a Democrat wins the presidency, the industry may never recover.

Not only is petroleum likely headed way below that profitability floor, but many energy firms involved with fracking are deeply in debt, and had taken out the debts with their petroleum fields as collateral. Since their collateral is worth only half what it used to be, the banks will call in their loans. Other energy firms involved in fracking have held significant assets in their own stocks, the price of which just zoomed to earth like a crashing meteor.

Reuters observed,

Fracking has been banned by countries such as France, and by states such as New York because it is highly polluting, leaving behind ponds of toxic water. Moreover, research has demonstrated that the process of fracking, which involves pumping water under high pressure underground to break up rocks and release oil or natural gas, causes gargantuan methane emissions that had earlier been underestimated as much as 45% . The methane in the atmosphere is burgeoning, and scientists had puzzled over why. But scientists have fingered the culprit: fracking. Methane is 80 times as potent a heat-trapping gas as carbon dioxide over two decades, and carbon dioxide is no slouch. A quarter of the global heating effect of greenhouse gas emissions put out by humans burning fossil fuels is owing to methane emissions. Rapid heating is melting the North and South Poles, causing sea level rise that will soon be calamitous.

Given that the world population is increasing and that developing countries such as China and India and Indonesia are seeing more and more people abandoning their bicycles or bus rides for mopeds or automobile ownership, for the world to want less petroleum this year than it did last is extremely unusual.

We are getting a preview courtesy COVID-19 of what will happen through the next decade and a half as electric vehicles take off, significantly reducing demand.

The world produces about $100 million barrels of petroleum a day, and given the Saudi determination to expand production starting on April 1, it could be producing 102 million barrels a day later this spring. The world may only want 90 mn. barrels a day this spring. What with the novel coronavirus pandemic, fewer trucks and cars will be on the road. Petroleum is largely used for transportation fuel.

Do you know what happens if demand falls and production increases? The price falls. In fact, it doesn't just fall. It collapses. It takes a deep dive. It falls off a cliff. It craters deep beneath the earth's crust.

How steep the fall is depends in part on whether Saudi Arabia and Russia keep playing chicken. Saudi Arabia wants to discipline Moscow, which rejected OPEC + production quotas aimed at reducing supply and supporting a $60 per barrel price. So Riyadh is opening the spigots, upping its production by two million barrels a day. Saudi Aramco says it is comfortable with a price point of $30 a barrel. But unfortunately for Aramco, the price may not have stopped falling.

Andreas de Vries at Oilspot.com believes the price could fall to as little as $10 a barrel later this spring. In 2019 the price tended to be around $60 a barrel.

The fossil fuel companies that lack deep pockets could well just fail this year. Brenda Sapino Jeffreys quotes Jason Cohen, an attorney at Bracewell in Houston, as saying of the oil industry, "There is, I'd say, a sellers market for bankruptcy talent." His observation gave me my title.

This steep decline in stock prices and oil prices comes on top of a 5-year run in which the market has destroyed 90% of the value of US investor stocks in oil services. That is, we could this year be entering an oil market crisis as severe as the Asian banking crash of 1997-1998 .

The difference is that by the time fossil fuels come out of their economic doldrums, renewables will have stolen a further march on them. From here on in, hydrocarbons are beginning their death spiral. Friends don't let friends invest in petroleum companies, and nobody should have those stocks in their retirement accounts– if they want ever to retire.

[May 15, 2020] NATO v. Nord Stream 2 caucus99percent

May 15, 2020 | caucus99percent.com

NATO v. Nord Stream 2

gjohnsit on Thu, 05/14/2020 - 3:54pm After a five month delay, Russia is ready to complete the Nord Stream 2 pipeline .

The Nord Stream 2 pipeline, built to increase the flow of Russian gas into Europe's biggest economy, was thwarted five months ago after U.S. President Donald Trump imposed sanctions that forced workers to retreat. Now, after a three-month voyage circumnavigating the globe, the Akademik Cherskiy, the Russian pipe-laying vessel that's a prime candidate to finish the project, has anchored off the German port where the remaining pipeline sections are waiting to be installed...
Satellite images captured by Planet Labs inc. on May 10 show that sections of pipeline have been moved to a jetty equipped with a crane for loading. Ship-tracking data shows that a dredging vessel operated by a Nord Stream 2 contractor, as well as a Russian pipe-laying-crane ship are also in the vicinity and that the Akademik Cherskiy had moved as of Wednesday next to the jetty loaded with pipes.

In order to complete the final 100-mile stretch of Nord Stream 2, Russia effectively needs to use its own vessels due to U.S. sanctions.
The U.S. still thinks that it can stop Gazprom from finishing the pipeline, but that's insane.

Tens of billions of dollars, along with Putin's reputation as a savvy geopolitical chess master, have been invested in the pipeline project. However, Moscow is now running out of viable options. The only move left is to proceed in defiance of sanctions that will adversely affect many in the higher echelons of the Russian establishment.

This is checkmate.

Yes, this is checkmate...for Putin.
After investing billions of dollars, Gazprom would go bust if they don't finish this pipeline. So do you really think that more U.S. sanctions will give them even a moment's pause?
Sanctions are pointless now.

The question here is, why was this pipeline such a big deal?
To give you an idea, consider the recently completed Turkstream pipeline .
The Turkstream pipeline network isn't even fully integrated yet, and it's already having an impact. Who it's impacting is the key.

Although Ukraine has not been importing any Russian gas for its domestic needs since November 2015, it has signed a five-year transit contract with Gazprom for a minimum 65bcm in 2020 and 40bcm/year from 2021.

However, transit volumes have fallen 47% year on year in the first four months of 2020, amounting to 15.5bcm. The steep drop has been linked to European oversupply and low demand, but also to the lack of transit to the Balkan region after Russian exports to Turkey, Bulgaria and Greece were diverted to the new TurkStream pipeline from January 2020.

"Our transmission system can transit 110bcm of gas [annually] but this year we expect only 50-55bcm of transit," Makogon added, pointing out that volumes would drop even lower if Russia commissions Nord Stream 2 , a 55bcm/year subsea pipeline designed to link Russia directly to Germany via the Baltic Sea.

Ukraine stands to lose $3 Billion a year in transit fees from Russia once Nord Stream 2 is completed this year. This will devastate Ukraine's budget and economy.
Before you feel any sympathy for Ukraine, consider the situation that Ukraine put Russia in.

Ukraine's NATO membership ambitions were written into the Ukrainian Constitution in February 2019 via an amendment that also confirmed the goal of eventually joining the European Union.

NATO integration has remained official Ukrainian policy following the April 2019 election of President Zelenskyy. In early 2020, the country was said to be on track to secure NATO Enhanced Opportunity Partner status later in the year if the pace of reforms was maintained.

NATO's mission continues to be "destroy Russia". So you can see why Russia would feel the need to, at the very least, not help fund an enemy nation.
Plus the potential consequences of Ukraine entering NATO are terrible.

There are ongoing concerns that membership would allow Ukraine to immediately invoke Article 5 of the NATO treaty, the stipulation that an armed attack against one member state is an attack against them all.

Fortunately, the new Ukraine government of President Zelensky doesn't appear nearly so eager for a military confrontation with Russia. Plus public support for joining NATO is dropping.

If I was to make a prediction, I would say that NATO was about to experience a political setback.

[May 10, 2020] MMT and COVID-19

May 10, 2020 | www.moonofalabama.org

financial matters , May 9 2020 22:43 utc | 34

The Fed is just following the Congressional mandate of supporting the people who fund our political system.

It should be clear that the stock market doesn't care about Main Street when you see it still going up with massive levels of unemployment.

MMT states that the Fed can create these funds that are handed out to business by the trillions but that is not what MMT 'policy' would want.

Most MMT people are actually against handouts to people in the form of a basic guaranteed income.

A major cornerstone of MMT policy though is a Job Guarantee. In times like these they would very much like to see employment supported by these government funds. Not only the basic job pool of a minimum wage job but also supporting more highly paid skilled employment such as supervising infrastructure projects etc.

MMT is more concerned with resources than money per se. It doesn't help to have money if people aren't making stuff, providing food and services etc.

[May 05, 2020] The oil business in America is going to take a very long time to recover.

May 05, 2020 | turcopolier.typepad.com

Oilman2 , 04 May 2020 at 01:54 PM

Colonel, you are NOT wrong. The oil business in America is going to take a very long time to recover. There are complete shutterings of businesses, bankruptcies and more - all while we were in the middle of a downturn. Personally, I just folded up my tent because my my active client list went from 21 to zero over this last month (and that includes intl clients).

As the number one buyer of US steel, the oilpatch represents much more than people realize. We have also been the number one buyer of many other items - where sales have disappeared as company quietly and reluctantly face the reality of the current induced glut.

I'm being forced to change livelihoods - interesting for me, as I am short of the age to get my SS check and too old to employ by most corporate masters....

[May 05, 2020] German Regulator Plans to Deny Nord Stream 2 Waiver from New Gas Directive

May 05, 2020 | sputniknews.com

javascript:void(0)

Handelsblatt newspaper reported, citing the draft decision of the Federal Network Agency of Germany (BNA), that the BNA intends to reject an application filed by Nord Stream 2 for an exemption of the pipeline project from the requirements of the updated EU gas directive.

The agency announced in mid-January that it had accepted applications from the Nord Stream 1 and Nord Stream 2 operators to exempt the gas pipelines from the requirements of the EU gas directive. According to Handelsblatt, the agency earlier on Friday sent a draft decision to the parties involved in the process. The newspaper added that the BNA will accept replies from them until 8 May, after which it will "promptly" make a final decision .

The reason for the rejection of the Nord Stream 2 application was the fact that in order to exempt the gas pipeline from the updated directive, the pipeline must have been completed before May 2019. Nord Stream 2 insisted that it was necessary to not proceed from the "construction" point of this requirement, but to take into account the fact that "billions of investments had already been made in accordance with the previous legal regime by the time the new directives of the domestic gas market came into force".

The spokesman for Nord Stream 2, Jens Mueller, said in January that the project meets all the requirements for its exemption from the rules of the updated EU gas directive in Germany and that this also applies to the completion date of the project.

[May 03, 2020] US oil consumption down 7 million barrels per day between gasoline, jet fuel and distillate

May 03, 2020 | www.moonofalabama.org

c1ue , May 3 2020 16:36 utc | 30

Wolf street: US oil consumption down 7 million barrels per day between gasoline, jet fuel and distillate EIA graph via Wolf Street

[May 03, 2020] Chevron, Exxon- the top two U.S. producers just announced their plan for combined global shut-ins of 800,000 barrels per day

May 03, 2020 | www.moonofalabama.org

Likklemore , May 1 2020 20:43 utc | 83

Chevron, Exxon- the top two U.S. producers just announced their plan for combined global shut-ins of 800,000 barrels per day in response to plunging crude prices and fuel demand.

Both companies on Friday outlined deep cuts in investments in the Permian shale basin, the top U.S. oilfield where growth in recent years made America the world's top oil producer and a net exporter for the first time in decades. They each announced global shut-ins of up to 400,000 barrels per day (bpd) this quarter due to lockdowns to fight the coronavirus pandemic.
Exxon and Chevron have been rapidly sidelining Permian drilling equipment since the market started crashing in March. U.S. crude prices have plunged nearly 70% this year, and traded in negative territory on April 20 for the first time ever.[;]

The shale oil sector bankruptcies. Wells Fargo has a tale to tell.

Sitting inside the credit-resolution group, where Wells Fargo handles struggling borrowers, the team includes many bankers who previously worked with the same oil and gas producers in its investment bank.

They work alongside bankruptcy specialists who have been reassigned to focus exclusively on energy to help Wells Fargo wade through the expected flood of restructurings.

"It's a bloodbath," said one person with knowledge of the bank's oil and gas portfolio, who was not authorized to speak publicly.[.]

Wells Fargo and JPMorgan Chase & Co (JPM.N) are considered to be the two largest lenders to U.S. energy companies. Citigroup Inc (C.N) had the largest energy loan book of any U.S. bank at the end of 2019 because of its international business.[.]

As of the end of March, Wells Fargo had $14.3 billion of oil and gas loans outstanding, according to filings.[.]

Calling Mr. Powell on the red phone please. The president is on Twitter. The CODE: Print.

[May 02, 2020] Gazprom ramps up its export capacity to China via the Power of Siberia line, plans to add a second compressor station this year

May 02, 2020 | thenewkremlinstooge.wordpress.com

Mark Chapman April 27, 2020 at 3:59 pm

Gazprom ramps up its export capacity to China via the Power of Siberia line, plans to add a second compressor station this year. Drill rigs at the Kovykta Field are expected to go from 7 this year to 18 next year, and the extraction flows added to the Power of Siberia capacity.

https://www.spglobal.com/platts/en/market-insights/latest-news/natural-gas/041420-russias-gazprom-eyes-capacity-increase-on-china-gas-export-link

[May 02, 2020] The servants of Washington in the EU will try to extract every last concession they can before the pipeline is completed, but they absolutely want it and will back down if they think Russia would actually give up on completing it

May 02, 2020 | thenewkremlinstooge.wordpress.com

Mark Chapman May 1, 2020 at 1:41 pm

The servants of Washington in the EU will try to extract every last concession they can before the pipeline is completed, but they absolutely want it and will back down if they think Russia would actually give up on completing it. Their strategy all along was to let Russia build it, but ensure its operation fell under the control of EU regulators so that they could get plenty of gas when they needed it, but use it as a negotiating tool when they had lots in reserve, start complaining about the price and try to get more pipeline volume for competitors, variations on the ideal where the Russians would absorb all the costs of building it, but would yield all advantages of the completed pipeline to the EU. Right up until the moment the first volumes go through the pipeline, the EU is going to act as a spoiler on a project they absolutely want to be completed.

If Russia said, all right then, fuck you; Get your gas from the Americans, if that's what you want, two things would happen – one, The Donald would come in his pants, and two, Brussels would go wait wait wait wait hold on. No need to be hasty.

But they think they are in a super-strong position now, because their American pals stopped it when it was just a whisker away from completion, and gave them breathing space to renegotiate a deal that was already set, and make up a bunch of new rules using that was then, this is now for a rationale. I hope Russia does the same to them once it's complete, and says yeah, you THOUGHT that was the price, but that was then, and charges them just enough under the American price that dropping them in favour of the Americans is not feasible, but still much more than they thought they would pay.

karl1haushofer May 1, 2020 at 12:40 pm
Another setback for Nord Stream 2: https://sputniknews.com/europe/202005011079159594-german-regulator-plans-to-deny-nord-stream-2-waiver-from-new-gas-directive -- reports/

[May 02, 2020] It'd be nice to think Russia is going to complete Nord Stream II right away just to spite Washington and its endless meddling, but as we have discussed before, there really is no hurry

May 02, 2020 | thenewkremlinstooge.wordpress.com

Mark Chapman April 27, 2020 at 9:27 am

That's funny; I just checked her position last night, and it said she was bound for Nakhodka, due early in July.

Yeah; making 10 knots for Nakhodka, due there July 1st. That's where she left from originally, but so far as I could make out there is nothing in Nakhodka which might lead to the belief she will be there undergoing updates and tweaks for her employment finishing Nord Stream II.

https://www.vesselfinder.com/vessels/AKADEMIK-CHERSKIY-IMO-8770261-MMSI-273399760

It'd be nice to think Russia is going to complete Nord Stream II right away just to spite Washington and its endless meddling, but as we have discussed before, there really is no hurry. Russia is locked into a new medium-term transit contract with Ukraine, the Russian state has reduced income available due to the oil-price mess and low demand owing to the 'pandemic', and would be forging ahead with work that would cost it just as much money to do now as it would later, when it likely will have more cash available. I've read the AKADEMIK CHERKSIY needs a short refit and a little updating to ready her for Nord Stream work, since being principal pipelayer for that line possibly requires some different equipment or at least some adjustments. It likely would require crewing by some more specialists, as well, and there's no reason to believe they have been aboard all this time. I suppose they could meet the ship in Nakhodka, but there is nothing at this point to suggest that.

The only thing that argues for Russia pressing ahead now is the weather, which should be entering the season when it would be best for that kind of work. Otherwise, nothing suggests Russia is in a tearing rush to get on with it. Certainly the partners have not been told anything, and they don't appear to be unduly alarmed at the lack of immediate progress.

https://neftegaz.ru/en/news/companies/523680-no-plan-b-presented-to-austria-s-omv-on-nord-stream-2-gas-link-ceo/

[Apr 28, 2020] Hudson gives him the primary credit for providing the foundation for Modern Monetary Theory

Apr 28, 2020 | www.moonofalabama.org

karlof1 , Apr 27 2020 0:25 utc | 53

Some will know who Hyman Minsky was, some won't. Hudson gives him the primary credit for providing the foundation for Modern Monetary Theory, and he gets praise from Keen, Wolfe and many others too. On the occasion of his 100th birthday, here's a long essay that seeks the following:

"But the question still stands: Was Minsky in fact a communist? Of course not. But, a century after his birth, it is useful to clarify often neglected aspects of his intellectual biography."

Since Minsky's referenced so often by Hudson particularly, I think this piece will be helpful for those of us following the serious economic issues now in play. I'd reserve an hour for a critical read.

[Apr 24, 2020] The Use and Abuse of MMT

Apr 24, 2020 | www.moonofalabama.org

karlof1 , Apr 23 2020 18:19 utc | 35

Musburger @3--

I highly suggest you read "The Use and Abuse of MMT" by Michael Hudson, with Dirk Bezemer, Steve Keen and T.Sabri Öncü.


Leser , Apr 23 2020 18:55 utc | 41

MMT is brilliant and it's really embarrassing that it took The Deadliest Pandemic™ for some folks to come round to it. We all collectively print an extra bit of money - and give it to each other!

There are historic examples documented of successful applications of the concept, look no further than to the earnest witness of Baron Munchausen pulling himself out of a swamp by his own hair. https://en.wikipedia.org/wiki/Baron_Munchausen

karlof1 , Apr 23 2020 19:22 utc | 48
Hudson also has another video posted to his site , "An interview on the Radical Imagination: Imagining How Financial Parasites and Debt Bondage Are Destroying Us," which is based on his book Killing the Host . It's a recent video interview that's @50 minutes long prefaced by the Occupy Wall Street Anthem and introduction.

One aspect of MMT that must be made clear is it advocates the use of public banking or the Treasury to pump capital in the form of money into the productive economy , not the parasitic economy the Fed supports--the difference is huge and vital. For MMT to succeed within the Outlaw US Empire, the Fed must be liquidated. For more, please read the essay I linked to @35.

suzan , Apr 23 2020 19:56 utc | 50
Musburger @ 3 : "What do you folks think about MMT?"


Re-inflation of a depressed economy can be achieved by government spending into:
public investment
employment
income transfers
income support
labour
tangible capital
infrastructure.

This is "good" MMT.

"Bad" MMT, or fake MMT, is government spending into WallStreet, handouts to:
the banks
large corporations
speculators
bondholders.

The March 2020 CAREs Act is bad MMT as was the 2008 bailout. This one is same as that one but "on steroids."
Both bailouts further empower(ed):
rentiers (the landlord class),
monopolies,
the financial creditor class
and cast most of the rest of the US population into reduced circumstances, poverty and/or debt servitude. They burden the working economy with overhead and debt that cannot be paid. Bad MMT.

While the MMT school has a healthy diversity within it, USG applications have flipped the theory on its head, says Hudson. See below for link.

(Remember Cheney's, "We are all Keynesians now"? )

Worse, Bad MMT does more than simply bailout the top 1%. It also increases the parasitic power of financialization on the real economy. As we have repeatedly seen, now most dramatically, the financial sector is incapable of planning for anything other than its own fictional valorization.

Libertarians' freedom from government dogma excoriates against centralized planning and yet, ironically, the end result of their "government is bad" path forced upon us in USA led directly to central 'planning' by default -- by parasitic-on-the real-economy privatized finance sector, a form of fascism not democracy or liberty.

USA'ns public health crisis occurs as states, which are required by law to not run deficits, face huge costs that will force more austerity on their populations. More callous, they are forced to compete against each other as they purchase essential equipment and technology (from for-profit privateers) to deal with the highly infectious novel virus, and the fed indemnifies the privateer mask makers!!!

What is the root of inequality today? Debt and the monopolization of real estate.
What are solutions?
Wipe out and roll back debt overhead on production and consumption.
This is "good" MMT.
Bad MMT furthers the debt burden on society, concentrates monopolization and cements in central planning by parasitic private finance sector.


https://michael-hudson.com/2020/04/covid-plan-more-capital-gains-not-profits/

[Apr 24, 2020] They can top off the national reserves on the cheap and profit when their war sends prices up again

Apr 24, 2020 | www.moonofalabama.org

Zengine3 , Apr 23 2020 18:03 utc | 30

If ever there was a time, it's now. Oil has bottomed out. They can top off the national reserves on the cheap and profit when their war sends prices up again. Maybe it's why The Orange Goober has ordered the Navy to "shoot down" any Iranian boats that harass/approach/rudely gesture at US ships.

Musburger , Apr 23 2020 18:08 utc | 31

@30

Scott Ritter thinks this is quite possible.
https://www.rt.com/op-ed/486598-trump-iran-war-oil/

Tuyzentfloot , Apr 23 2020 18:23 utc | 36
Ritter's article worries me. There is now a sales argument for war: "don't worry about oil prices going sky high, Iran can't use that weapon against us now!".
LOL , Apr 23 2020 18:38 utc | 38
You over excitable little Iran war-monkeys really should take time out of your busy war-monkey daily-schedules to learn something about the topography of Iran and it's defensive and offensive military capabilities.

It would certainly save everyone else from having to listen to you being wrong yet again.

karlof1 , Apr 23 2020 18:53 utc | 39
dh @34--

You're on the right track. There's a huge supply glut as all forms of storage are mostly filled as proven by the negative WTI pricing. Global demand is still being destroyed. War in the Persian Gulf region will further destroy demand; and since very little oil's being shipped from there, the supply glut won't be used up anytime soon--certainly not quickly enough to see a sharp rebound in oil price. The crucial point is domestic US refineries have cut back their runs as their margins are even thinner than before, plus demand destruction is still occurring, thus the domestic storage glut. The wife and I jested last night if we only had a rail spur we could order up a couple of tank cars full of unleaded at the current very distressed price and be set for a longtime.

As The Saker notes in his latest , Trump must make the voting public look everywhere except at him and Congress, the bellowing at Iran being part of that entire theatre. Yes, a mistake could have very negative consequences for the USN and all US assets in the region as well as Occupied Palestine--the overall underlying dynamic hasn't changed since Trump broke the Iran Nuclear Treaty. Too add further insult to Trump and Pompeo, Iran's doing a much better job at containing COVID-19 than the Outlaw US Empire :

"The US pandemic death toll is this week heading above 50,000 compared with Iran's figure of 5,300. Considering the respective population numbers of 330 and 80 million that suggests Iran is doing a much better job at containing the virus. On a per-capita basis, according to publicly available data, Iran's mortality rate is less than half that of the US.

"This is while the US has sanctioned Iran to the hilt. American sanctions – arguably illegal under international law – have hit Iran's ability to import medical supplies to cope with COVID-19 and other fatal diseases, yet Iran through its own resources is evidently managing the crisis much better than the US."

As with the Tar Baby, the more wrestling the Outlaw US Empire does the weaker it gets.

Zengine3 , Apr 23 2020 18:55 utc | 40
@LOLtroll

They can't invade. That's your own moronic straw-man. And yes, it would further cut supply and prices would go up. The current bottom is due to overproduction but so long as civilization cranks along the oil gets used eventually.

[Apr 23, 2020] What an Oil ETF Has to Do With Plunging Oil Prices

Apr 23, 2020 | www.bloomberg.com

The oil market is in disarray, a result of a coronavirus-led collapse in demand, surplus supply following a price war and a shortage of storage. Yet there have been plenty of people willing to bet on a rebound in basement-level crude prices, and for many retail investors the vehicle of choice has been an exchange-traded fund. However, those wagers via the biggest American ETF -– the U.S. Oil Fund, or USO -– have contributed to market mayhem and helped push crude prices below zero.

1. What did the fund do?

It grew so huge so quickly that it became a sizable player in the market for West Texas Intermediate, the U.S. benchmark for crude. Investors piled in during March and April, convinced that oil prices that had been falling -- pushed down by a price war between Saudi Arabia and Russia that boosted production just as demand was slashed by pandemic-driven lockdowns -- would eventually recover once economies reopened. At different stages, the fund held about a quarter of all May and June contracts for WTI.

2. What's the problem?

Unlike shares that can be held as long as an investor chooses, oil futures have finite terms and are agreements to buy or sell a physical product. The May futures contract, for example, expired on April 21. Any holder who had not sold by then would need to take delivery of the oil -- 1,000 U.S. barrels, or 42,000 gallons, for each contract.

3. Where does USO come in?

As a favored investment vehicle for many bullish speculators , the number of shares in the fund ballooned from 145 million at the end of February to more than 1.4 billion by mid-April. Its outsized portion of the WTI market -– on paper -- came at a time when demand for physical oil was cratering and storage space was becoming harder and more expensive to find.

4. What does that have to do with the price plunge?

For years, USO was mandated to invest in the most-active WTI contract and to roll it over to the following contract. (Rolling over means selling it and, often simultaneously, buying the following month's contract.) The flood of money into May contracts earlier had pushed oil prices up; as USO sold its May futures as part of the rollover and bought June and July contracts, prices fell for May and rose for the following months, opening an unusually wide spread. Only a handful of traders remained in the May contract on Monday, when prices plunged well below zero .

5. What's the worry now?

With USO holding a significant level of June contracts, there are concerns that prices will go negative again and that the whole process might repeat -- or might be worse, if the April 20th debacle scares off more investors. To try to mitigate the prospect, USO, which lost 37% of its value in the first three weeks of April, has moved to allocate some holdings to contracts expiring later in the year, since those prices tend to be less volatile. But the fund is adding to pressure on oil prices in other ways.


6. How is that?

https://buy.tinypass.com/checkout/template/show?displayMode=inline&containerSelector=.inline-newsletter&templateId=OTK9NE7VLZ7E&offerId=fakeOfferId&showCloseButton=false&trackingId=%7Bjcx%7DH4sIAAAAAAAAAFWQXU_CMBSG_0uvKWm7fnKHyHAoCony4V3tuq1xbHMdYGL873ZENDQnTXqe8755e76AdikYgeQuvvVxUrVzMACNzu3a2VPSE4IIgohCQvqiuL-l5LBkq-0mmdX5ZDfRYzSH5M2ITGQWY0GJxlFGLUc2jbh8E5gpEoztZ2NbZytjz9bTLZ7coqWKX15uruj005pD5-rqPIYlksxLVIQc4RCf0o666P1DHvfvLGcpq8v6Sj82f2Jf1Kdnu29K3dnZckmTRfS0iNEMR0FRaH9hYNS1BzsA3e_7LH56vlePU7F-eBVT8M_WunW66vqR6lCWA2D0vtEur_ylcXTenTk4wusFRgIiCZUg8EgTv9ssHucn8epWRQPDN6MIccqyTEqDjRIpyhQzUrIUc5KGBK4JllwOsVJDgvhQytA8eNuOc1t1gaUn0wftSjDCTAquOBL0-wc_ZnWZ5gEAAA&experienceId=EX1CD0P9FUUB&tbc=%7Bjzx%7Dt_3qvTkEkvt3AGEeiiNNgAAU00osQjCe0eF96F_9vcluNhIruyJ5U_hxmYIoR_aQC3rHe7849TeV2Z2AEouDIc2XbqmfsITfbdl6zvDN4VT5RP0yLhL9h60mm8w09XJtjylU0Z664w9lha1BgkmqDg&iframeId=offer-0-ScnYD&url=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2020-04-22%2Fwhat-an-oil-etf-has-to-do-with-plunging-oil-prices-quicktake%3Fsrnd%3Dpremium&parentDualScreenLeft=1536&parentDualScreenTop=0&parentWidth=1536&parentHeight=762&parentOuterHeight=864&aid=IHFDsFInrJ&contentSection=content-article&pageViewId=2020-04-22-22-41-22-886-l5QXWIGogCYCaA0J-2bc7f7fe11742a13f4e60ed368b71592&visitId=v-2020-04-22-22-37-08-972-v4IsYWMNJw7ZiQhp-808330645ff88c1c97d0f95c885d162d&userProvider=publisher_user_ref&userToken=&customCookies=%7B%7D&hasLoginRequiredCallback=false&width=170&_qh=46cb607e8b

There was so much demand for USO that it exhausted the number of shares it was allowed to issue and, on April 20, asked regulators for permission to register an additional 4 billion, more than double the existing number. Until the new shares are cleared for issuance, the ETF will not purchase more futures contracts, according to analysts, potentially adding to pressure on crude prices. Without new oil contracts, the fund will also become untethered from the prices it's supposed to track.

7. Anything else?


ETF prices are kept in sync with the value of their holdings, their so-called NAV (net-asset value), through the creation and redemption of shares. So-called "authorized participants" for instance sell an ETF when it's rising and buy the underlying security to pocket a quick profit, keeping the fund's price and NAV in lockstep in the process. However, with the authorized participants no longer able to create shares, that's disrupted demand for the underlying contracts.

8. How about other ETFs?

USO is hardly the only exchange-traded fund to be hammered by the swings in oil futures; the effects were felt around the globe. The Samsung S&P GSCI Crude Oil ER Futures ETF, whose holdings of the derivatives slumped 26% on Tuesday to $378 million , saw its traded units lose half their value for a time Wednesday. Closing down 46% at HK $1.79 , the ETF had its biggest drop and lowest finish since trading began in May 2016. Credit Suisse Group AG told investors in a leveraged exchange-traded note that tracks the price of oil they probably won't get any money back after the value of the note dropped below zero.

The Reference Shelf

[Apr 22, 2020] The Neoliberal Collapse by Miatta Fahnbulleh

Notable quotes:
"... To boost sluggish wages, governments should use all the levers of the state -- corporate taxes, wage regulations, and subsidies -- to incentivize or force businesses to pay their workers fairly. ..."
"... A new social contract with citizens should extend beyond the workplace, however, with the ultimate goal being the establishment of a "well-being state" that would provide everyone with the basics necessary to maintain a decent quality of life. This would require increased investment in the staples of the welfare state, which have been weakened under neoliberal governments, such as guaranteed universal access to high-quality health care and education. But the new approach would go beyond those familiar elements by offering universal access to childcare, public transportation, and minimum income protection -- that is, a floor below which no one's income can fall irrespective of whether a person is employed. These expansions of the welfare state should be funded through progressive taxation that would raise the tax burden on those who can most afford it, by increasing the top rates for income and corporate taxes and by taxing wealth, such as capital gains, at the same level as income. ..."
"... Top-down policies, however, will not be sufficient to spur the kind of transformation that must take place in developed countries in order to truly shake off neoliberal stagnation and decline. ..."
Feb 28, 2020 | www.foreignaffairs.com

Capitalism is in crisis. Until recently, that conviction was confined to the left. Today, however, it has gained traction across the political spectrum in advanced economies. Economists, policymakers, and ordinary people have increasingly come to see that neoliberalism -- a creed built on faith in free markets, deregulation, and small government, and that has dominated societies for the last 40 years -- has reached its limit.

This crisis has been long in the making but was brought into sharp focus in the aftermath of the global financial meltdown of 2007–8 and the global recession that followed it. In the developed countries of the Organization for Economic Cooperation and Development, economic growth over the last decade ceased to benefit most people. At the end of 2017, nominal wage growth among OECD members was only half what it was a decade earlier . More than one in three people in the OECD countries are estimated to be economically vulnerable, meaning they lack the means to maintain a living standard at or above the poverty level for at least three months. Meanwhile, in those countries, income inequality is higher than at any time in the past half century: the richest ten percent hold almost half of total wealth, and the bottom 40 percent hold just three percent.

Defenders of neoliberalism frequently point out that although decades of wage stagnation and wealth concentration have led to ballooning inequality in developed countries, the same time period has seen a dramatic increase in prosperity on a global scale. Over a billion people, they argue, have been lifted out of extreme poverty owing to technological advances, investments, and prosperity that were made possible by the spread of free markets. However, this argument fails to account for the critical role that governments have played in that change through the provision of education, health care, and employment. Such state interventions have arguably been as decisive as the invisible hand of the market in lifting living standards. This defense also ignores the fact that despite many gains in prosperity, massive wealth concentration and staggering inequality continue to shape the global economy: less than one percent of the world's population owns 46 percent of the world's wealth, and the poorest 70 percent own less than three percent.

Inequality has always been a feature of capitalist societies, and people have been willing to tolerate it as long as they felt that their quality of life was improving, their opportunities were expanding, and their children could expect to do even better than them -- that is, as long as all the proverbial boats were rising. When that stopped happening in recent decades, it fed a growing perception that the system is unfair and is not working in the interest of the majority of people. Pent-up frustration has led to a clamor for change -- including a new receptivity to socialist ideals that have long been sidelined or even considered taboo. In the United Kingdom, for example, 53 percent of people recently polled said they believed that the economy has become more unfair over the last decade. Eighty-three percent said they felt that the economy worked well for the wealthy, but only ten percent said that it worked for people born into poor families. And ideas such as restoring public ownership of the essential utilities that were privatized in recent decades, such as railways, electrical services, and water companies, are gaining traction , with over 75 percent of people polled supporting such a step. Meanwhile, in the United States, a 2018 Gallup poll found that among Americans aged 18 to 29, socialism had a higher approval rating (51 percent) than capitalism (45 percent). "This represents a 12-point decline in young adults' positive views of capitalism in just the past two years," Gallup noted, "and a marked shift since 2010, when 68 percent viewed it positively."

Neoliberalism is not just failing people: it's failing the earth.

A mere revival of the social democratic agenda of the postwar era, however, would not be sufficient. For one thing, that period's emphasis on central authority and state ownership runs counter to the widespread demand in developed economies for more local and collective control of resources. Perhaps more important, however, is the need to confront a challenge that postwar social democratic models did not have to take into account: the threat posed by climate change and catastrophic environmental degradation. After all, neoliberalism is not just failing people: it's failing the earth. Owing in no small part to the massive levels of consumption and fossil fuel use required by an economic model that prioritizes growth above all else, climate change now imperils the future of human existence. Last year, the Intergovernmental Panel on Climate Change concluded that the world has barely over a decade to halve carbon emissions if humanity is to have any chance of limiting the increase in average global temperatures to 1.5 degrees Celsius above preindustrial levels -- a point past which the damage to human and natural systems would be devastating and largely irreversible.

Just like the economic breakdown that has chipped away at people's quality of life, environmental decline is rooted in the crisis of capitalism. And both challenges can be addressed by embracing an alternative economic model, one that responds to a hunger for genuine reform by adapting socialist ideals to the contemporary era. A new economic model must prioritize a thriving and healthy natural environment. It must deliver improvements in well-being and guarantee all citizens a decent quality of life. It must be built by businesses that plan for the long term, seek to serve a social purpose beyond just increasing profits and shareholder value, and commit to giving their workers a voice. The new model would empower people and give them a larger stake in the economy by establishing common ownership of public goods and essential infrastructure and by encouraging the cooperative and joint ownership of private, locally administered enterprises. This calls for an active but decentralized state that would devolve power to the level of local communities and enable people to act collectively to improve their lives.

A NEW SOCIAL CONTRACT

The United Kingdom provides an interesting case study of how the crisis of capitalism is playing out. There, as in the United States, center-right and center-left governments alike have spent decades following a neoliberal recipe of tax cuts, reduced social welfare benefits, and deregulation -- far more enthusiastically than most other European countries, which have stronger social democratic traditions and institutions. As a result, the neoliberal breakdown has been particularly painful in the United Kingdom, where people are on average poorer today than they were in 2008, adjusting for inflation. British household debt is higher than it was before the financial crisis, as more people borrow just to get by, and a staggering 14.3 million people live in poverty .

For many British people, the 2016 referendum on whether to leave the European Union served as an outlet for their discontent and anger at a failing system. The vote in favor of Brexit was a clear message from communities under pressure that the status quo needed to change. More than three years on, this disquiet continues to grow, opening up space for more radical changes in domestic policy -- as witnessed by the Labour Party's recent embrace of ideas that would once have been considered too risky, such as the renationalization of utilities and the establishment of a state-run pharmaceutical company.

But even in the United Kingdom, political platforms have lagged behind public demands for significant change. What's needed in developed economies across the world is not tinkering around the edges but a full-scale reformation of the relationship among the state, the economy, and local communities. The first step would be a global Green New Deal: a massive mobilization of resources to decarbonize and at the same time create millions of jobs and lift living standards. The goal should be net-zero carbon emissions within ten to 15 years, which will require governments to make significant investments in green infrastructure, such as onshore and offshore wind farms and smart energy grids; in new technologies such as carbon capture and storage; and in training workers to develop the skills they will need for the jobs a green economy will create, such as installing insulation, maintaining renewable energy systems, and reconditioning and refurbishing used goods.

Policymakers will also need to create incentives for companies to reduce their carbon use by replacing subsidies for fossil fuels with tax breaks for the use of renewables. New regulations, such as zero-carbon building standards or quotas for the use of fossil fuel energy, would help bend markets that have been slow to act in response to the climate crisis. And central banks will need to encourage financial markets to divest from fossil fuels through tougher credit guidance policies, including capping the amount of credit that can be used to support investment in carbon-intensive activities and setting quotas for the amount of finance that should flow to low-carbon investment.

Anger at a failing system has opened up space for radical changes in domestic policy.

To boost sluggish wages, governments should use all the levers of the state -- corporate taxes, wage regulations, and subsidies -- to incentivize or force businesses to pay their workers fairly. A just share of the rewards from their labor should come not only in the form of higher wages but also in reductions in working time, with a move to an average four-day workweek, which governments can achieve by increasing statutory holidays. At the same time, the power of workers to protect their interests should be strengthened by requiring all companies to automatically recognize labor unions and by giving workers stronger legal rights to organize, bargain collectively, and strike. Workers must also gain greater ownership of the organizations that employ them. Governments ought to mandate employee ownership funds, which transfer a share of a firm's profits, in the form of equity, into a trust that is owned by workers collectively. Through the trust, workers would receive shares in the company, just like any shareholder. Those shares would come with voting rights, enabling employees to become the dominant shareholders in every enterprise over time, with the power to shape the direction of the businesses where they work. In the United Kingdom, a growing number of companies, including the department store chain John Lewis, the home-entertainment retailer Richer Sounds, and the consulting firm Mott MacDonald, are already reaping the benefits of putting ownership in the hands of workers : higher productivity, better worker retention and engagement, and stronger profits.

A new social contract with citizens should extend beyond the workplace, however, with the ultimate goal being the establishment of a "well-being state" that would provide everyone with the basics necessary to maintain a decent quality of life. This would require increased investment in the staples of the welfare state, which have been weakened under neoliberal governments, such as guaranteed universal access to high-quality health care and education. But the new approach would go beyond those familiar elements by offering universal access to childcare, public transportation, and minimum income protection -- that is, a floor below which no one's income can fall irrespective of whether a person is employed. These expansions of the welfare state should be funded through progressive taxation that would raise the tax burden on those who can most afford it, by increasing the top rates for income and corporate taxes and by taxing wealth, such as capital gains, at the same level as income.

POWER TO THE PEOPLE

Top-down policies, however, will not be sufficient to spur the kind of transformation that must take place in developed countries in order to truly shake off neoliberal stagnation and decline. Those societies also must become more democratic, with power and resources distributed to regional and local governments, closer to the people in the communities they serve. This is one critical way in which such a new economic agenda would differ from more traditional socialism, which tends to favor centralized authority and state ownership. For example, rather than relying on federal or provincial governments for everyday essentials, such as energy, affordable housing, and public transportation, municipalities should establish corporations owned by and accountable to residents to provide these services.

The Basque Country, in Spain, offers one example of what a more democratic economy might look like. There, the Mondragon Corporation , set up in 1956 by graduates of a technical college to provide employment through worker cooperatives, has grown to become one of the ten largest business groups and the fourth-largest employer in Spain, with hundreds of different companies and subsidiaries and over 75,000 workers. The cooperatives operate in a variety of sectors , including banking, consumer goods, and engineering. They are set up not merely to turn a profit but also to achieve a specific social or environmental goal. They are owned and run by the people who work for them rather than by external investors, and their governance structures ensure that members have a stake in the organizations and share in the wealth they create.

Community land trusts in the United Kingdom provide another example. Granby Four Streets, in Liverpool, and the London Community Land Trust, in the Mile End district, provide affordable housing to their local communities by buying land from the private sector and taking it into community ownership. The trust builds affordable homes that it sells or rents to local residents at discounted rates. An asset lock prevents the land from being resold, which guarantees that the homes will remain affordable.

Bottom-up experiments such as these will be critical to the success of a new economic model. For those experiments to flourish, influential political figures who identify with the socialist tradition -- people such as Alexandria Ocasio-Cortez and Bernie Sanders in the United States and Jeremy Corbyn in the United Kingdom -- should use their platforms to draw attention to local-level activists and organizations that are working to create a more democratic economy. Meanwhile, some degree of patience will be in order: it will take time for such new thinking to produce the large-scale changes necessary. But such patience must also have a limit: when it comes to fixing the damage that neoliberalism has done, time is running out.

[Apr 22, 2020] What an Oil ETF Has to Do With Plunging Oil Prices

Apr 22, 2020 | www.bloomberg.com

The oil market is in disarray, a result of a coronavirus-led collapse in demand, surplus supply following a price war and a shortage of storage. Yet there have been plenty of people willing to bet on a rebound in basement-level crude prices, and for many retail investors the vehicle of choice has been an exchange-traded fund. However, those wagers via the biggest American ETF -– the U.S. Oil Fund, or USO -– have contributed to market mayhem and helped push crude prices below zero.

1. What did the fund do?

It grew so huge so quickly that it became a sizable player in the market for West Texas Intermediate, the U.S. benchmark for crude. Investors piled in during March and April, convinced that oil prices that had been falling -- pushed down by a price war between Saudi Arabia and Russia that boosted production just as demand was slashed by pandemic-driven lockdowns -- would eventually recover once economies reopened. At different stages, the fund held about a quarter of all May and June contracts for WTI.

2. What's the problem?

Unlike shares that can be held as long as an investor chooses, oil futures have finite terms and are agreements to buy or sell a physical product. The May futures contract, for example, expired on April 21. Any holder who had not sold by then would need to take delivery of the oil -- 1,000 U.S. barrels, or 42,000 gallons, for each contract.

3. Where does USO come in?

As a favored investment vehicle for many bullish speculators , the number of shares in the fund ballooned from 145 million at the end of February to more than 1.4 billion by mid-April. Its outsized portion of the WTI market -– on paper -- came at a time when demand for physical oil was cratering and storage space was becoming harder and more expensive to find.

4. What does that have to do with the price plunge?

For years, USO was mandated to invest in the most-active WTI contract and to roll it over to the following contract. (Rolling over means selling it and, often simultaneously, buying the following month's contract.) The flood of money into May contracts earlier had pushed oil prices up; as USO sold its May futures as part of the rollover and bought June and July contracts, prices fell for May and rose for the following months, opening an unusually wide spread. Only a handful of traders remained in the May contract on Monday, when prices plunged well below zero .

5. What's the worry now?

With USO holding a significant level of June contracts, there are concerns that prices will go negative again and that the whole process might repeat -- or might be worse, if the April 20th debacle scares off more investors. To try to mitigate the prospect, USO, which lost 37% of its value in the first three weeks of April, has moved to allocate some holdings to contracts expiring later in the year, since those prices tend to be less volatile. But the fund is adding to pressure on oil prices in other ways.


6. How is that?

https://buy.tinypass.com/checkout/template/show?displayMode=inline&containerSelector=.inline-newsletter&templateId=OTK9NE7VLZ7E&offerId=fakeOfferId&showCloseButton=false&trackingId=%7Bjcx%7DH4sIAAAAAAAAAFWQXU_CMBSG_0uvKWm7fnKHyHAoCony4V3tuq1xbHMdYGL873ZENDQnTXqe8755e76AdikYgeQuvvVxUrVzMACNzu3a2VPSE4IIgohCQvqiuL-l5LBkq-0mmdX5ZDfRYzSH5M2ITGQWY0GJxlFGLUc2jbh8E5gpEoztZ2NbZytjz9bTLZ7coqWKX15uruj005pD5-rqPIYlksxLVIQc4RCf0o666P1DHvfvLGcpq8v6Sj82f2Jf1Kdnu29K3dnZckmTRfS0iNEMR0FRaH9hYNS1BzsA3e_7LH56vlePU7F-eBVT8M_WunW66vqR6lCWA2D0vtEur_ylcXTenTk4wusFRgIiCZUg8EgTv9ssHucn8epWRQPDN6MIccqyTEqDjRIpyhQzUrIUc5KGBK4JllwOsVJDgvhQytA8eNuOc1t1gaUn0wftSjDCTAquOBL0-wc_ZnWZ5gEAAA&experienceId=EX1CD0P9FUUB&tbc=%7Bjzx%7Dt_3qvTkEkvt3AGEeiiNNgAAU00osQjCe0eF96F_9vcluNhIruyJ5U_hxmYIoR_aQC3rHe7849TeV2Z2AEouDIc2XbqmfsITfbdl6zvDN4VT5RP0yLhL9h60mm8w09XJtjylU0Z664w9lha1BgkmqDg&iframeId=offer-0-ScnYD&url=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2020-04-22%2Fwhat-an-oil-etf-has-to-do-with-plunging-oil-prices-quicktake%3Fsrnd%3Dpremium&parentDualScreenLeft=1536&parentDualScreenTop=0&parentWidth=1536&parentHeight=762&parentOuterHeight=864&aid=IHFDsFInrJ&contentSection=content-article&pageViewId=2020-04-22-22-41-22-886-l5QXWIGogCYCaA0J-2bc7f7fe11742a13f4e60ed368b71592&visitId=v-2020-04-22-22-37-08-972-v4IsYWMNJw7ZiQhp-808330645ff88c1c97d0f95c885d162d&userProvider=publisher_user_ref&userToken=&customCookies=%7B%7D&hasLoginRequiredCallback=false&width=170&_qh=46cb607e8b

There was so much demand for USO that it exhausted the number of shares it was allowed to issue and, on April 20, asked regulators for permission to register an additional 4 billion, more than double the existing number. Until the new shares are cleared for issuance, the ETF will not purchase more futures contracts, according to analysts, potentially adding to pressure on crude prices. Without new oil contracts, the fund will also become untethered from the prices it's supposed to track.

7. Anything else?


ETF prices are kept in sync with the value of their holdings, their so-called NAV (net-asset value), through the creation and redemption of shares. So-called "authorized participants" for instance sell an ETF when it's rising and buy the underlying security to pocket a quick profit, keeping the fund's price and NAV in lockstep in the process. However, with the authorized participants no longer able to create shares, that's disrupted demand for the underlying contracts.

8. How about other ETFs?

USO is hardly the only exchange-traded fund to be hammered by the swings in oil futures; the effects were felt around the globe. The Samsung S&P GSCI Crude Oil ER Futures ETF, whose holdings of the derivatives slumped 26% on Tuesday to $378 million , saw its traded units lose half their value for a time Wednesday. Closing down 46% at HK $1.79 , the ETF had its biggest drop and lowest finish since trading began in May 2016. Credit Suisse Group AG told investors in a leveraged exchange-traded note that tracks the price of oil they probably won't get any money back after the value of the note dropped below zero.

The Reference Shelf

[Apr 22, 2020] Energy Minister Alexander Novak said that the fall in prices for WTI oil futures is due to the actions of speculators.

Apr 22, 2020 | vz.ru

Energy Minister Alexander Novak said that the fall in prices for WTI oil futures is due to the actions of speculators.

"Yesterday's collapse of oil quotes of the us WTI brand occurred due to the sale of futures for delivery in may at the end of trading on paper (after April 20, the may futures are not traded on the exchange), the lack of demand for additional oil supplies in may and the likelihood of overstocking storage facilities. This caused a speculative fall of the financial instrument to negative values, " he said, according to TASS.

The head of the energy Ministry urged "not to dramatize the situation". According to him, it is important to understand that this is "a paper market, not a trade in physical oil," RIA Novosti reports.

The Minister also noted that the pressure on the oil market will continue until the start of the OPEC+ agreement in may, after which the reduction of oil production by countries outside the agreement and the easing of restrictions will begin.

"The oil market is currently in an extremely volatile state due to a sharp drop in demand associated with measures to counter the spread of coronavirus, with the gradual overstocking of storage facilities and the uncertainty of the timing of the global economic recovery. Pressure on the market will continue until the OPEC + agreement begins in may, reducing production by countries outside the agreement and easing restrictive measures, " he said.

Novak assured that OPEC+ countries are closely monitoring the situation in the oil market and have all the capabilities to respond.

"But don't dramatize the situation. It is important to understand that this is a paper market, that is, trading in derivative financial instruments, and not physical oil. Quotes for June Brent and WTI futures are significantly higher, although they are also subject to volatility due to the General negative mood in the market," Novak added.

The price of WTI oil for delivery in may ended Monday's main trading on the NYMEX on negative values, falling to minus 37.63 dollars. The decrease was 300%. Before that, the quotes reached minus 40.32 dollars per barrel. Later, the price of may WTI futures returned to positive values, rising by 160% to $ 2.21 per barrel.

The price of a barrel of oil on the morning of April 21 was trading at $ 21.41.

[Apr 21, 2020] On monetary policy: there is always money for corporate welfare, the military, tax relief and benefits for the oligarchy but never money for health care, education, infrastructure

Notable quotes:
"... The budget deficit is simply a ruse to make you believe that government funding is limited when in reality they create money on demand with a few keystrokes. ..."
"... Thus there is always money for corporate welfare, the military, tax relief and benefits for the oligarchy but never money for health care, education, infrastructure, etc. ..."
Apr 21, 2020 | www.moonofalabama.org

Noah Way , Apr 21 2020 16:42 utc | 75

@ #6 Passer by

In the broadest sense the US deficit is a measure of how much money the govt has created (not entirely accurate as the creation of money - really debt - has been largely outsourced to private banks). If the national debt was 'paid off' It would suck all the money out of society and the economy would collapse.

The Fed doesn't need taxes as revenue as it just creates whatever money it needs. The budget deficit is simply a ruse to make you believe that government funding is limited when in reality they create money on demand with a few keystrokes.

Thus there is always money for corporate welfare, the military, tax relief and benefits for the oligarchy but never money for health care, education, infrastructure, etc. The deficit is 1/2 of a balance sheet, the deficit on the govt side is balanced by a surplus (money in circulation) in the economy. Note that states are revenue constrained and depend on taxes and federal outlays to operate as they cannot create their own money on demand.

But what about inflation? Too much money in circulation lowers its value. Taxes are the real federal economic regulatory mechanism. When there is inflation, higher taxes directly remove money from circulation. The disinformation campaign is that interest rates control inflation, which has a) repeatedly been demonstrated false and b) is simply another system of rewards for the banking cartel.

The best metaphor is a sink. The faucet is the creation of money, the basin is the economy, and the drain is taxes. When the sink starts to overflow (inflation) the solution is to open up the drain (raise taxes).

Note also that this is for a sovereign economy, one that is controlled by the government. The EU has effectively destroyed all the sovereign economies in Europe with its central bank. Thus Greece, Italy, Spain, etc. have no control of their own economies and as such are unable to economically regulate themselves and subject to foreign predatory forces.

gm , Apr 21 2020 16:51 utc | 77

@Posted by: Noah Way | Apr 21 2020 16:42 utc | 75

Shorter version: "Deficits Don't Matter" Dick Cheney, 2002.
https://www.chicagotribune.com/news/ct-xpm-2004-01-12-0401120168-story.html

[Apr 21, 2020] The most acute pain was among so called hedges, namely who sold the obligations to buy oil at a certain price.

Nobody can cancel the end of cheap oil. those manipulations with futures and paper oil is just a blip of the radar. "Bottom line is that we live on a finite world which capitalism treats as an infinite resource."
Apr 21, 2020 | www.moonofalabama.org
juliania , Apr 21 2020 15:43 utc | 61

On the previous thread, Piotr Berman @ 417 did bring up the subject of this post by b, and had the following final comment: "...Actually, the most acute pain is among the clever folk who provided the so-called hedges, namely who sold the obligations to buy oil at a certain price. They are losing hundreds of billions -- my guess. Now they are forced to buy AND store, hence the negative price."

Thanks, Piotr. Some of what is happening makes a bit more sense to me as far as the strange dealings in the stock market are concerned.

Also, just above at 416, karlof1 had this to say: "...Was the West ever on the path to making its goal the improvement of the Common Man as advocated by Wallace and his political allies?..." His answer is NO (exclamation point.)

My answer is YES (exclamation point.) Even if you only progress as far as the creation of the UN, with the leadership of Eleanor, that is an important pivotal moment for mankind which we cannot ignore. But I will state uncategorically that the JFK administration had similar idealistic goals and would have carried them out, had it not been for divisive powers plotting against it. That such dastardly powers succeeded does not negate the previous effort.

And even the example of China proves that this is not an impossible dream for mankind in general. As also is the example of Russia. We are fortunate in this generation to have two role models instead of one.

I don't have the Frost poem at hand so I will thusly mangle the last lines (sorry)

Two paths lay in the woods, and I
Took the one less travelled by
And that has made all the difference.

I've mangled it, but the meaning is there, I think. (I'll go find the correct version, and point of reference, I was a college student when Robert Frost came to Johns Hopkins and I heard him read his poems. He did so also at Kennedy's inaugural.)


gm , Apr 21 2020 10:36 utc | 8

What -$37/bbl oil means to you:

Oil futures paper contracts market (in normal times of stable->rising oil prices and plenty of tank storage capacity a simple safe "buy low, hold, sell high" investment vehicle used heavily by investment banks, hedge funds, ETFs and teachers', municipal employees', etc, retirement/pension funds) explained in 5 minutes by Chris Martenson starts at ~minute 35:00:

https://www.youtube.com/watch?v=R8Pv77R3g1E

arby , Apr 21 2020 12:10 utc | 17
Emily, We may still be at or around peak oil. That does not mean that all of the heavily indebted countries and oil companies won't pump what's left as fast and hard as they can.

Now you have to stir in a massive plunge in demand to the equation. Seems to me that all newer oil discoveries are deep sea or shale. All of which require much more energy to produce then say thirty years ago.

When it takes the equivalent of one barrel of energy to produce one barrel of energy it will be lights out.

William Gruff , Apr 21 2020 12:10 utc | 18
dan of steele @2

The petrodollar was not in and of itself the mechanism that the US used to "export debt" and enrich itself off global trade. Rather, the petrodollar was the mechanism used to lock-in the US$ as the global reserve currency. If you wanted oil, you needed US$. After that it was just convenient to use US$ for other internationally traded commodities as well. Of course, this made even more sense way back in the distant past of the middle of last century because most of the international trade in manufactured goods was for American products, for which you'd have to use dollars to buy anyway.

The empire fanbois will cook up all kinds of explanations for why the dollar will remain the Global Reserve Currency in order to reassure themselves of the empire's continued hegemony, but the fact is that all of the "locks" locking other countries into that regime are now gone. Countries can choose to walk away now whereas in the past that would mean giving up access to oil and no longer importing all of those awesome things that the US used to make. That is not a barrier anymore.

Emily , Apr 21 2020 12:56 utc | 24
Arby 17.
Thank you for taking the time to reply.
But something to ponder
Forbes
https://www.forbes.com/sites/michaellynch/2018/06/29/what-ever-happened-to-peak-oil/
Yergin
https://www.technologyreview.com/2011/09/22/191161/peak-oil-debunked/
Well good news for those of us who agree with Edgar Cayce.
'Russia is the hope of the world'.
Russia has 60 years worth left and thats with its known reserves.
Hasn't touched the Arctic yet.....
https://www.worldometers.info/oil/russia-oil/
gm , Apr 21 2020 13:19 utc | 27
US/Western financial markets are a "musical chairs" game, where right now more chairs are being pulled out from the game faster than the FED and the central banks can 'digitally print' new chairs to keep the game going.
Peter AU1 , Apr 21 2020 14:27 utc | 39
Looks like energy dominance will get a bail out.
"We will never let the great US Oil & Gas Industry down. I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!" Trump said via Twitter.

https://sputniknews.com/us/202004211079043543-trump-instructs-treasury-energy-depts-to-devise-plan-to-fund-us-oil-gas-industry/
juliania , Apr 21 2020 14:36 utc | 41
Is this a result of all the lockdowns? A sort of automotive general strike occasioned by the virus, aided and abetted by government enforcement of restrictions on industry, travel, general hulabaloo?

Peace has descended upon a weary world. Nature has commanded us to cease and desist from gigantic insults upon the earth. Stop digging! she says, Leave it in the ground! Cease and desist making war for oil!

What does it profit a man? It profits him nothing! I have no idea where this leads, but it is a delicious moment. Look, see the power we have to bring everything to a standstill, even when we only do it because we are forced to! What if we did it willingly?

Where are your trillions now, moghuls?

The earth has spoken. We should all listen. Me, I am going out to plant potatoes.

Trisha , Apr 21 2020 15:27 utc | 56
Peak shale has arrived. The energy inefficiency of fracking - directly related to the economic efficiency of producing shale - killed it off. This would have happened even without COVID-19.

The same will (eventually) happen with oil. The global economy - already teetering - has now been pushed over the edge by COVID-19. The demand side of capitalist growth has been temporarily (and in some cases permanently) crushed - which is a good thing for the planet - as workers are idled for the foreseeable future, and many out of a job forever.

Bottom line is that we live on a finite world which capitalism treats as an infinite resource.

[Apr 21, 2020] 20 April 2020 at 05:20 PM

Apr 21, 2020 | turcopolier.typepad.com
div This (oil + the virus) is looking like an economic Pearl Harbor for shale oil industry This (oil + the virus) is looking like an economic Pearl Harbor. I think BRICS is playing a far better game of chess so far and will win if we don't replace The Swamp with dedicated people with vision and smarts and who put country above cronyism and self-enrichment.

JJackson , 20 April 2020 at 05:33 PM

What has the fluctuating price of oil got to do with peak oil? One is reflection of demand, plus manipulation of the price by producers, and the other has to do with the long term rates of extraction relative to the creation of new reserves by deposition of marine micro-organism and there decay under pressure and temperature conditions only geological time scales. the two are as similar as the price of fish and oranges.
Jack , 20 April 2020 at 07:00 PM
Sir

You were spot on about Peak Oil. US shale will not die. While shareholders and bond holders will take a haircut today, the extraction technology will continue to improve and their costs of production will decline. As oil prices improve shale production will return. The US is in a strong position as it doesn't have to be concerned about oil at least for the next several decades.

From a supply/demand perspective, oil density in the west will continue to decline as our economies become more efficient and as solar and nuclear becomes more cost competitive for electricity generation.

An investment maxim is to buy when there's blood in the streets. We will continue to use oil for at least another couple generations IMO.

The big issue in the short term is going to be the drastic impacts for those economies entirely dependent on crude revenues. The last time crude prices were lower for a sustained period the Soviet Union collapsed. MbS is running massive budget deficits as he keeps his population from revolting against the monarchy. One possible good outcome is there's going to be less funding for the jihadists in the short term.

Jack , 20 April 2020 at 08:21 PM
BTW, huge opportunity for Trump administration. Buy paper futures for May delivery at negative prices and then accept delivery of physical.

This is the real Art of the Deal.

srw , 20 April 2020 at 08:36 PM
There is oil out there and there will be for a long, long, time. The only determining factor is the price to get it out of the ground. Here in North America fracking has opened the spigot but the price is $40+ a barrel to get it out of the ground.

What I can't fathom is why Canada is pushing through with the Keystone XL pipeline taking tar sands oil from Alberta to Nebraska and eventually to the gulf coast.

Obama put the stop to it but the Trumpster reversed his executive order and they started building again this month, although a federal judge just stopped it due to environmental review.

Several years ago I read that tar sands oil costs $70+/barrel and that doesn't include shipping cost. Does Canada know something about the future price of oil or are they just subsiding their oil companies/workers? I sure wouldn't invest in it.

[Apr 19, 2020] America was built by cheap oil, ruled through cheap oil, but it's over. All the fiscal and monetary tricks in the book will not change that.

Apr 19, 2020 | www.moonofalabama.org

sad canuck , Apr 18 2020 21:21 utc | 61

As the infamous swamp creature HRC once said: "What difference, at this point, does it make?" America can huff and puff economic bubbles and kick the national equivalents of puppies (Syria, Venezuela) but it is powerless to create cheap oil or intimidate near-peer adversaries. That is in inescapable logic of surplus energy economics. America was built by cheap oil, ruled through cheap oil, but it's over. All the fiscal and monetary tricks in the book will not change that. Of course China faces that as well (Russia not so much for now). The difference is that Asia spent its money (and more) on infrastructure and industry that will serve it for the next generation or so, while America blew it on consumer toys, services and useless war gadgets. So even if the oil engine is almost dead, China has built up some momentum that will carry it along for a while. That momentum is long since gone in the west and the economy will reset once again to a far lower level.

The gnashing of teeth and racist rage will go on in America for a decade or more, but it won't make any difference at all to the outcome. The sooner it accepts that reality, the faster it can adapt to a lesser role and lower standard of living. That's not going to happen until "somebody" admits the scale and scope of the problem. Carter was the last one who tried and the result was the neo-liberal disease that engulfs the west. Hopefully the next attempt at reality isn't met with full-blown fascism but it might.

[Apr 17, 2020] Oil price probably depends on whether the USA can deliver or will deliver: Scott Ritter thinks it can't.

Apr 17, 2020 | turcopolier.typepad.com

OIL WARS. After a lot of phonecalls – especially between Putin, Trump and Riyadh , OPEC plus Russia plus USA have agreed to a production cut. How long will the agreement last? Your guess – it probably depends on whether the USA can deliver or will deliver: Scott Ritter thinks it can't . On the other hand, Washington has had a chance to learn its lesson – shale oil needs price about twice what it is today back down to about $20/bbl ; one producer has already gone bust . COVID has so greatly reduced demand that the cuts may have little effect anyway .

[Apr 11, 2020] Exclusive U.S. banks prepare to seize energy assets as shale boom goes bust by David French and Imani Moise

Notable quotes:
"... JPMorgan Chase & Co, Wells Fargo & Co, Bank of America Corp and Citigroup Inc are each in the process of setting up independent companies to own oil and gas assets, said three people who were not authorized to discuss the matter publicly. The banks are also looking to hire executives with relevant expertise to manage them, the sources said. ..."
"... U.S. oil and gas producers have increasingly relied on banks for cash over the past year, as debt or equity options dried up. Lenders have been conservative in valuing hydrocarbons used as collateral, but recent restructurings have left them spooked. ..."
Apr 11, 2020 | finance.yahoo.com

NEW YORK (Reuters) - Major U.S. lenders are preparing to become operators of oil and gas fields across the country for the first time in a generation to avoid losses on loans to energy companies that may go bankrupt, sources aware of the plans told Reuters.

JPMorgan Chase & Co, Wells Fargo & Co, Bank of America Corp and Citigroup Inc are each in the process of setting up independent companies to own oil and gas assets, said three people who were not authorized to discuss the matter publicly. The banks are also looking to hire executives with relevant expertise to manage them, the sources said.

The banks did not provide comment in time for publication.

Energy companies are suffering through a plunge in oil prices caused by the coronavirus pandemic and a supply glut, with crude prices down more than 60% this year.

Although oil prices may gain support from a potential agreement Thursday between Saudi Arabia and Russia to cut production, few believe the curtailment can offset a 30% drop in global fuel demand, as the coronavirus has grounded aircraft, reduced vehicle use and curbed economic activity more broadly.

Oil and gas companies working in shale basins from Texas to Wyoming are saddled with debt.

The industry is estimated to owe more than $200 billion to lenders through loans backed by oil and gas reserves. As revenue has plummeted and assets have declined in value, some companies are saying they may be unable to repay.

Whiting Petroleum Corp became the first producer to file for Chapter 11 bankruptcy on April 1. Others, including Chesapeake Energy Corp, Denbury Resources Inc and Callon Petroleum Co, have also hired debt advisers.

If banks do not retain bankrupt assets, they might be forced to sell them for pennies on the dollar at current prices. The companies they are setting up could manage oil and gas assets until conditions improve enough to sell at a meaningful value.

Big banks will need to get regulatory waivers to execute their plans, because of limitations on their involvement with physical commodities, sources said.

Banks are hoping their planned ownership time frame of a year or so will pass a Federal Reserve requirement that they do not plan to hold assets for a long time. Because lenders would be stepping in to support part of the economy that is important to any potential rebound, and which has not gotten direct bailouts from the federal government, that might help applications, too.

For now, the banks are establishing holding companies that can sit above limited liability companies (LLCs) containing seized assets. The LLCs would be owned proportionally by banks participating in the original secured loan.

To run the oil-and-gas operations, banks might hire former industry executives or specialty firms that have done so for private equity, sources said. Houston-based EnerVest Operating LLC would be among the most likely operators, sources said.

"We regularly look for opportunities to operate on behalf of other entities, that is no different in this market," said EnerVest Operating's chief executive, Alex Zazzi.


GETTING ASSERTIVE

U.S. banks have not done anything like this since the late-1980s, when another oil-price rout bankrupted a bunch of energy companies. More recently, they have relied on restructuring processes that prioritize them as secured creditors and leave bondholders to seek control in lieu of payment.

But banks are becoming more assertive because of the coronavirus recession and balance sheet vulnerabilities that have developed in recent years.

U.S. oil and gas producers have increasingly relied on banks for cash over the past year, as debt or equity options dried up. Lenders have been conservative in valuing hydrocarbons used as collateral, but recent restructurings have left them spooked.

Alta Mesa Resources' bankruptcy will likely provide banks with less than two-thirds of their money, while Sanchez Energy's could leave them with nothing.

The structures banks are setting up will take a few months to establish, sources said. That gives producers until the fall - the next time banks will evaluate the collateral behind energy loans - to get their houses in order.

After several years of on-and-off issues with energy borrowers, lenders have little choice but to take more dramatic steps, said Buddy Clark, a restructuring partner at law firm Haynes and Boone.

"Banks can now believably wield the threat that they will foreclose on the company and its properties if they don't pay their loan back," he said.

(Reporting by David French and Imani Moise in New York; Additional Reporting by Elizabeth Dilts Marshall; Editing by Leslie Adler; Editing by Lauren Tara LaCapra)

[Apr 08, 2020] In Gulf's Oil Rigs, Crews Fight Virus to Keep Crude Flowing

Notable quotes:
"... Cramped quarters on drilling rigs leave no room for distancing ..."
"... That's led to worries about the safety of the sites, the biggest of which resemble mini-cities with as many as 200 workers, and the nation's dependence on their output. Oil wells in the U.S. Gulf of Mexico supply about 2 million barrels of crude a day, or 15% of U.S. production. ..."
Apr 08, 2020 | www.bloomberg.com
Cramped quarters on drilling rigs leave no room for distancing
Inside more than a thousand offshore drilling rigs and oil production platforms that dot the Gulf of Mexico, workers navigate narrow corridors, sleep in shared rooms and dine in crowded mess halls.

It's an environment designed for efficiency -- not for keeping a lethal coronavirus at bay.

"There's no way to do social distancing on a rig," said Tim Tarpley, vice president of the Petroleum Equipment and Services Association .

That's led to worries about the safety of the sites, the biggest of which resemble mini-cities with as many as 200 workers, and the nation's dependence on their output. Oil wells in the U.S. Gulf of Mexico supply about 2 million barrels of crude a day, or 15% of U.S. production.

[Apr 01, 2020] Trump, Putin Will Discuss The End Of U.S. Shale Oil

Apr 01, 2020 | www.moonofalabama.org

Jackrabbit , Mar 30 2020 18:14 utc | 6

Trump announced that he would use the cheap prices to fill the U.S. strategic oil reserve. But the spare room in the reserve storage at that time was only some 150 million barrels. As it can only be filled at a rate of 2 million barrels per day the topping off of the reserve is insignificant in the current market.

The oil producers at first pumped their oil into storage tanks to be sold later. When those filled up they rented supertankers to store the oil at sea. But empty supertankers are now also getting rare and the price for them is increasing :

The CEO of the world's largest tanker owner, Frontline Ltd., said on Friday that he'd never known such demand to hire ships for long-term storage. Traders could book ships to put 100 million barrels at sea this week alone, he estimated, but even that could accounts for less than a week's oversupply.

The only solution will be a shut down of the more expensive oil fields. Canada and Brazil are already doing it. U.S. shale producers who are bleeding cash will now have to follow.

That is clearly what Russia wants :

As soon as U.S. shale leaves the market, prices will rebound and could reach $60 a barrel, Rosneft's Igor Sechin said recently. As fate would have it, in what many would have until recently considered an impossible scenario, a lot of U.S. shale might do just that.

Breakeven prices for U.S. shale basins range between $39 and $48 a barrel, according to data compiled by Reuters. Meanwhile, West Texas Intermediate (WTI) is trading below $25 a barrel and has been for over a week now.

The Trump administration has asked the Saudis to produce less oil but as the Saudi tourist industry is currently also dead the Saudi clown prince needs every dollar he can get. The Saudis will continue to pump and they will sell their oil at any price.

The White House is now concerned that it will completely lose its beloved shale oil industry and all the jobs connected to it.

Russia of cause knows this and a few days ago it made an interesting offer :

A new OPEC+ deal to balance oil markets might be possible if other countries join in, Kirill Dmitriev, head of Russia's sovereign wealth fund said, adding that countries should also cooperate to cushion the economic fallout from coronavirus.
...
"Joint actions by countries are needed to restore the(global) economy... They (joint actions) are also possible in OPEC+ deal's framework," Dmitriev, head of the Russian Direct Investment Fund (RDIF), told Reuters in a phone interview.
...
"We are in contact with Saudi Arabia and a number of other countries. Based on these contacts we see that if the number of OPEC+ members will increase and other countries will join there is a possibility of a joint agreement to balance oil markets."

Dmitriev declined to say who the new deal's members should or could be. U.S. President Donald Trump said last week he would get involved in the oil price war between Saudi Arabia and Russia at the appropriate time.

A logical new member of an expanded crude oil cartel would be one of the biggest global producer that so far was not a member of that club - the U.S. of A.

We now learn that Trump is ready to talk about that or other concepts:

As Ria reports (in Russian) the topics of upcoming phone call [between Putin and Trump] will be Covid-19, trade (???) and, you guessed it, oil prices.

Trump, who sanctioned the Russian-German Nord-Stream II pipeline while telling Germany to buy U.S. shale gas, is now in a quite bad negotiation position. Russia does not need a new OPEC deal right now. It has many financial reserves and can live with low oil prices for much longer than the Saudis and other oil producing countries. Trump would have to make a strategic offer that Russia could not resist to get some cooperation on oil prices.

But what strategic offer could Trump make that would move Putin to agree to some new deal?

Ukraine? Russia is not interested in that unrulable , bankrupt and fascist infested entity.

Syria? The Zionist billionaires would stop their donations to Trump if he were to give up on destroying it.

Joining an OPEC++ deal and limit U.S. oil production? That would be an anti-American intervention in free markets and Congress would never agree to it.

And what reason has Russia to believe that Trump or his successor would stick to any deal? As the U.S. is non-agreement-capable it has none.

The outcome of the phone call will therefore likely be nothing.

The carnage in the oil markets will continue and will ravage those producer countries that need every penny while the corona virus is ravaging their people. Meanwhile the U.S. shale market will go bust . US financial companies had a big exposure to the Shale Oil frackers.

Good thing trillions of dollars of 'liquidity' has been shoveled their way.

<> <> <> <> <>

Lender of last resort: the unborn.

!!


Thomas Minnehan , Mar 30 2020 18:15 utc | 7

FWIW:
One aspect of the crude complete collapse is to keep an eye on futures and the serious contango at the moment: contango=prices on future contracts are higher than current contract.

e.g. May 2020 CL contract=~$20, May 2021 =~$35.50.

Someone or someones are betting that the crude market will improve, i.e. they are storing crude in very large crude carriers (VLCC) @>$200k per day lease cost. That is a serious commitment/bet on future price/mkt improvement.

karlof1 , Mar 30 2020 18:32 utc | 9
Unmentioned is the connection between Fracking Fraud and the Bond Market Bubble with Congress actively intervening/abetting the Fraud by providing more money to the Ponzi Scheme.
vk , Mar 30 2020 19:18 utc | 22
It was time. The shale industry already was a huge bubble even when oil prices were at USD 60.00 (because it had to borrow a lot to invest, and the more wells drilled, the lower was the oil output per USD invested), which insiders in Wall Street were already discussing how to burst it.

And this is a 100% intentional by the Russians. If American shale really go down, then it would be ironic, since it was the oil crisis of 1975 that effectively ended the Soviet Union.

Vengeance is dish best served cold indeed.

Krollchem , Mar 30 2020 19:28 utc | 26
Another factor going against the shale fracking pipe dream is that the Strategic Petroleum Reserve (SPR) is filled with real oil. Fracking produces light condensate (not oil) that does not meet this criteria, and thus the frackers will not benefit from filling the SPR (unless Trump changes the rules)

Besides, Exxon wants to crush the independent oil shale players and pick up the pieces at pennies on the dollar. Furthermore, former ExxonMobil head Lee Raymond once stated that "Exxon U.S. is not a "company and I don't make decisions based on what's good for the U.S."
https://www.desmogblog.com/2020/03/27/shale-bailout-trump-oil-exxon-strategic-petroleum-reserve

David , Mar 30 2020 19:35 utc | 28
A study by the Wall Street Journal concluded that in one ten year period, the shale oil companies' total costs had exceeded their revenues by two hundred and eighty billion dollars. They have stayed in business by issuing new stock and more debt to cover their losses. Their prime fields are seeing production declines. Their costs are rising as the price of is oil tanking. Collapse is imminent. It's going to have far-reaching consequences.
TG , Mar 30 2020 20:04 utc | 37
Yet another example of the utter intellectual bankruptcy of the US ruling class. They've been playing a rigged game for so long, they've forgotten how to think.

As others here have pointed out, not to worry, the US fracking industry will get bailed out.

The real thing the US might do, is not to join an expanded OPEC+, but to limit imports of foreign oil and protect the domestic industry. Contrary to current 'free trade' dogma, protectionism does work (example A: the United States from 1776 to 1970. Any questions?), but classically you want to limit imports of MANUFACTURED goods and keep the cost of raw materials low. Increasing the relative costs of raw materials in the US while still allowing mass importation of manufactured goods from low-wage nations is anti-Hamiltonian and will crush what remains of US domestic manufacturing..)

Krypton , Mar 30 2020 20:06 utc | 38
Meanwhile Western Canadian Select is now going for $5 a barrel - less than the price of a coffee and muffin at Starbucks.
Michael Droy , Mar 30 2020 20:11 utc | 40
Not sure the US shale market can "go bust" as such. The owners can go bankrupt, but that just means banks and bondholders become the new owners, and their debt investment suddenly turns into equity investment with zero gearing. Once that happens the US shale producers become solid companies financed with zero debt and no incentive to hold back on production. They pump and pump and pump until the pumps no longer work.
Sure, no new developments, but the existing infrastructure will last a few years yet.
Hal Duell , Mar 30 2020 20:15 utc | 41
I don't see a way out for the US fracking industry. Their product is too expensive in the current times, and those setting the rules in these times (Russia and Saud Arabia) have no good reason to help.
The social damage from a collapse in the US will be papered over with printed money. I don't know how that will play out.
One scenario is time being called on the US's forever-wars in the Middle East, but would they be replaced by an invasion of Venezuela? There is good stuff down there, as well as the heavy stuff they've been pulling out. And just across the border into Brazil there is some high ground that looks like a good spot to build a command post.
The US could cut its losses in the wider world, something that seems to be happening anyway, and return to America, north and south. I don't see it just quietly going down the gurgler, but the European Union might.
Stonebird , Mar 30 2020 20:35 utc | 46
Of course it is already a war. The question I ask is, who is fighting and against whom?
The tactical aim at the moment is the end of the petro-dollar. A secondary aim is finding a limit to US militarism. Which in turn depends on the pork.... soorry.... the grifting of large sums of unlimited largess. Third, is trade and domination of markets including sanctions and "treaties". Fourth, is the "domination" of population dissent and overriding Judicial systems.

So the US, China and Russia are at it "hammer and tongs" (old saying but apt). Covid is just one means to an end, regime change another. Who else is in the fight? I would suggest that the Oligarchy and the Termites, the Fed and the deep parallel financial pool, the uncontrolled but unified intelligence "agencies", all have their own agendas.

naiverealist , Mar 30 2020 20:40 utc | 48
Posted by: Laguerre | Mar 30 2020 19:14 utc | 21

"The slow collapse of the US position in Iraq means that the US is not going to hold those oil-fields for too long."

Remember where this oil is going to. During the previous presidential term, it was discovered that the oil was going into Turkey, aided and abetted by the profiteers Erdogan and his son, and then onto oil tankers that shipped it to Occupied Palestine. Current production is also going into Jordan, where it is being shipped by pipeline into the refinery in Eliat(?). I can only surmise the price to be extremely cheap.

So the inhabitants of Occupied Palestine will expect the US to maintain this flow as long as they can, come hell or dead GIs.

vk , Mar 30 2020 20:41 utc | 49
The problem with shale became clear right after the first wells were drilled.

If I understood the reports from the "shale bubble" website correctly, originally the magic over shale gas and oil came from the fact that Wall Street was involved since the beginning (so it was a "coastal elites/heartland rednecks alliance" from birth) and the expectation was that a horizontal well would perform the same way as the traditional vertical well.

A traditional vertical well follows are normal curve graphic, imitating a hill. It starts low, but keeps growing until reaching a peak, maintains this peak for a while (some decades) and then begin a suave fall, which also takes decades.

No wonder, then, the huge euphoria that started in Wall Street when those horizontal wells begun pumping out oil at absurd quantities - they imagine that was the output floor of such wells, and that productivity would only rise after the decades. Indeed, it was predicted at the time that the USA not only was firmly walking towards self-sufficiency - many also predicted it would become the world's greatest oil exporter (yes, above Saudi Arabia, Venezuela, Russia etc.).

But this euphoria was short-lived, as, some years later, productivity of the horizontal wells begun to suddenly fall. It was then realized, after further research, that those wells performed differently than the vertical wells: they begun directly with peak production, then immediately started to fall. Their output graphic looks like an upside-down, slightly inclined letter L.

Even after this discovery, the investors didn't immediately give up. They thought: let's just drill longer wells. And they did. It was then that another problem came out: it seems that, after 3-5 miles, those horizontal wells suddenly lose a lot of pressure necessary to pump the oil out of it. To make things worse, after this length, they begin to suck out pressure from the neighboring wells as well. Therefore, it is a self-defeating enterprise to extend the horizontal wells beyond 3 miles length. And the situation is even direr because shale reserves are usually concentrated in one specific area - it's not like you can drill one horizontal well in Ohio and another one in Florida and so on: the rule of thumb that the oil and gas "must be there" to be extracted in economically viable quantities still do apply to horizontal wells.

After that, all that kept the American shale industry alive was Wall Street and its rotten papers recycling machine.

El Cid , Mar 30 2020 20:44 utc | 50
The US unilateral economic siege on Venezuela and Iran has the affect of cutting world oil supply that benefits US shale and fracking industry.
karlof1 , Mar 30 2020 20:56 utc | 55
A friendly reminder to all barflies that fracking within the Outlaw US Empire also takes more energy to operate than the energy extracted. The business was bankrupt before it began, and nothing can change that fundamental fact.
Likklemore , Mar 30 2020 22:00 utc | 70
China will 'compel' Saudi Arabia to trade oil in yuan -- and that's going to affect the US dollar
from CNBC, Oct.2017
"I believe that yuan pricing of oil is coming and as soon as the Saudis move to accept it -- as the Chinese will compel them to do -- then the rest of the oil market will move along with them," Carl Weinberg, chief economist and managing director at High Frequency Economics, told CNBC

Also, recall the recent ARAMCO IPO, reportedly China took a 5 % stake. Hmmm. Was it with USTs?

occupatio , Mar 31 2020 0:16 utc | 89
The minute the Al Saud family begins accepting yuan for oil their days are numbered.
The US put them there, put the Saudi in Saudi Arabia. Any move to accept yuan will be seen as betrayal, and the Al Sauds will be removed, either replaced or simply obliterated.
Posted by: Realist | Mar 30 2020 23:21 utc | 86

+++

If Saudi Arabia shifts to the Yuan, it would have to diversify away from buying US arms. They might be the undisclosed buyer of high-end Chinese missiles, said to have an "urgent need" for them, as per Chinese media on 2020/3/29. This news might be functioning as diplomatic signalling.

Chinese high-end missile sees first export delivery despite pandemic
https://www.globaltimes.cn/content/1184117.shtml

It was the first time a third-generation anti-tank weapon system developed by the Chinese company has been exported, according to the statement.

As the client was in urgent need of the missiles, the successful delivery had significant meaning for establishing Norinco's (China North Industries Group Corporation) market position and further opening up the market, the company said.

Norinco did not disclose more details on the deal in the statement, including the name of the buyer, the quantity purchased and the value of the deal.

Likklemore , Mar 31 2020 0:37 utc | 91
The US put them there, put the Saudi in Saudi Arabia. Any move to accept yuan will be seen as betrayal, and the Al Sauds will be removed, either replaced or simply obliterated.

You hug that thought. Newsflash: The horses camels have already bolted. China is expanding its presence/influence in ME.

These 35 agreements with KSA,'centered around ways to align the Saudi Vision 2030 with the Chinese Belt and Road Initiative' will not be in USD - unless China is unloading USTs. There is nothing US can do except sell more arms to the kingdom. Reuters, WSJ reported the big signing and likely, CNN, Fox, ABC buried it.


"Saudi crown prince signs raft of cooperation agreements with China
Feb.22, 2019
BEIJING: Crown Prince Mohammed bin Salman on Friday met with Chinese Vice Premier Han Zheng to discuss ways of further developing relations between the Kingdom and China.

The meeting took place in the grand surroundings of the Great Hall of the People in the Chinese capital Beijing. After their talks, the crown prince headed the Saudi delegation at the third session of the China-Saudi Arabia High-Level Joint Committee which he co-chaired with Zheng.

Delegates at the meeting discussed moves to strengthen cooperation between the two countries on trade, investment, energy, culture and technology, as well as the coordination of political and security matters. The committee also reviewed plans for greater integration between China's Belt and Road development strategy and the Saudi Vision 2030 reform program.

After agreeing on the minutes of the meeting, the Saudi royal and Zheng took part in the signing of a range of agreements, memorandums of understanding (MoU), investment projects and bilateral cooperation accords between the Kingdom and China:[.]

MoU between the Kingdom's Ministry of Energy, Industry and Mineral Resources and the National Development and Reform Commission in China, signed by Saudi Energy Minister Khalid Al-Falih and Ning Jizhe, vice chairman of the National Development and Reform Commission.

MoU between the Chinese Ministry of Commerce and Saudi Ministry of Commerce and Investment to form a working group to facilitate trade, signed by Abdul Rahman Al-Harbi, the Kingdom's deputy minister of commerce and investment, and Qian Keming, Chinese vice minister of commerce.[.]

Piotr Berman , Mar 31 2020 1:46 utc | 99
Deciphering the mental processes of MBS is always speculative, but it is very hard for KSA to deliver on the threat to increase the deliveries by 2.5 mln bbl/day. As we can see, planes fly only a fraction of pre-virus level, people on quarantine drive much less, you can offer fuel for free and it will not sell more. Now, if you could offer some hand sanitizer and facial tissues with each "full tank", perhaps it could work... But stopping oil production is troublesome for some reasons, to the ignorant me it seems that if you interrupt flow dynamic of oil, it is troublesome to restart it, shale oil may suffer from something similar. Thus tanker ships are being filled up and used for storage as destination ports refuse to take cargoes invoking "higher power". Hapless KSA cannot find enough tankers, and when they find them, hard to find a port to accept them. So KSA combative threat could impact psychology of the traders, but the virus made a dent in demand of several times larger magnitude.

Nobody knows how long the demand will stay low, but as it does, storage will be bursting, renting tanker ships became expensive. so the glut it will take time to dissipate (folks renting the tanker ships will be pressed to get rid of the cargoes at the first opportunity), and with no coordination to cut the production, low prices may stay for a year or more. This seems necessary to cut shale oil and other high cost oil project down to size. Periodic down period of pricing does not change long term calculations, but long periods will drive a lot of small players out of business. This means so-called consolidation, creditors become owners and sell it to vultures (regular folks cannot own something that costs more to maintain than it brings revenue). And what do the vultures do? "Paring excess capacity". Happened to many industries in the past. And even brainless bankers will give it two thoughts before lending money for projects in high cost oil production.

BTW, Putin is doing a gently MBS-like manouver, with the assist from Trump. To wit, Russia started to tax repatriated profits -- no need to imprison the account holders in Ritz Carton. But why would they be motivated to repatriate the profits back to Mother Russia? A patriotic virus? Or pestering with account freezes that Trumpian robbers are so fond of doing?

One mystery for me is why Canadians bother to produce oil with single-digit prices. Stopping tar oil production should be simple, just mothball the equipment.

One rumour in the oil patch is that USG will give them bail out. That could be a boon for green thinking idealists who are hostile to carbon energy production, because many deplorables do not like bailout (unless they are the beneficiaries). This could allow Trump to be defeated by a brain dead opponent.

daffyDuct , Mar 31 2020 2:28 utc | 101
"Bloomberg reports that Plains All American Pipeline asked its suppliers to scale back production,
and Plains and Enterprise Products Partners is requiring customers to prove they have a buyer or place to offload the crude they are shipping
The companies made the requests during the past week.

This is a clear sign that a growing glut of crude is overwhelming storage capacity. Pipeline companies are running out of storage space for oil. Coronavirus related lockdowns are resulting in plunging demand."

https://www.forexlive.com/news/!/pipeline-operators-asking-oil-producers-to-reduce-output-growing-glut-is-capacity-20200329

Bill , Mar 31 2020 15:34 utc | 137
@Vic

Hajj revenues poised to exceed $150bn by 2022: Experts

(the article refers to both Hajj and Umrah revenues)

https://www.arabnews.com/node/1151751/saudi-arabia

If that actually occurred it would exceed SA's 2019 $88bn oil revenue by a good margin

Canthama , Mar 31 2020 17:26 utc | 152
It is payback time for Russia no doubt, but Russia plays always the long game, any decision or concession will always be related to the long game. for Russia, which is the global leader in energy supplier (oil, gas & nuclear).
Russia got really mad with the Nordstream II delay, this is something Russia will not forget that easy, besides costing them a lot, it was some sort of global humiliation, that combination is pure fire. Even if the sanction are lifted now, Nordstream would start late 2020 and not late 2019....1 year delay anyway, so lifting sanctions won't matter here.
My first reaction is that Russia will not agree with the USA in anything, it will drive the shale market dry for a little longer, it must if it wants to cause long term problems for the players in the US, so no short term relieve for the shale players here, and if Russia does agree in the OPEC++ with the US and other export players then this will take time, and then US Gov can not intervene in the local production, more time...and no results, at the end the US will have to give up something, and I do not think lifting sanctions will be it, they may try it, bit it has no real value for Russia....only a global military retreat, something that will cost dearly, politically and in image will. serve Russia and its key strategic ally...China, mind you that cheap oil and gas helps China's recovery...March nbrs came in from China and it has already shown a better recovery than expected.
This is the only way I can see Russia playing the long game, together with China and a major strategic geopolitical defeat for the US.
JC , Mar 31 2020 17:46 utc | 154
Posted by: Canthama | Mar 31 2020 17:26 utc | 152

"This is the only way I can see Russia playing the long game, together with China and a major strategic geopolitical defeat for the US."

I like what you said, but Russia and China must continue supports one another. Both should also supports Iran and Venezuela too.

[Apr 01, 2020] Trump Shifts to Worry Over Oil Rout, Discusses Prices With Putin

Apr 01, 2020 | finance.yahoo.com

(Bloomberg) -- President Donald Trump said he's concerned oil prices have fallen too far and called Vladimir Putin on Monday to discuss Russia's oil-price war with Saudi Arabia.

The leaders, who also talked about the spread of the coronavirus, agreed to discussions on oil between energy officials in the two countries, according to the Kremlin. Both leaders "agreed on the importance of stability in global energy markets," the White House said in a statement.

The U.S. president said earlier he doesn't want to see the American energy sector "wiped out" after Russia and Saudi Arabia "both went crazy" and launched into a conflict that depressed oil prices.

"I never thought I'd be saying that maybe we have to have an oil increase, because we do. The price is so low," Trump said in an interview on "Fox & Friends."

Crude oil futures tumbled as much as 7.7% in New York, touching an 18-year low.

The Trump-Putin call came at the request of the U.S. and was "prolonged," according to the Kremlin. Neither the White House or Kremlin statements said specifically how long the two leaders talked.

Trump's view on the oil dispute marks a shift from earlier this month, when he likened the plunge in oil prices to a "tax cut" for Americans. The U.S. president spoke to Saudi Crown Prince Mohammed bin Salman on March 9 about the price war.

Trump has long argued that improving relations between Washington and Moscow could help solve international disputes. The president said he wanted to discuss trade with Putin, though he said he expected the Russian president to raise objections to U.S. sanctions. State-run Tass quoted Kremlin spokesman Dmitry Peskov as saying that Putin didn't ask Trump for sanctions relief on the call.

Oil tumbled earlier to its lowest point in nearly two decades, heading for the worst quarter on record as coronavirus lockdowns cascaded through the world's largest economies, leaving the market overwhelmed by cratering demand and a ballooning surplus. The slump in demand has shut refineries from South Africa to Canada.

Goldman Sachs Group Inc. estimates consumption will drop by 26 million barrels a day this week. Meanwhile, Riyadh and Moscow are showing no signs of a detente in their supply battle as Saudi Arabia announced plans to increase its oil exports in the coming months, despite U.S. warnings against flooding the market.

Some analysts argue Russia's motivations extend well beyond oil and are complicated by the federation's anger over U.S. sanctions and opposition to the Nord Stream 2 pipeline linking Russia to Germany. And the price for getting Russia to back down could be too high.

"Russia's concerns with the U.S. go beyond market share. Putin is frustrated with sanctions and may be more interested in punishing the U.S. than Saudi Arabia," said Dan Eberhart, a Trump donor and chief executive of drilling services company Canary LLC. "If Trump wants an agreement with Putin, he may have to promise to ease up on sanctions. I am not sure he can deliver without the backing of congress."

Rosneft PJSC over the weekend sold its assets in Venezuela to the Russian government, a move that shields the Russian oil giant from further U.S. sanctions while keeping Moscow behind the regime of Nicolas Maduro. Fears of broader sanctions have grown after the U.S. in recent months slapped restrictions on Rosneft trading companies for handling business with Venezuela.

In the call, the White House said Trump "reiterated that the situation in Venezuela is dire, and we all have an interest in seeing a democratic transition to end theongoing crisis." The statement didn't say how Putin responded.

Talks between members of the Organization of Petroleum Exporting Countries and its allies broke down in early March as Russia refused to sign on to larger production cuts proposed by Saudi Arabia. The failure to reach an agreement prompted the Saudis to unleash a price war which, combined with the devastating effect of the virus pandemic, caused the market to crash.

Global demand is slumping by as much as 20 million barrels a day, about 20%, as billions of people go into lockdown to slow the spread of the virus. The outlook remains dire, with traders, banks and analysts forecasting a huge oversupply as governments effectively shut their economies.

[Mar 24, 2020] The government will again bail out shale industry

Mar 24, 2020 | www.unz.com

Mr McKenna , says: Show Comment March 23, 2020 at 6:20 am GMT

@Kim

They're going to have to bail out/nationalize the shale oil industry.

Or "They" could just ignore it.

It has achieved these outcomes – despite steep decline rates and a constant need for huge numbers of new wells – through massive levels of junk debt forced into existence by almost zero interest rates and by having little to no profits since 2008.

Sounds like a really rotten business model. "steep decline rates and a constant need for huge numbers of new wells" describes an industry in eclipse, to put it kindly.

The break-even for shale oils wells varies, but $70 a barrel is a good average figure.

Even worse. This 'business' is essentially fake and should be shuttered. Every dollar thrown at it will be wasted. If everything in the world somehow reverses itself one day and shale oil is once again needed, we can restart it. Won't happen, though. Obsolete.

anachronism , says: Show Comment March 23, 2020 at 7:38 am GMT
@Kim One part of the New Deal, that seemed to work very well for all parties concerned, was the Department of Agriculture's willingness to buy up excess grain/dairy production in order to encourage an ample supply of grain/dairy and a sustainable price, so that farmers could get out of the boom/bust cycle. These excess stores were intended to provide supplies when weather or disasters disrupted the harvests. The AG Dept. also established guidelines for farmers on how much acreage should be allocated to which type of food product, based upon its own estimates of aggregate demand and needs for strategic reserves. It even paid farmers to keep acreage fallow at times.

The Department of Energy could do something similar (provided the Congress should legislate it). For this to work, the government must limit foreign sources from supplying the US markets to serve only as augmentation to US energy production whenever/wherever the US energy producers can't meet the demand at the price level that the Energy Department sets. If the price is determined on an average COST+ ROI basis, our energy producers would effectively become utilities.

Miro23 , says: Show Comment March 23, 2020 at 8:35 am GMT
@Kim

They're going to have to bail out/nationalize the shale oil industry.

Why? These were private failed investment decisions, so let the industry go bankrupt along with their shareholders and junk bond investors.

The world doesn't need oil supplied at $70 – And what has this got to do with the US public? They didn't make these shale oil investment decisions.

TBTF (Too Big To Fail) is another fake argument. If the investment banks had been allowed to fail in 2008, we would now have a smaller and more prudent banking sector. There are always some serious banks out there to pick up the pieces.

[Mar 19, 2020] US imposes sanctions against #Iran after offering to help with #Coronavirus outbreak

Mar 19, 2020 | www.moonofalabama.org

karlof1 , Mar 18 2020 18:28 utc | 53

This might soon become the global rallying cry :

"USA is the greatest enemy of humanity - I hope they will pay for that:

"US imposes sanctions against #Iran after offering to help with #Coronavirus outbreak"

The situation has now gone well beyond immorality and into the realm of EVIL--an EVIL that's Bipartisan, shared by Ds and Rs alike.


bevin , Mar 18 2020 18:33 utc | 54

Miss Lacy and Arby both draw our attention to the obscenity of the US using this crisis in order to put pressure on governments that it dislikes by cutting off medicine and other resources.

Among the places where people are currently dying in large numbers because Washington chooses that they should are Cuba-under an oil embargo-, Nicaragua, Venezuela and Iran.

Those who cannot bring themselves to believe that government could be so evil as to deploy a virus as a weapon to weaken another state, only have to look at what is happening today: Venezuela desperately needs funds, much of its foreign exchange having been seized illegally by the US and its satellites, in order to weather the pandemic.

Anyone supporting such a policy, condoning the killing of vulnerable people to embarrass another state, is an accessory to murder.

farm ecologist , Mar 18 2020 19:40 utc | 67
Re., IMF refuses emergency funds to Venezuela

Posted by: arby | Mar 18 2020 14:32 utc | 11
Posted by: Miss Lacy | Mar 18 2020 18:15 utc | 50
Posted by: bevin | Mar 18 2020 18:33 utc | 55

Anyone supporting such a policy, condoning the killing of vulnerable people to embarrass another state, is an accessory to murder.

Although many argue that the foreign policies of the US government don't really reflect the views and desires of ordinary citizens, the comments in the Fox News report on this story suggest otherwise (caveat - be prepared to be appalled).

https://www.foxnews.com/world/venezuela-asks-imf-for-massive-emergency-loan-to-fight-coronavirus


[Mar 17, 2020] Russia Strikes Back Where It Hurts American Oil by Scott Ritter

Mar 17, 2020 | www.theamericanconservative.com

R ussia and Saudi Arabia are engaged in an oil price war that has sent shockwaves around the world, causing the price of oil to tumble and threatening the financial stability, and even viability, of major international oil companies.

On the surface, this conflict appears to be a fight between two of the world's largest producers of oil over market share. This may, in fact, be the motive driving Saudi Arabia, which reacted to Russia's refusal to reduce its level of oil production by slashing the price it charged per barrel of oil and threatening to increase its oil production, thereby flooding the global market with cheap oil in an effort to attract customers away from competitors.

Russia's motives appear to be far different -- its target isn't Saudi Arabia, but rather American shale oil. After absorbing American sanctions that targeted the Russian energy sector, and working with global partners (including Saudi Arabia) to keep oil prices stable by reducing oil production even as the United States increased the amount of shale oil it sold on the world market, Russia had had enough. The advent of the Coronavirus global pandemic had significantly reduced the demand for oil around the world, stressing the American shale producers. Russia had been preparing for the eventuality of oil-based economic warfare with the United States. With U.S. shale producers knocked back on their heels, Russia viewed the time as being ripe to strike back. Russia's goal is simple: to make American shale oil producers " share the pain ".

The United States has been slapping sanctions on Russia for more than six years, ever since Russia took control (and later annexed) the Crimean Peninsula and threw its weight behind Russian separatists in eastern Ukraine. The first sanctions were issued on March 6, 2014, through Executive Order 13660 , targeting "persons who have asserted governmental authority in the Crimean region without the authorization of the Government of Ukraine that undermine democratic processes and institutions in Ukraine; threaten its peace, security, stability, sovereignty, and territorial integrity; and contribute to the misappropriation of its assets."

The most recent round of sanctions was announced by Secretary of State Mike Pompeo on February 18, 2020, by sanctioning Rosneft Trading S.A., a Swiss-incorporated, Russian-owned oil brokerage firm, for operating in Venezuela's oil sector. The U.S. also recently targeted the Russian Nord Stream 2 and Turk Stream gas pipeline projects.

Russia had been signaling its displeasure over U.S. sanctions from the very beginning. In July 2014, Russian President Vladimir Putin warned that U.S. sanctions were "driving into a corner" relations between the two countries, threatening the "the long-term national interests of the U.S. government and people." Russia opted to ride out U.S. sanctions, in hopes that there might be a change of administrations following the 2016 U.S. Presidential elections. Russian President Vladimir Putin made it clear that he hoped the U.S. might elect someone whose policies would be more friendly toward Russia, and that once the field of candidates narrowed down to a choice between Donald Trump and Hillary Clinton, Putin favored Trump .

"Yes, I did," Putin remarked after the election, during a joint press conference with President Trump following a summit in Helsinki in July 2018. "Yes, I did. Because he talked about bringing the U.S.-Russia relationship back to normal."

Putin's comments only reinforced the opinions of those who embraced allegations of Russian interference in the 2016 U.S. Presidential election as fact and concluded that Putin had some sort of hold over Trump. Trump's continuous praise of Putin's leadership style only reinforced these concerns.

Even before he was inaugurated, Trump singled out Putin's refusal to respond in kind to President Obama's levying of sanctions based upon the assessment of the U.S. intelligence community that Russia had interfered in the election. "Great move on delay (by V. Putin) – I always knew he was very smart!" Trump Tweeted . Trump viewed the Obama sanctions as an effort to sabotage any chance of a Trump administration repairing relations with Russia, and interpreted Putin's refusal to engage, despite being pressured to do so by the Russian Parliament and Foreign Ministry, as a recognition of the same.

This sense of providing political space in the face of domestic pressure worked both ways. In January 2018, Putin tried to shield his relationship with President Trump by calling the release of a list containing some 200 names of persons close to the Russian government by the U.S. Treasury Department as a hostile and "stupid" move .

"Ordinary Russian citizens, employees and entire industries are behind each of those people and companies," Putin remarked. "So all 146 million people have essentially been put on this list. What is the point of this? I don't understand."

From the Russian perspective, the list highlighted the reality that the U.S. viewed the entire Russian government as an enemy and is a byproduct of the "political paranoia" on the part of U.S. lawmakers. The consequences of this, senior Russian officials warned, "will be toxic and undermine prospects for cooperation for years ahead."

While President Trump entered office fully intending to " get along with Russia ," including the possibility of relaxing the Obama-era sanctions , the reality of U.S.-Russian relations, especially as viewed from Congress, has been the strengthening of the Obama sanctions regime. These sanctions, strengthened over time by new measures signed off by Trump, have had a negative impact on the Russian economy, slowing growth and driving away foreign investment .

While Putin continued to show constraint in the face of these mounting sanctions, the recent targeting of Russia's energy sector represented a bridge too far. When Saudi pressure to cut oil production rates coincided with a global reduction in the demand for oil brought on by the Coronavirus crisis, Russia struck.

The timing of the Russian action is curious, especially given the amount of speculation that there was some sort of personal relationship between Trump and Putin that the Russian leader sought to preserve and carry over into a potential second term. But Putin had, for some time now, been signaling that his patience with Trump had run its course. When speaking to the press in June 2019 about the state of U.S.-Russian relations, Putin noted that "They (our relations) are going downhill, they are getting worse and worse," adding that "The current [i.e., Trump] administration has approved, in my opinion, several dozen decisions on sanctions against Russia in recent years."

By launching an oil price war on the eve of the American Presidential campaign season, Putin has sent as strong a signal as possible that he no longer views Trump as an asset, if in fact he ever did. Putin had hoped Trump could usher in positive change in the trajectory of relations between the two nations; this clearly had not happened. Instead, in the words of close Putin ally Igor Sechin , the chief executive of Russian oil giant Rosneft, the U.S. was using its considerable energy resources as a political weapon, ushering in an era of "power colonialism" that sought to expand U.S. oil production and market share at the expense of other nations.

From Russia's perspective, the growth in U.S. oil production -- which doubled in output from 2011 until 2019 -- and the emergence of the U.S. as a net exporter of oil, was directly linked to the suppression of oil export capability in nations such as Venezuela and Iran through the imposition of sanctions. While this could be tolerated when the target was a third party, once the U.S. set its sanctioning practices on Russian energy, the die was cast.

If the goal of the Russian-driven price war is to make U.S. shale companies "share the pain," they have already succeeded. A similar price war, initiated by Saudi Arabia in 2014 for the express purpose of suppressing U.S. shale oil production, failed, but only because investors were willing to prop up the stricken shale producers with massive loans and infusion of capital. For shale oil producers, who use an expensive methodology of extraction known as "fracking," to be economically viable, the breakeven price of oil per barrel needs to be between $40 and $60 dollars. This was the price range the Saudi's were hoping to sustain when they proposed the cuts in oil production that Russia rejected.

The U.S. shale oil producers, saddled by massive debt and high operational expenses, will suffer greatly in any sustained oil price war. Already, with the price of oil down to below $35 per barrel, there is talk of bankruptcy and massive job layoffs -- none of which bode well for Trump in the coming election.

It's clear that Russia has no intention of backing off anytime soon. According to the Russian Finance Ministry , said on Russia could weather oil prices of $25-30 per barrel for between six and ten years. One thing is for certain -- U.S. shale oil companies cannot.

In a sign that the Trump administration might be waking up to the reality of the predicament it faces, Treasury Secretary Steve Mnuchin quietly met with Russia's Ambassador to the U.S., Anatoly Antonov. According to a read out from the Russian Ministry of Foreign Affairs, the two discussed economic sanctions, the Venezuelan economy, and the potential for "trade and investment." Mnuchin, the Russians noted, emphasized the "importance of orderly energy markets."

Russia is unlikely to fold anytime soon. As Admiral Josh Painter, a character in Tom Clancy's "The Hunt for Red October," famously said , "Russians don't take a dump without a plan."

Russia didn't enter its current course of action on a whim. Its goals are clearly stated -- to defeat U.S. shale oil -- and the costs of this effort, both economically and politically (up to and including having Trump lose the 2020 Presidential election) have all been calculated and considered in advance. The Russian Bear can only be toyed with for so long without generating a response. We now know what that response is; when the Empire strikes back, it hits hard.

Scott Ritter is a former Marine Corps intelligence officer who served in the former Soviet Union implementing arms control treaties, in the Persian Gulf during Operation Desert Storm, and in Iraq overseeing the disarmament of WMD. He is the author of several books, including his forthcoming, Scorpion King: America's Embrace of Nuclear Weapons From FDR to Trump (2020).

[Mar 15, 2020] Is a Zero Growth Economy Viable?

Mar 15, 2020 | angrybearblog.com

Stormy | March 12, 2020 1:44 pm

US/Global Economics The present pandemic demonstrates that the global economy is closely tied to consumer spending. Suppose the pandemic is merely a foretaste of the effects of climate change and ecological destruction. Can we fashion a world base on Zero Growth, a Steady State Economy?

Zero growth might well entail the following:

1. A fixed and renewal body of resources.
2. A demographic balance, i.e., a fixed population size.

Can such an economy enable all of humanity to prosper and grow? If so, what must be do to enable us to grow and prosper?

Can we have an economy where consumption is stable, i.e., does not grow?

Or, to put it another way, where the amount of capital spent on consumption is constant, fixed.


Carol , March 12, 2020 2:14 pm

Changes! Not necessarily in any order
1. Stop glorifying "success" as the accumulation of things and money
2. Start defining success as a well balanced, creative life with rich human communications and community ties
3. Get rid of excessive wealth and poverty. Cultivate the "enough is enough" mentality
4. unleash creativity, without tying it to moneymaking.
5. Of course, a UBI. With that, many stressors leading to cancerous economic growth can be removed. The push to have children to support you in old age is gone (a driver in poorer countries). Yes, some people won't be interested in what we like to call work, but then, most work is in service to the cancerous economy.
6. Of course, universal health care
7. Of course, a serious community approach to child bearing, more realistic than the individualistic "I should be able to have as many children as I want."
8. A huge shift on emphasis from "lemme grab all I want" to "I am a part of the whole, and responsible for its well-being" including ecosystems

This would be nice, but the underpinnings of our current economy are based on "individualism." To have people change their philosophies to more communitarian ones without the soul crushing rule making that many non-individualistic societies indulge in would require a mature, humane approach to life in general.

2slugbaits , March 12, 2020 3:25 pm

Does zero growth mean zero sum? If the latter, then I don't think the non-OECD countries will buy into it. If not, then good luck convincing the OECD countries to cut back their consumption.

Stormy , March 12, 2020 4:01 pm

Hi, 2slugbaits–I remember our discussions from many years ago. Nice to read your responses again.

Your question is a good one. No, I do not mean "zero sum." Given that
radically falling consumer consumption may lead to a recession equal to or worse than 2008 --

Can we have an economy where consumption is stable, i.e., does not grow?

Or, to put it another way, where the amount of capital spent on consumption is constant, fixed.

I would want such an economy to be fair to all.

The conditions I outlined in my piece still hold, I think.

Stormy , March 12, 2020 4:06 pm

Carol,

Do you think your goals are feasible? Do you think a different kind of governance is needed to achieve such an economy?

J.Goodwin , March 12, 2020 7:10 pm

You can in many cases create a greater amount of something with the same or fewer inputs.

I think the key isn't non-growth consumption, but non-growth inputs.

Stormy , March 12, 2020 7:26 pm

J. Goodwin,

That is a great observation! A cleaner way of putting it. I am going to chew on that one for a while.

thanks.

[Mar 15, 2020] US seeking to carve out Sunni state as its influence in Iraq wanes: Wehrmacht occupying Ukraine vs US occupying Iraq.

Mar 15, 2020 | www.moonofalabama.org

Kali , Mar 14 2020 18:26 utc | 18

The neocons trying to control Trump are going to have a hard time this year because of the election. Trump knows his people voted for him because of his promises to get the troops back home. Of course the neocons want to build up more and more troops in Iraq or even split Iraq into 3 different countries. The Iraqi and Iranian leaders with the Syrians to a lesser degree will try to take advantage of Trump's dilemma. The Kurds are involved also. This is all explored by Pam Ho How Much Do You Suck (To lose a popularity contest with Saddam Hussein)

Willy2 , Mar 14 2020 18:32 utc | 19

- The US knows it "influence" is waning and tries to "carve out" a sunni "rump state" in North-West Iraq. First the US fights ISIS in that same area/region from the year 2014 onwards and now they are supposed to fight in FAVOUR of the sunnis/ISIS ?

"US seeking to carve out Sunni state as its influence in Iraq wanes"

https://www.middleeasteye.net/news/us-seeking-carve-out-sunni-state-its-influence-iraq-wanes

- Some politicians are recognizing that the killing of Qassam Sulemani has weakened the US position in the Middle East.

"Killing Soleimani made US 'weaker' in Middle East, US senator says".

https://www.middleeasteye.net/news/killing-soleimani-made-us-weaker-middle-east-us-senator-says

arata , Mar 14 2020 19:37 utc | 29
General McKenzie said they have bombed a civilian air port in Karbala was a right decision, Iraqi police force who were killed, they shouldn't be there!
See the video 13:00 onward.
Peter AU1 , Mar 14 2020 19:50 utc | 32
arata 29
Rueters had a piece on it which I linked in the last Iraq thread. Total yank arrogance and exceptionalism.

https://www.reuters.com/article/us-iraq-security-usa-iran-retaliation-mi/iraq-condemns-u-s-air-strikes-warns-of-consequences-idUSKBN2101AD?il=0
""These locations that we struck are clear locations of terrorist bases," said Marine General Kenneth McKenzie, head of the U.S. military's Central Command.

"If Iraqis were there and if Iraqi military forces were there, I would say it's probably not a good idea to position yourself with Kataib Hezbollah in the wake of a strike that killed Americans and coalition members," he told a Pentagon news briefing."

dltravers , Mar 14 2020 21:40 utc | 40
Despite Trump the Iraq policy transcends his administration and will continue in some form in the future. There will be a continued presence in some form and in some part of the country. Our beloved ally in the region demands our presence.

They smartly keep the presence small with no draft remembering that is what took them out of Nam. An angry draft worthy populace, a counter culture disillusioned with the murder of their liberal anti war leadership by the state, and ample media coverage of the war carnage.

All of that is long gone, and even with the age of internet reporting the populace has been bought off with entertainment, amazon, porn, and bullshit.

Abe , Mar 15 2020 0:39 utc | 54
@43

Parallel is IMO very interesting, Wehrmacht occupying Ukraine and US occupying Iraq. In both cases there was minority that welcomed occupier with open arms, wanting to oppress majority of own country folks due to earlier grievances. In both cases, invader didn't want to bother with using that minority to own goals, as they saw them all as inferior race. And invader was in both cases more interested in conquering more powerful neighbor to the east.

Irony is that, if Nazi Germany/US didn't look at Ukraine/Iraq people as inferior race they could use them for own goal to fight Russia/Iran. But, dumb as they are, they stuck all those Ukrainians into camps(lot of them sympathizers to Germany/rabidly against Russia)/ disbanding ex. Saddam's army and made kernel of future anti US force into region, not to mention Kurdish question.


Peter AU1 , Mar 15 2020 0:39 utc | 55
53 Snake put up a link back up the thread.
https://www.presstv.com/Detail/2020/03/14/620858/Iraq-military-demands-foreign-forces-swiftly-withdraw-following-US-air-raids
"Iraqi lawmakers unanimously approved a bill on January 5, demanding the withdrawal of all foreign military forces..."

"Later on January 9, former Iraqi prime minister Adel Abdul-Mahdi called on the United States to dispatch a delegation to Baghdad tasked with formulating a mechanism for the move.

According to a statement released by his office at the time, Abdul-Mahdi "requested that delegates be sent to Iraq to set the mechanisms to implement the parliament's decision for the secure withdrawal of (foreign) forces from Iraq" in a phone call with US Secretary of State Mike Pompeo."

US in response moved to a few bases they intended to occupy and give the two finger salute to Iraq. Trump threatened sanctions and theft of Iraq's oil money which is in the US. Pentagon now moving patriots in.

Jackrabbit , Mar 15 2020 2:43 utc | 69
Question to b @53: ... it was a non-binding resolution.

It's "non-binding" on USA only because the Prime Minister conducts foreign policy and there's no current written basing agreement between Iraq and USA that can be terminated. The resolution demands that the Prime Minister arrange for the departure of US troops.

The resolution is binding on the Prime Minister because it was a valid vote in accordance with Iraqi Parliamentary procedure.

USA refused to discuss leaving Iraq and claimed that the Parliamentary vote was "non-binding" because it was unrepresentative (USA got their Sunni and Kurd sympathizers to boycott the vote). But Parliament still had a quorum, so the vote is legal and binding.

<> <> <> <> <> <>

Is it enforceable?

USA/NATO are very unlikely to leaving willingly. We are seeing the start of a civil war in Iraq because most Sunnis and Kurds support USA/NATO remaining while Shia want USA/NATO to leave.

!!

james , Mar 15 2020 2:36 utc | 67
just start with the first lie and go from their... usa / uk lied the world into going to war on iraq... and from their the lies just keep on getting stacked.. if you can't acknowledge the first lie, you probably are incapable of recognizing all the other lies that have been thrown on the same bullshit pile... one big pile of lies and bullshite - a specialty of the exceptional country..
james , Mar 15 2020 2:25 utc | 65
@ 63 question.. you like this usa style bullshit that buys politicians in iraq and when that doesn't work, they go on to the next attempt at installing a politician willing to agree to their bullshite? interesting bullshit concept of democracy if you ask me... everything has a price tag and honour is something you can pick up at the grocery store... right..

[Mar 15, 2020] While it is still popular to claim that the United States has never defaulted on its debt, this is a myth

Mar 15, 2020 | www.moonofalabama.org

Likklemore , Mar 14 2020 22:42 utc | 44

@c1ue 28 and 30

Given that 2/3rds or more of the debt is owed to Americans

suggest you whisper that to the Chinese, other sovereign holders and non-US individuals - you know those Tbills and Tbonds.

Nobody has a better credit rating than the USG - because the USG can literally not default.

Really? Why did S&P downgrade US credit rating in 2014?

and

what do you think happened on August 15 1971? that date can be categorized as recent!

LINK


[.]
While it is still popular to claim that the United States has never defaulted on its debt, this is a myth. The US has been forced to default a couple of times throughout history, the last of which being when Richard Nixon&rsquo closed the gold window. By cutting the ability of foreign governments to redeem US dollars for gold, America was allowed to pay back past debt with devalued fiat money. This form of default has long been a popular option for governments with debt obligations it can't or won't honor.

Of course, as Peter Klein wrote last week, even Trump's suggestion of the US restructuring its debt isn't the doomsday scenario CNBC talking heads have made it out to be, noting that:

[T]he idea that the US can never restructure or even repudiate the national debt -- that US Treasuries must always be treated as a unique and magical "risk-free" investment -- is wildly speculative at best, preposterous at worst.

Murray Rothbard himself advocated for outright repudiating the national debt, arguing:

The government is an organization, so why not liquidate the assets of that organization and pay the creditors (the government bondholders) a pro-rata share of those assets? This solution would cost the taxpayer nothing, and, once again, relieve him of $200 billion in annual interest payments. The United States government should be forced to disgorge its assets, sell them at auction, and then pay off the creditors accordingly.

Trump himself has even touched on the possibility of selling of assets held by the Federal government as a form of debt reduction.[.]

Oops then there was 1979 said caused by word-processing error
so we defaulted on some of them."

c1ue dear friend, the current level of US debt is unsustainable. Never mind the happy cheerleaders promoting mighty U.S. is the wealthiest nation on earth. Have no fear our dollar is good as gold, backed by the full faith and credit of Uncle Sam.

Here is a brief history of U.S.defaults starting with year 1790- LINK

[Mar 11, 2020] The demise of oil is overstated and the rise of renewables is also

Mar 11, 2020 | www.moonofalabama.org

snedly arkus , Mar 10 2020 23:48 utc | 50

The demise of oil is overstated and the rise of renewables is also. Electric cars? Where do you think the power is going to come from? Forget nukes and hydro as well healed enviros will fight to the death to stop them. Japan is closing their nukes and going to coal. Same with Germany. Without a way to store electricity renewables are a lost cause that needs fossil backup. Molton salt lovers won't tell you about the huge solar molton salt plant near Tonopah Nevada that's been mothballed for a year due to being totally unreliable. Or the solar plant at Ivanpah in Nevada that has never lived up to expectations and has to have a gas plant running full time to make up for night and shortfalls. The grids, especially local grids in your neighborhood are creaky and will never handle the amount of electricity if we all go to electric cars and eliminate gas heat, gas hot water, and gas cooking in favor of electric. When they tell you how much to upgrade the grid they are only talking about the main grid and not the even larger expense of upgrading the local. Some Australian neighborhoods have had grid failure with half a dozen electric cars charging at once.

Thanks to US sanctions Venezuela is not pumping much oil. To make up for the loss of the Venezuelan crude which the US Gulf coast refiners relied on they are now importing a bunch of heavy crude from RUSSIA along with other Russian petroleum products. Next door to Venezuela in Guyana huge finds of oil are in the process of being exploited. Point is the more they look the more oil they find so to say oil is on it's way out is far too premature. Point is renewables as they now exist are not ready for prime time in a modern society that needs a constant flow of electricity. Plenty of pie in the sky predictions of we'll solve the technical problems but not much in results.

In the US we are getting large numbers of wind farms getting old and junked and their large rotors made of various composites are not recyclable and are now filling up landfills. Lots of blather of we can recycle worn out batteries, which are lead acid, but not much if we can do so with lithium ion. Not to mention the cleared land and roads needed to employ wind and solar and the destruction of animals and their habitat.

Without hookup to the grid all those bragging about their cheap electricity, as power companies are required to buy their electricity at top dollar, is no longer cheap. Large solar and wind installations get a paid subsidy for the electricity they produce without which those renewables are not cost competitive with fossil fuels. The average ratepayer and taxpayer does not realize they are subsidizing those "competitive" rates.

[Mar 10, 2020] The US shale sector is getting completely killed. A complete bloodbath. Billions of dollars in equity wiped out

Mar 10, 2020 | www.moonofalabama.org

karlof1 , Mar 9 2020 20:12 utc | 36

This bird tweets :

"The U.S. shale sector is getting completely killed. A complete bloodbath. Billions of dollars in equity wiped out.

"Occidental Petroleum is down 44%. EOG is down 35%. Continental Resources down 40%. Smaller players like Parsley down more than 50%."

I suggest this bird look at one of those corp's balance sheets since they had very little equity but lots of liabilities (Assets=Liabilities+Equity) as Assets and Liabilities where allowed to grow with the use of interest-free money to keep the Ponzi Scheme afloat. Also recall that CEOs often get paid in shares which get dividends. Often those dividends are paid using the zero interest loan money leaving the corp with a bigger, unstable pile of debt and the CEO with a purse fattened by the loan instead of actual company performance, ie, profits.

[Mar 09, 2020] Russia's 2020 federal budget assumes a price of $42.4 per barrel of Urals crude oil blend (

Mar 09, 2020 | www.moonofalabama.org

S , Mar 9 2020 6:19 utc | 73

@Likklemore #26:
Russia will be fine all the way down to $20//bbl

Russia's 2020 federal budget assumes a price of $42.4 per barrel of Urals crude oil blend (the prices of other oil & gas exports, such as other crude oil blends, natural gas, LNG and petroleum products, are converted into Urals blend prices using statistical formulas). If the market price turns out to be higher, the surplus goes into the National Wealth Fund ($124 bn as of December 1, 2019; currency composition is 45% U.S. dollars, 45% euros, 10% pound sterling); conversely, if the price is lower, the deficit is financed from the NWF. This is known in Russia as "the budget rule" ( бюджетное правило ).

You can see the prices of various crude oil blends at the OilPrice.com 's Oil Price Charts page, but note that the Urals blend prices shown are lagging by three days as of the time of this comment. Generally, Urals blend price is somewhere between WTI and Brent blend prices, so it should be around $32/bbl at the moment. Meaning, Russia will now have to start taking money from the NWF.

If the low prices persist for a long period of time, Russia can balance the budget by devaluing the ruble, as its foreign debt is one of the lowest in the world -- no budget cuts are necessary. Russia's foreign exchange reserves currently stand at $570 bn (77.1% foreign currencies, 1.2% SDR, 0.7% reserve position in the IMF, 21.0% gold).

[Mar 08, 2020] Why "orphan" oil and gas wells are a growing problem for states

Mar 08, 2020 | www.moonofalabama.org

Trailer Trash , Mar 6 2020 22:22 utc | 35

>USA shale producers

Soon people won't have to worry much about damage from new wells. Instead they will have to worry about existing-and-soon-to-be-abandoned wells. This is already a huge problem in Alberta, where "it's estimated that more than 155,000 Alberta energy wells have no economic potential and will eventually require reclamation".

But not to worry. It will only cost $47 Billion for Alberta to clean up the mess .

No surprise that it is worse in the US. I couldn't quickly find a cost estimate.

Nobody knows how many orphan and abandoned drilling sites litter farms, forests and backyards nationwide. The U.S. Environmental Protection Agency estimates there are more than a million of them. Unplugged wells can leak methane, an explosive gas, into neighborhoods and leach toxins into groundwater.

Why "orphan" oil and gas wells are a growing problem for states

[Mar 07, 2020] Is the U.S. Fracking Boom Based on Fraud?

Notable quotes:
"... As Fastow explained, in finance, the difference between a loophole and fraud isn't always easy to identify. And that may be something the U.S. fracking industry is working to its advantage. ..."
Mar 07, 2020 | www.nakedcapitalism.com

Posted on March 6, 2020 by Yves Smith Yves here. It really is remarkable how super low interest rates have led investors on a widespread basis to pour money down ratholes. Unicorns is one. Another has been fracking, which despite being another widespread cash sink, remarkably has kept sucking in funding. As we pointed out in 2014 :

John Dizard at the Financial Times (hat tip Scott) gives a more intriguing piece of the puzzle: the degree to which production is still chugging along despite it being uneconomical. The oil majors have been criticized for levering up to continue developing when it is cash-flow negative; they are presumably betting that prices will be much higher in short order.

But the same thing is happening further down the food chain, among players that don't begin to have the deep pockets of the industry behemoths: many of them are still in "drill baby, drill" mode. Per Dizard:

Even long-time energy industry people cannot remember an overinvestment cycle lasting as long as the one in unconventional US resources. It is not just the hydrocarbon engineers who have created this bubble; there are the financial engineers who came up with new ways to pay for it.

Justin Mikulka argues that one reason these persistently unprofitable fracking companies keep going is via fraud.

By Justin Mikulka, a freelance writer, audio and video producer living in Trumansburg, NY. Originally published at DeSmogBlog

In a 2016 interview with Fraud Magazine , former Enron CFO Andrew Fastow explained what he thought made him so successful while at the former energy corporation that's now infamous for financial scandal.

"I think my ability to do structured financing, to finance things off-balance sheet and to find ways to manipulate financial statements -- there's no nice way to say it. Like I said at the conference, I was good at finding loopholes."

As Fastow explained, in finance, the difference between a loophole and fraud isn't always easy to identify. And that may be something the U.S. fracking industry is working to its advantage.

Fastow, the convicted fraudster, does admit that what they did at Enron misled investors. "We created something that was monstrously misleading, but any one of those deals alone wasn't necessarily considered fraudulent," he said.

Fast-forward to today and a different part of the energy industry: The U.S. shale oil and gas industry has lost more than a quarter trillion dollars since 2007, while being sold to investors as an economic boom, even at oil prices much lower than those of recent years. Does that financial mismatch seem misleading? Or perhaps, familiar?

In an unexpected twist, Fastow now gives talks to the energy industry on ethical leadership.

Sounding the Alarm

Bethany McLean was the first reporter to question whether Enron was a financially sound company in a 2001 article for Fortune magazine. McLean went on to co-author the book The Smartest Guys in the Room , which documented the fall of Enron due to its fraudulent practices, including the ones Fastow engineered.

In 2018, McLean also published the book Saudi America , which highlighted many of the financial challenges the fracking industry has faced. In a recent interview for Texas Monthly's podcast Boomtown , McLean explained one of the very accepted and blatantly misleading practices of the fracking industry:

I'd raise a couple of points. One is that companies have long hyped these break-even numbers. They say we can break even at $25 a barrel, we can break even at $20 a barrel. And then you look at their consolidated financial statements and they are losing money. And so something is going wrong the people called it to me [sic] corporate math or investor economics. So they were trying to put together these investor pitch decks that would show investors a set of economics that weren't real. So they would show you that they could break even on a well at $25 barrel of oil but then yet you'd go to the corporate financial statements and they were losing money.

Is that a loophole? Where you can openly misrepresent to investors the financial reality of your business? Or is it fraud?

As more and more players in the fracking industry run out of options and file for bankruptcy, investors are beginning to ask questions about why all the money is gone.

"This is an industry that has always been filled with promoters and stock scams and swindlers and people have made billions when investors have lost their shirts."

In a bonus episode of #Boomtown , we speak to @bethanymac12 about the fracking industry. https://t.co/sSmXUM3ANu

-- Texas Monthly (@TexasMonthly) February 6, 2020

The Blank Check Companies

Much like with the housing crisis that caused the financial crisis of 2008, the fracking boom has led to Wall Street bankers finding innovative ways to finance a money-losing endeavor. Some companies are now even selling bonds based on future well performance , a concept similar to the mortgage-backed securities that led to the 2008 housing crisis.

Another Wall Street invention is what is called a "special purpose acquisition company" ( SPAC ), or, as they are also known, blank check companies. The way these investments work is a big bank or private equity firm backs a management team to raise money for the SPAC with the agreement that the leaders of the SPAC will then at some point make a "special purpose acquisition" -- which means they will find an existing company and buy it.

They are called blank check companies because the management is given a blank check to buy whatever they choose. In the 1980s, the Wall Street Journal ( WSJ ) noted that "blank-check companies were often associated with penny-stock frauds." In a 2017 article on the oil industry, the WSJ reported that " SPAC s were a hallmark of the frothy days before the financial crisis [of 2008]."

Understandably, SPAC s were often seen as a risky investment, but much like with the housing crisis, the biggest names on Wall Street are getting involved and giving the concept legitimacy, with Goldman Sachs starting to back SPAC s in 2016. And new fracking companies have come about as a result.

Ben Dell, a managing partner at investment firm Kimmeridge Energy, explained one of the risks of SPAC investments to the Wall Street Journal. " SPAC management teams have an incentive to spend the money they have raised no matter what, so they can collect fees and pay themselves a salary and stock options at the company they purchase," Dell said.

" SPAC s are the most egregious example in the industry of executive misalignment with investors," Dell told the WSJ .

As I have previously reported , one of the problems with the fracking industry is that CEO s are paid very well even when the companies lose money. According to Dell, SPAC s take this problem to a new "egregious" level.

Alta Mesa: A Star Is Born

To successfully raise money for a blank check company, having some star power in the management helps. As the Wall Street Journal has noted, investments in SPAC s " are largely bets on their executives ."

Jim Hackett would seem to be the ideal candidate to lead a SPAC in the fracking industry. Hackett has an impressive resume: the former CEO of fracking company Anadarko, former chairman of the Federal Reserve Bank of Dallas , an executive committee member of the industry lobbying group American Petroleum Institute , and partner at the major private equity firm Riverstone Holdings.

In 2013 Hackett retired from Anadarko to attend Harvard Divinity School to get a degree in theology. However, he was still a partner at Riverstone and in 2017 was lured back to the fracking business to run a SPAC backed by Riverstone.

The SPAC raised a billion dollars while being advised by the biggest names in the business, including Goldman Sachs and CitiGroup. The initial blank check company was called Silver Run Acquisition Corp. II .

Hackett used the money to buy two companies in Oklahoma -- an oil producer and a pipeline -- and the new combined company Alta Mesa was valued at $3.8 billion.

The Future Was Bright for Alta Mesa

Hackett and Alta Mesa had big plans for making money fracking wells in Oklahoma, which included forecasts for big increases in oil and gas production from the newly acquired assets with very low break-even numbers.

When the Wall Street Journal reported the creation of Alta Mesa, it noted , "Alta Mesa's core acreage in Northeast Kingfisher County has among the lowest breakevens in the U.S. at around $25 per barrel, the company said." Because oil was well over that price at the time, the future looked good, according to Hackett and Alta Mesa. Forbes reported that Hackett said Alta Mesa's holdings were "oil that will be economic even at $40 WTI [West Texas Intermediate]" and oil has been well over that mark since Hackett made that statement in 2017.

Like break-even numbers, another area where misleading investors in the oil industry might be particularly easy is making overly optimistic forecasts about how much oil will be produced by future wells. The Wall Street Journal has documented this as a significant problem for the U.S. shale industry.

Description of Alta Mesa assets in investor proxy statement. Credit: Screen capture from proxy statement.

In early 2018 when touting the potential of the proposed new company Alta Mesa, Hackett said that "its average well would produce nearly 250,000 barrels of oil over its life." A year later, Alta Mesa said it expected those wells would produce less than half that, only 120,000 barrels of oil over the life of the well.

In May last year, Alta Mesa was under investigation by the Securities and Exchange Commissions ( SEC ) "for possible issues in its financial reporting."

Later in 2019, Alta Mesa filed for bankruptcy after writing down its assets by $3.1 billion. The billion-dollar blank check had been spent, and it took less than two years to lose it all.

SEC Investigation and Multiple Investor Lawsuits

Alta Mesa's assets were sold off earlier this year. The SEC declined to comment on the status of the investigation.

In May 2019, the Houston Chronicle reported , "Alta Mesa also is facing a series of lawsuits. Some shareholders are suing claiming they were defrauded and lied to about the value of the company and its assets when the company was formed."

One lawsuit filed by the Plumbers and Pipefitters National Pension Fund claims that the proxy statement for Alta Mesa contained materially false and misleading information. That filing lays out a lot of facts to support that claim.

Statement for complaint for violation of the Securities Exchange Act of 1934. Credit: Screen capture of court documents

Another lawsuit alleges that Alta Mesa didn't pay the proper amount of royalties to landowners, with state investigations into this issue.

Yet another lawsuit has been filed against Riverstone for " misleading statements ."

Investors are saying they were misled by Hackett and Riverstone. The allegations are based on the claims that were made about how much oil the company could produce. In hindsight, those claims appeared wildly inaccurate and misleading. But is that fraud? Or just taking advantage of a loophole?

In January, the Houston Chronicle summed up the situation as it described Alta Mesa's downfall : "It was a dramatic fall from grace after significantly overestimating its potential in Oklahoma's STACK shale play "

While Alta Mesa is a spectacular example of how fast the fracking business can make large sums of money disappear after "significantly overestimating its potential," it also likely marks the beginning of investor lawsuits against many other failing fracking companies with similar histories.

Learning From Enron

When Jim Hackett decided to go to Harvard Divinity School, several favorable profiles about his choice were written, including one on the Harvard website. That article noted that one of the reasons Hackett decided to go to school was because of "the collapse of Enron, a disaster that he attributed to 'a failure in leadership' among people he knew well."

The speed with which Hackett and Alta Mesa went bankrupt is remarkable, indicating a likely failure in leadership.

However, Hackett seems to have learned something from former Enron executive Andrew Fastow: that there is work for former executives like them to teach the energy industry about ethics and morality.

Hackett is now a lecturer at the University of Texas at Austin Center for Leadership and Ethics .

Fraud? Or Just a Laughing Matter?
Good reporting is hard work but sometimes involves a bit of luck. Like when a Wall Street Journal reporter , in a room full of people hired to make forecasts of fracked oil and gas production, learned about the existence of much more accurate methods for predicting that oil production. And also learned that with accuracy comes much lower estimates of shale oil reserves.

The WSJ article that followed quoted Texas A&M professor and expert on calculating oil and gas reserves John Lee. "There are a number of practices that are almost inevitably going to lead to overestimates," said Lee. Those are the practices used by the industry, with Alta Mesa serving as just one example.

Overestimates are why Alta Mesa received funding but now no longer exists.

The Wall Street Journal reported that during a presentation given by Lee, an audience member "stood up and challenged the engineers in attendance," asking why the forecasters weren't using accurate models like the ones that were available -- as Lee had described.

Another audience member explained the reason.

" Because we own stock," replied another engineer, "sparking laughter," according to the Wall Street Journal.

Is it misleading to laugh at your company's investors if you know the estimates you are giving them are inflated, but because you own the stock that benefits from those estimates, you do it anyway? Is that fraud? Perhaps that depends on if you get you get ethics lessons from Andrew Fastow and Jim Hackett.

Will the biggest innovation of the fracking revolution be making financial fraud a laughing matter?

A lot of people on EFT like to talk about how shale is fraudulent. That's simply not true:

You can't commit fraud when the rules are so lax you can just make shit up and it's still allowed.

-- Alpine High Fire Sale (@losingyourmoney) February 19, 2020


PlutoniumKun , March 6, 2020 at 6:43 am

While I've little doubt there is a lot of fraud, so much of the stupidity around fracking comes down to the old saying that its hard to make a man undrestand something when his job is to not understand it.

The financing of the oil and gas industry is almost entirely dependent on projections – projections of flow per well, and projections of future prices. All you need to do is make a few optimistic projections of one or both, and you've suddenly turned a dud into a highly valuable asset. Anyone can look at the pricing and question it, but with oil/gas, that is much harder with 'novel' types of well as there are few if any precedents. So if someone says 'the well is producing X per day, we can continue this flow for 3 years and when thats finished, we can drill down another 200 metres and replicate the same flow', there is nobody to contradict it. The drilling guys aren't going to argue, they want to keep their jobs. The geologist isn't going to argue, he has his mortgage to pay. The senior manager won't argue, he wants a promotion. The drilling company owners won't argue, they want to cash out. And the Wall Street financier won't argue, because he can pass on the risk to the equivelent of the last booms 'German bankers'.

So when someone like Arthur Berman – a geologist who has continuously being questioning the underlying geological assumptions – raises concerns – he's listened to politely, even invited to some conferences, but is otherwise ignored. Because its not in anyones interest to listen. There is literally nobody who's job it is to shout 'stop'. So much for self regulating markets.

While there may well be very severe economic consequences if and when this blows up in everyones face (and I suspect that Covid-19 will be the catalyst for this, oil demand is collapsing day by day), the big loser is the planet we depend on for our survival.

jackiebass , March 6, 2020 at 7:15 am

I live in NY on the PA border. Fracking is still happening south in PA but is only a fraction of what it once was. If you drive into PA you will see lots full of fracking materials that have sat there for a long time. At first for about two years it was a boom. The activity from fracking was amazing. Then as fast as it started it slowed down to a crawl. There are a few reasons in my opinion. The so called sweet sports were quickly fracked leaving less attractive sights. It was concealed that a fracked well produced most of it's gas in the first two years. After that the production from a well dropped off drastically. Locals soon lost their enthusiasm for fracking.There is still some fracking but it is hardly noticeable. Local people thought this would be great but attitudes soon soured. A few made big bucks at the expense of the rest. The fracking was in former coal country. The difference is coal lasted a lot longer. Now the majority of people in the area oppose fracking. I'm thankful that NY state banned fracking because of the negatives associated with fracking. I own 50 acres near the PA border. Before fracking was banned I was constantly hounded by leasing companies. I refuse to lease because to me my land was more important than a few bucks. I hope in my life time NY doesn't reverse the fracking ban. On another note there are wind farms where I live. I would leas to a wind company because there are fewer negatives and it's less intrusive.

jefemt , March 6, 2020 at 9:31 am

The good news is that if the companies were chasing you, you own the minerals. You can donate them to a conservation land trust and assure that no mineral extraction takes place, and get a tax benefit for the foregone production.

Win Win!

Ignacio , March 6, 2020 at 7:27 am

So, one first profits from fraud to later profit by lecturing everybody about ethics?
A-ma-zing!

Kevin C. Smith , March 6, 2020 at 10:02 am

BIG red flag for me when someone like Jim Hackett decides to go to Harvard Divinity School

Shiloh1 , March 6, 2020 at 10:22 am

Daniel Plainview was baptiized, but that was so he could drink Eli's milkshake later and club him to death with a bowling pin.

Colonel Smithers , March 6, 2020 at 11:09 am

Thank you, Kevin.

That sounds like my former CEO and chairman, Stephen Green, becoming an Anglican clergyman.

Ignacio , March 6, 2020 at 7:49 am

It can be argued that the money invested in many fracking companies with such inflated pay-back periods, ROIs or breakeven estimates, apart from fraud, could be considered as a private subsidy, just like Uber investors subsidize Uber taxi services. If we can blame it to low interest rates resulting in such subsidies, for fracking oil, unicorns, education, housing etc. to my knowledge this has only been argued in very few sites like here at NC or Wolf Street but merits a close examination. If pension and mutual funds are pouring a lot of money in such business with low to negative returns what consequences are to be expected in the future?

Trent , March 6, 2020 at 8:18 am

Eight to Ten years ago you would have seen giant trucks moving water and dirt from fracking sites when you got off the turnpike around Donegal PA. Since about 2015 or 2016 i'd say that completely died. Pittsburgh actually had one year of population gain due to the fracking boom but thats done. Yves mentioned investors and low interest rates chasing bad investments and fraud. I'd say the same thing is going on in healthcare based on my exp. of it and the amount of money floating around. We need higher interest rates to nip this stuff in the bud and re-balance the economy.

a different chris , March 6, 2020 at 12:11 pm

>We need higher interest rates

Yup. In so many ways.

tegnost , March 6, 2020 at 8:25 am

This pretty much says it all regarding the health of our eCONomy, but hey, after it all falls apart we should have plenty of reformed criminals to teach ethics classes

"The Wall Street Journal reported that during a presentation given by Lee, an audience member "stood up and challenged the engineers in attendance," asking why the forecasters weren't using accurate models like the ones that were available -- as Lee had described.

Another audience member explained the reason.

"Because we own stock," replied another engineer, "sparking laughter," according to the Wall Street Journal."

fresno dan , March 6, 2020 at 8:39 am

In a 2016 interview with Fraud Magazine,
==============================================
I have to say, I was shocked, SHOCKED to find that there is a magazine actually, only devoted to fraud – that is published bi-monthly.
AND than I was shocked to find out that the magaine actually, only devoted to fraud is ONLY published bi-monthly

Zamfir , March 6, 2020 at 2:19 pm

That's what they say. After you take subscription, you'll find they publish monthly.

The Rev Kev , March 6, 2020 at 9:39 am

Is the U.S. Fracking Boom Based on Fraud? Is the Pope Catholic? There are going to have to be major structural changes in the world's economy in the next few years and with the demand for oil dropping, prices have gotten cheaper which is turning fracking into a non-profit industry. In any case, how are you suppose to frack with sick crews? This is one industry that needs to go away before it causes any more damage. You'd find more honesty in a boiler room brokerage firm than in this industry.

xkeyscored , March 6, 2020 at 12:33 pm

I did wonder why 'Fracking Boom' was in the title.

Carolinian , March 6, 2020 at 10:11 am

There's a recent documentary called The Price of Everything that is about the enormous sums being paid for every latest fad in modern art. The show says that all the great masters, old and new, have been locked up by museums or the super rich and so a recent flood of new investors are looking for any excuse to spend lots of money on paintings. Apparently there is so much money sloshing around at the top of our unequal economy that that these plutocrats don't even care if they lose their shirts on bad investments. The main thing is to keep it out of the hands of the poor.

Clearly we as a society are suffering from affluenza, at least among the elites who should all be virus quarantined and then maybe we will forget to check back.The show tries to pretend that this money driven art world is a cool thing. It had this viewer thinking of guillotines.

xkeyscored , March 6, 2020 at 12:37 pm

Unfortunately, those most negatively affected by affluenza are those not infected with it.

JBird4049 , March 6, 2020 at 6:11 pm

Yes, like all the people who cannot see the art. It's mostly buried in storage. What is the point of having over two thousand years of art from multiple civilizations, if most of it is hidden away and often only known from catalog descriptions or cramped tiny pictures.

TimH , March 6, 2020 at 10:51 am

If Enron was fraud, how come Uber isn't considered fraud?

a different chris , March 6, 2020 at 12:12 pm

Because people can still make money off it.

No, not *you*. Not *us*. But people that "matter".

lyman alpha blob , March 6, 2020 at 1:46 pm

You must mean the insiders who suckered the rubes into taking shares off their hands at the IPO. IIRC the IPO price was over $70/share. Right now it's just under $32 with no signs of every being a profitable enterprise.

Grifters, charlatans and mountebanks everywhere you look.

franklin kirk , March 6, 2020 at 11:03 am

Charging mineral resource rent, which everyone has an equal claim to, would help to reduce the tendency of financial shenanigans. The profit motive is crack to rent seekers.

Colonel Smithers , March 6, 2020 at 11:06 am

Thank you, Yves.

Speaking of Enron, it is perhaps appropriate that my employer's head of non core assets, toxic waste for fire sale, came from Enron. Standard Chartered has some, too.

Polar Donkey , March 6, 2020 at 11:32 am

It seems like the Russians today decided to put the final nail in U.S. fracking industry and turn the screws on Saudi Arabia.

inode_buddha , March 6, 2020 at 2:22 pm

Is the US a fraud?
.
Fixed it for you.

rd , March 6, 2020 at 5:31 pm

I think the big issue goes back to the investors and bond rating agencies, similar to the subprime mortgage crisis. If bondholders aren't willing to do the homework, then they don't get paid for the risk that they are undertaking. with the multiple prediction tools for well production, you can make up an optimistic and pessimistic case. If the bond yield doesn't cover that risk to your satisfaction, then you don't buy the bond or you demand a higher interest yield and lower bond price.

Instead, it seems like the industry is raising money from people who don't want to think more than a few months ahead on a multi-year investment. The challenges faced by the fracking industry have been well publicized for several years now. If an investor doesn't understand those challenges now and isn't looking at specific methods of calculating production yield etc., then they have only themselves to blame if their investment loses money.

This is a very different issue than if somebody flat out lies about whether or not wells exist etc.

A single well can make financial sense even if there will never be a net profit from it. Fracking is pretty similar to the Hollywood film industry where nobody ever has any net profits despite living high on the hog. "Don't ever settle for net profits. It's called 'creative accounting'." – Lynda Carter: https://en.wikipedia.org/wiki/Hollywood_accounting

elkern , March 6, 2020 at 5:52 pm

I dunno. There may be a sucker born every minute, but I can't picture enough of them getting born with a million (or billion) Dollars to blow on rackets like this to keep it going this long.

Sad to see that the Plumbers' Union Pension Fund was a victim; I hope that's not a pattern, but it would make sense. If it's a pattern, then it's no wonder the Fed tried so hard to postpone the next Crash until after the elections. How much junk paper has Wall Street sold to other Pension Funds? States & Municipalities are already squeezed by "unfunded liabilities"; how much repackaged funky Fracking paper are held by public (governmental) agencies? Damn, this is gonna be a mess.

I'd advise investing in popcorn, except that my 401k will probably evaporate soon, so maybe it's pitchforks.

JBird4049 , March 6, 2020 at 6:01 pm

CFO Fastow of Enron. How nice to see him land on his feet. The company made listening to the rolling blackout reports for California while driving to work a requirement.

[Mar 06, 2020] Is the U.S. Fracking Boom Based on Fraud?

Mar 06, 2020 | www.nakedcapitalism.com

Posted on March 6, 2020 by Yves Smith Yves here. It really is remarkable how super low interest rates have led investors on a widespread basis to pour money down ratholes. Unicorns is one. Another has been fracking, which despite being another widespread cash sink, remarkably has kept sucking in funding. As we pointed out in 2014 :

John Dizard at the Financial Times (hat tip Scott) gives a more intriguing piece of the puzzle: the degree to which production is still chugging along despite it being uneconomical. The oil majors have been criticized for levering up to continue developing when it is cash-flow negative; they are presumably betting that prices will be much higher in short order.

But the same thing is happening further down the food chain, among players that don't begin to have the deep pockets of the industry behemoths: many of them are still in "drill baby, drill" mode. Per Dizard:

Even long-time energy industry people cannot remember an overinvestment cycle lasting as long as the one in unconventional US resources. It is not just the hydrocarbon engineers who have created this bubble; there are the financial engineers who came up with new ways to pay for it.

Justin Mikulka argues that one reason these persistently unprofitable fracking companies keep going is via fraud.

By Justin Mikulka, a freelance writer, audio and video producer living in Trumansburg, NY. Originally published at DeSmogBlog

In a 2016 interview with Fraud Magazine , former Enron CFO Andrew Fastow explained what he thought made him so successful while at the former energy corporation that's now infamous for financial scandal.

"I think my ability to do structured financing, to finance things off-balance sheet and to find ways to manipulate financial statements -- there's no nice way to say it. Like I said at the conference, I was good at finding loopholes."

As Fastow explained, in finance, the difference between a loophole and fraud isn't always easy to identify. And that may be something the U.S. fracking industry is working to its advantage.

Fastow, the convicted fraudster, does admit that what they did at Enron misled investors. "We created something that was monstrously misleading, but any one of those deals alone wasn't necessarily considered fraudulent," he said.

Fast-forward to today and a different part of the energy industry: The U.S. shale oil and gas industry has lost more than a quarter trillion dollars since 2007, while being sold to investors as an economic boom, even at oil prices much lower than those of recent years. Does that financial mismatch seem misleading? Or perhaps, familiar?

In an unexpected twist, Fastow now gives talks to the energy industry on ethical leadership.

Sounding the Alarm

Bethany McLean was the first reporter to question whether Enron was a financially sound company in a 2001 article for Fortune magazine. McLean went on to co-author the book The Smartest Guys in the Room , which documented the fall of Enron due to its fraudulent practices, including the ones Fastow engineered.

In 2018, McLean also published the book Saudi America , which highlighted many of the financial challenges the fracking industry has faced. In a recent interview for Texas Monthly's podcast Boomtown , McLean explained one of the very accepted and blatantly misleading practices of the fracking industry:

I'd raise a couple of points. One is that companies have long hyped these break-even numbers. They say we can break even at $25 a barrel, we can break even at $20 a barrel. And then you look at their consolidated financial statements and they are losing money. And so something is going wrong the people called it to me [sic] corporate math or investor economics. So they were trying to put together these investor pitch decks that would show investors a set of economics that weren't real. So they would show you that they could break even on a well at $25 barrel of oil but then yet you'd go to the corporate financial statements and they were losing money.

Is that a loophole? Where you can openly misrepresent to investors the financial reality of your business? Or is it fraud?

As more and more players in the fracking industry run out of options and file for bankruptcy, investors are beginning to ask questions about why all the money is gone.

"This is an industry that has always been filled with promoters and stock scams and swindlers and people have made billions when investors have lost their shirts."

In a bonus episode of #Boomtown , we speak to @bethanymac12 about the fracking industry. https://t.co/sSmXUM3ANu

-- Texas Monthly (@TexasMonthly) February 6, 2020

The Blank Check Companies

Much like with the housing crisis that caused the financial crisis of 2008, the fracking boom has led to Wall Street bankers finding innovative ways to finance a money-losing endeavor. Some companies are now even selling bonds based on future well performance , a concept similar to the mortgage-backed securities that led to the 2008 housing crisis.

Another Wall Street invention is what is called a "special purpose acquisition company" ( SPAC ), or, as they are also known, blank check companies. The way these investments work is a big bank or private equity firm backs a management team to raise money for the SPAC with the agreement that the leaders of the SPAC will then at some point make a "special purpose acquisition" -- which means they will find an existing company and buy it.

They are called blank check companies because the management is given a blank check to buy whatever they choose. In the 1980s, the Wall Street Journal ( WSJ ) noted that "blank-check companies were often associated with penny-stock frauds." In a 2017 article on the oil industry, the WSJ reported that " SPAC s were a hallmark of the frothy days before the financial crisis [of 2008]."

Understandably, SPAC s were often seen as a risky investment, but much like with the housing crisis, the biggest names on Wall Street are getting involved and giving the concept legitimacy, with Goldman Sachs starting to back SPAC s in 2016. And new fracking companies have come about as a result.

Ben Dell, a managing partner at investment firm Kimmeridge Energy, explained one of the risks of SPAC investments to the Wall Street Journal. " SPAC management teams have an incentive to spend the money they have raised no matter what, so they can collect fees and pay themselves a salary and stock options at the company they purchase," Dell said.

" SPAC s are the most egregious example in the industry of executive misalignment with investors," Dell told the WSJ .

As I have previously reported , one of the problems with the fracking industry is that CEO s are paid very well even when the companies lose money. According to Dell, SPAC s take this problem to a new "egregious" level.

Alta Mesa: A Star Is Born

To successfully raise money for a blank check company, having some star power in the management helps. As the Wall Street Journal has noted, investments in SPAC s " are largely bets on their executives ."

Jim Hackett would seem to be the ideal candidate to lead a SPAC in the fracking industry. Hackett has an impressive resume: the former CEO of fracking company Anadarko, former chairman of the Federal Reserve Bank of Dallas , an executive committee member of the industry lobbying group American Petroleum Institute , and partner at the major private equity firm Riverstone Holdings.

In 2013 Hackett retired from Anadarko to attend Harvard Divinity School to get a degree in theology. However, he was still a partner at Riverstone and in 2017 was lured back to the fracking business to run a SPAC backed by Riverstone.

The SPAC raised a billion dollars while being advised by the biggest names in the business, including Goldman Sachs and CitiGroup. The initial blank check company was called Silver Run Acquisition Corp. II .

Hackett used the money to buy two companies in Oklahoma -- an oil producer and a pipeline -- and the new combined company Alta Mesa was valued at $3.8 billion.

The Future Was Bright for Alta Mesa

Hackett and Alta Mesa had big plans for making money fracking wells in Oklahoma, which included forecasts for big increases in oil and gas production from the newly acquired assets with very low break-even numbers.

When the Wall Street Journal reported the creation of Alta Mesa, it noted , "Alta Mesa's core acreage in Northeast Kingfisher County has among the lowest breakevens in the U.S. at around $25 per barrel, the company said." Because oil was well over that price at the time, the future looked good, according to Hackett and Alta Mesa. Forbes reported that Hackett said Alta Mesa's holdings were "oil that will be economic even at $40 WTI [West Texas Intermediate]" and oil has been well over that mark since Hackett made that statement in 2017.

Like break-even numbers, another area where misleading investors in the oil industry might be particularly easy is making overly optimistic forecasts about how much oil will be produced by future wells. The Wall Street Journal has documented this as a significant problem for the U.S. shale industry.

Description of Alta Mesa assets in investor proxy statement. Credit: Screen capture from proxy statement.

In early 2018 when touting the potential of the proposed new company Alta Mesa, Hackett said that "its average well would produce nearly 250,000 barrels of oil over its life." A year later, Alta Mesa said it expected those wells would produce less than half that, only 120,000 barrels of oil over the life of the well.

In May last year, Alta Mesa was under investigation by the Securities and Exchange Commissions ( SEC ) "for possible issues in its financial reporting."

Later in 2019, Alta Mesa filed for bankruptcy after writing down its assets by $3.1 billion. The billion-dollar blank check had been spent, and it took less than two years to lose it all.

SEC Investigation and Multiple Investor Lawsuits

Alta Mesa's assets were sold off earlier this year. The SEC declined to comment on the status of the investigation.

In May 2019, the Houston Chronicle reported , "Alta Mesa also is facing a series of lawsuits. Some shareholders are suing claiming they were defrauded and lied to about the value of the company and its assets when the company was formed."

One lawsuit filed by the Plumbers and Pipefitters National Pension Fund claims that the proxy statement for Alta Mesa contained materially false and misleading information. That filing lays out a lot of facts to support that claim.

Statement for complaint for violation of the Securities Exchange Act of 1934. Credit: Screen capture of court documents

Another lawsuit alleges that Alta Mesa didn't pay the proper amount of royalties to landowners, with state investigations into this issue.

Yet another lawsuit has been filed against Riverstone for " misleading statements ."

Investors are saying they were misled by Hackett and Riverstone. The allegations are based on the claims that were made about how much oil the company could produce. In hindsight, those claims appeared wildly inaccurate and misleading. But is that fraud? Or just taking advantage of a loophole?

In January, the Houston Chronicle summed up the situation as it described Alta Mesa's downfall : "It was a dramatic fall from grace after significantly overestimating its potential in Oklahoma's STACK shale play "

While Alta Mesa is a spectacular example of how fast the fracking business can make large sums of money disappear after "significantly overestimating its potential," it also likely marks the beginning of investor lawsuits against many other failing fracking companies with similar histories.

Learning From Enron

When Jim Hackett decided to go to Harvard Divinity School, several favorable profiles about his choice were written, including one on the Harvard website. That article noted that one of the reasons Hackett decided to go to school was because of "the collapse of Enron, a disaster that he attributed to 'a failure in leadership' among people he knew well."

The speed with which Hackett and Alta Mesa went bankrupt is remarkable, indicating a likely failure in leadership.

However, Hackett seems to have learned something from former Enron executive Andrew Fastow: that there is work for former executives like them to teach the energy industry about ethics and morality.

Hackett is now a lecturer at the University of Texas at Austin Center for Leadership and Ethics .

Fraud? Or Just a Laughing Matter?
Good reporting is hard work but sometimes involves a bit of luck. Like when a Wall Street Journal reporter , in a room full of people hired to make forecasts of fracked oil and gas production, learned about the existence of much more accurate methods for predicting that oil production. And also learned that with accuracy comes much lower estimates of shale oil reserves.

The WSJ article that followed quoted Texas A&M professor and expert on calculating oil and gas reserves John Lee. "There are a number of practices that are almost inevitably going to lead to overestimates," said Lee. Those are the practices used by the industry, with Alta Mesa serving as just one example.

Overestimates are why Alta Mesa received funding but now no longer exists.

The Wall Street Journal reported that during a presentation given by Lee, an audience member "stood up and challenged the engineers in attendance," asking why the forecasters weren't using accurate models like the ones that were available -- as Lee had described.

Another audience member explained the reason.

" Because we own stock," replied another engineer, "sparking laughter," according to the Wall Street Journal.

Is it misleading to laugh at your company's investors if you know the estimates you are giving them are inflated, but because you own the stock that benefits from those estimates, you do it anyway? Is that fraud? Perhaps that depends on if you get you get ethics lessons from Andrew Fastow and Jim Hackett.

Will the biggest innovation of the fracking revolution be making financial fraud a laughing matter?

A lot of people on EFT like to talk about how shale is fraudulent. That's simply not true:

You can't commit fraud when the rules are so lax you can just make shit up and it's still allowed.

-- Alpine High Fire Sale (@losingyourmoney) February 19, 2020


PlutoniumKun , March 6, 2020 at 6:43 am

While I've little doubt there is a lot of fraud, so much of the stupidity around fracking comes down to the old saying that its hard to make a man undrestand something when his job is to not understand it.

The financing of the oil and gas industry is almost entirely dependent on projections – projections of flow per well, and projections of future prices. All you need to do is make a few optimistic projections of one or both, and you've suddenly turned a dud into a highly valuable asset. Anyone can look at the pricing and question it, but with oil/gas, that is much harder with 'novel' types of well as there are few if any precedents. So if someone says 'the well is producing X per day, we can continue this flow for 3 years and when thats finished, we can drill down another 200 metres and replicate the same flow', there is nobody to contradict it. The drilling guys aren't going to argue, they want to keep their jobs. The geologist isn't going to argue, he has his mortgage to pay. The senior manager won't argue, he wants a promotion. The drilling company owners won't argue, they want to cash out. And the Wall Street financier won't argue, because he can pass on the risk to the equivelent of the last booms 'German bankers'.

So when someone like Arthur Berman – a geologist who has continuously being questioning the underlying geological assumptions – raises concerns – he's listened to politely, even invited to some conferences, but is otherwise ignored. Because its not in anyones interest to listen. There is literally nobody who's job it is to shout 'stop'. So much for self regulating markets.

While there may well be very severe economic consequences if and when this blows up in everyones face (and I suspect that Covid-19 will be the catalyst for this, oil demand is collapsing day by day), the big loser is the planet we depend on for our survival.

jackiebass , March 6, 2020 at 7:15 am

I live in NY on the PA border. Fracking is still happening south in PA but is only a fraction of what it once was. If you drive into PA you will see lots full of fracking materials that have sat there for a long time. At first for about two years it was a boom. The activity from fracking was amazing. Then as fast as it started it slowed down to a crawl. There are a few reasons in my opinion. The so called sweet sports were quickly fracked leaving less attractive sights. It was concealed that a fracked well produced most of it's gas in the first two years. After that the production from a well dropped off drastically. Locals soon lost their enthusiasm for fracking.There is still some fracking but it is hardly noticeable. Local people thought this would be great but attitudes soon soured. A few made big bucks at the expense of the rest. The fracking was in former coal country. The difference is coal lasted a lot longer. Now the majority of people in the area oppose fracking. I'm thankful that NY state banned fracking because of the negatives associated with fracking. I own 50 acres near the PA border. Before fracking was banned I was constantly hounded by leasing companies. I refuse to lease because to me my land was more important than a few bucks. I hope in my life time NY doesn't reverse the fracking ban. On another note there are wind farms where I live. I would leas to a wind company because there are fewer negatives and it's less intrusive.

jefemt , March 6, 2020 at 9:31 am

The good news is that if the companies were chasing you, you own the minerals. You can donate them to a conservation land trust and assure that no mineral extraction takes place, and get a tax benefit for the foregone production.

Win Win!

Ignacio , March 6, 2020 at 7:27 am

So, one first profits from fraud to later profit by lecturing everybody about ethics?
A-ma-zing!

Kevin C. Smith , March 6, 2020 at 10:02 am

BIG red flag for me when someone like Jim Hackett decides to go to Harvard Divinity School

Shiloh1 , March 6, 2020 at 10:22 am

Daniel Plainview was baptiized, but that was so he could drink Eli's milkshake later and club him to death with a bowling pin.

Colonel Smithers , March 6, 2020 at 11:09 am

Thank you, Kevin.

That sounds like my former CEO and chairman, Stephen Green, becoming an Anglican clergyman.

Ignacio , March 6, 2020 at 7:49 am

It can be argued that the money invested in many fracking companies with such inflated pay-back periods, ROIs or breakeven estimates, apart from fraud, could be considered as a private subsidy, just like Uber investors subsidize Uber taxi services. If we can blame it to low interest rates resulting in such subsidies, for fracking oil, unicorns, education, housing etc. to my knowledge this has only been argued in very few sites like here at NC or Wolf Street but merits a close examination. If pension and mutual funds are pouring a lot of money in such business with low to negative returns what consequences are to be expected in the future?

Trent , March 6, 2020 at 8:18 am

Eight to Ten years ago you would have seen giant trucks moving water and dirt from fracking sites when you got off the turnpike around Donegal PA. Since about 2015 or 2016 i'd say that completely died. Pittsburgh actually had one year of population gain due to the fracking boom but thats done. Yves mentioned investors and low interest rates chasing bad investments and fraud. I'd say the same thing is going on in healthcare based on my exp. of it and the amount of money floating around. We need higher interest rates to nip this stuff in the bud and re-balance the economy.

a different chris , March 6, 2020 at 12:11 pm

>We need higher interest rates

Yup. In so many ways.

tegnost , March 6, 2020 at 8:25 am

This pretty much says it all regarding the health of our eCONomy, but hey, after it all falls apart we should have plenty of reformed criminals to teach ethics classes

"The Wall Street Journal reported that during a presentation given by Lee, an audience member "stood up and challenged the engineers in attendance," asking why the forecasters weren't using accurate models like the ones that were available -- as Lee had described.

Another audience member explained the reason.

"Because we own stock," replied another engineer, "sparking laughter," according to the Wall Street Journal."

fresno dan , March 6, 2020 at 8:39 am

In a 2016 interview with Fraud Magazine,
==============================================
I have to say, I was shocked, SHOCKED to find that there is a magazine actually, only devoted to fraud – that is published bi-monthly.
AND than I was shocked to find out that the magaine actually, only devoted to fraud is ONLY published bi-monthly

Zamfir , March 6, 2020 at 2:19 pm

That's what they say. After you take subscription, you'll find they publish monthly.

The Rev Kev , March 6, 2020 at 9:39 am

Is the U.S. Fracking Boom Based on Fraud? Is the Pope Catholic? There are going to have to be major structural changes in the world's economy in the next few years and with the demand for oil dropping, prices have gotten cheaper which is turning fracking into a non-profit industry. In any case, how are you suppose to frack with sick crews? This is one industry that needs to go away before it causes any more damage. You'd find more honesty in a boiler room brokerage firm than in this industry.

xkeyscored , March 6, 2020 at 12:33 pm

I did wonder why 'Fracking Boom' was in the title.

Carolinian , March 6, 2020 at 10:11 am

There's a recent documentary called The Price of Everything that is about the enormous sums being paid for every latest fad in modern art. The show says that all the great masters, old and new, have been locked up by museums or the super rich and so a recent flood of new investors are looking for any excuse to spend lots of money on paintings. Apparently there is so much money sloshing around at the top of our unequal economy that that these plutocrats don't even care if they lose their shirts on bad investments. The main thing is to keep it out of the hands of the poor.

Clearly we as a society are suffering from affluenza, at least among the elites who should all be virus quarantined and then maybe we will forget to check back.The show tries to pretend that this money driven art world is a cool thing. It had this viewer thinking of guillotines.

xkeyscored , March 6, 2020 at 12:37 pm

Unfortunately, those most negatively affected by affluenza are those not infected with it.

JBird4049 , March 6, 2020 at 6:11 pm

Yes, like all the people who cannot see the art. It's mostly buried in storage. What is the point of having over two thousand years of art from multiple civilizations, if most of it is hidden away and often only known from catalog descriptions or cramped tiny pictures.

TimH , March 6, 2020 at 10:51 am

If Enron was fraud, how come Uber isn't considered fraud?

a different chris , March 6, 2020 at 12:12 pm

Because people can still make money off it.

No, not *you*. Not *us*. But people that "matter".

lyman alpha blob , March 6, 2020 at 1:46 pm

You must mean the insiders who suckered the rubes into taking shares off their hands at the IPO. IIRC the IPO price was over $70/share. Right now it's just under $32 with no signs of every being a profitable enterprise.

Grifters, charlatans and mountebanks everywhere you look.

franklin kirk , March 6, 2020 at 11:03 am

Charging mineral resource rent, which everyone has an equal claim to, would help to reduce the tendency of financial shenanigans. The profit motive is crack to rent seekers.

Colonel Smithers , March 6, 2020 at 11:06 am

Thank you, Yves.

Speaking of Enron, it is perhaps appropriate that my employer's head of non core assets, toxic waste for fire sale, came from Enron. Standard Chartered has some, too.

Polar Donkey , March 6, 2020 at 11:32 am

It seems like the Russians today decided to put the final nail in U.S. fracking industry and turn the screws on Saudi Arabia.

inode_buddha , March 6, 2020 at 2:22 pm

Is the US a fraud?
.
Fixed it for you.

rd , March 6, 2020 at 5:31 pm

I think the big issue goes back to the investors and bond rating agencies, similar to the subprime mortgage crisis. If bondholders aren't willing to do the homework, then they don't get paid for the risk that they are undertaking. with the multiple prediction tools for well production, you can make up an optimistic and pessimistic case. If the bond yield doesn't cover that risk to your satisfaction, then you don't buy the bond or you demand a higher interest yield and lower bond price.

Instead, it seems like the industry is raising money from people who don't want to think more than a few months ahead on a multi-year investment. The challenges faced by the fracking industry have been well publicized for several years now. If an investor doesn't understand those challenges now and isn't looking at specific methods of calculating production yield etc., then they have only themselves to blame if their investment loses money.

This is a very different issue than if somebody flat out lies about whether or not wells exist etc.

A single well can make financial sense even if there will never be a net profit from it. Fracking is pretty similar to the Hollywood film industry where nobody ever has any net profits despite living high on the hog. "Don't ever settle for net profits. It's called 'creative accounting'." – Lynda Carter: https://en.wikipedia.org/wiki/Hollywood_accounting

elkern , March 6, 2020 at 5:52 pm

I dunno. There may be a sucker born every minute, but I can't picture enough of them getting born with a million (or billion) Dollars to blow on rackets like this to keep it going this long.

Sad to see that the Plumbers' Union Pension Fund was a victim; I hope that's not a pattern, but it would make sense. If it's a pattern, then it's no wonder the Fed tried so hard to postpone the next Crash until after the elections. How much junk paper has Wall Street sold to other Pension Funds? States & Municipalities are already squeezed by "unfunded liabilities"; how much repackaged funky Fracking paper are held by public (governmental) agencies? Damn, this is gonna be a mess.

I'd advise investing in popcorn, except that my 401k will probably evaporate soon, so maybe it's pitchforks.

JBird4049 , March 6, 2020 at 6:01 pm

CFO Fastow of Enron. How nice to see him land on his feet. The company made listening to the rolling blackout reports for California while driving to work a requirement.

[Mar 04, 2020] A decline of 3.8 million barrels per day in oil consumption is a real bombshell. It has smell of the major recession.

Mar 04, 2020 | peakoilbarrel.com

Ron Patterson x Ignored says: 03/04/2020 at 2:08 pm

Oil consumption just fell off a cliff. OPEC is facing a huge test Bold mine.

Oil producers are facing the biggest drop in demand for their product ever as the coronavirus spreads around the world, forcing OPEC and its allies to consider emergency measures.

Research firm IHS Markit said Wednesday that oil demand will suffer its steepest decline on record in the first quarter -- worse even than during the 2008 global financial crisis -- as schools and offices close, airlines cancel flights worldwide and a growing number of people hunker down at home.

Most of the reduction in demand can be traced to China, where the coronavirus has caused what IHS Markit describes as an "unprecedented stoppage" of economic activity.

But reduced consumption will be widespread, and IHS Markit expects global demand to drop by 3.8 million barrels per day in the first quarter compared to 2019. Demand in the first three months of 2019 was 99.8 million barrels per day.

"This is a sudden, instant demand shock -- and the scale of the decline is unprecedented," said Jim Burkhard, vice president and head of oil markets at IHS Markit.

A decline of 3.8 million barrels per day is a real bombshell.

Despite claims by China that they have more recoveries than new infections, there is strong evidence that they are lying. Travel inside China is still almost non-existent and most industry is still shut down.

TonyEriksen x Ignored says: 03/04/2020 at 4:50 pm
Ron,

3.8 mbd demand drop is huge.

Brent heading down to $50
https://oilprice.com/

[Feb 25, 2020] A Worthless 'New Deal' from the Iran Hawks

So Menendez survived as MIC stooge. Nice.
Iran hawks never talk about diplomacy except as a way to discredit it.
Notable quotes:
"... And even if Iran were to accept and proceed comply in good faith, just as Iran complied scrupulously with the JCPOA, what's to prevent any US administration from tearing up that "new deal" and demanding more? ..."
Feb 25, 2020 | www.theamericanconservative.com
|

10:03 am

Daniel Larison Two Iran hawks from the Senate, Bob Menendez and Lindse Graham, are proposing a "new deal" that is guaranteed to be a non-starter with Iran:

Essentially, their idea is that the United States would offer a new nuclear deal to both Iran and the gulf states at the same time. The first part would be an agreement to ensure that Iran and the gulf states have access to nuclear fuel for civilian energy purposes, guaranteed by the international community in perpetuity. In exchange, both Iran and the gulf states would swear off nuclear fuel enrichment inside their own countries forever.

Iran is never going to accept any agreement that requires them to give up domestic enrichment. As far as they are concerned, they are entitled to this under the Non-Proliferation Treaty, and they regard it as a matter of their national rights that they keep it. Insisting on "zero enrichment" is what made it impossible to reach an agreement with Iran for the better part of a decade, and it was only when the Obama administration understood this and compromised to allow Iran to enrich under tight restrictions that the negotiations could move forward. Demanding "zero enrichment" today in 2020 amounts to rejecting that compromise and returning to a bankrupt approach that drove Iran to build tens of thousands of centrifuges. As a proposal for negotiations, it is dead on arrival, and Menendez and Graham must know that. Iran hawks never talk about diplomacy except as a way to discredit it. They want to make a bogus offer in the hopes that it will be rejected so that they can use the rejection to justify more aggressive measures.

The identity of the authors of the plan is a giveaway that the offer is not a serious diplomatic proposal. Graham is one of the most incorrigible hard-liners on Iran, and Menendez is probably the most hawkish Democratic senator in office today. Among other things, Menendez has been a booster of the Mujahideen-e Khalq (MEK), the deranged cult of Iranian exiles that has been buying the support of American politicians and officials for years. Graham has never seen a diplomatic agreement that he didn't want to destroy. When hard-liners talk about making a "deal," they always mean that they want to demand the other side's surrender.

Another giveaway that this is not a serious proposal is the fact that they want this imaginary agreement submitted as a treaty:

That final deal would be designated as a treaty, ratified by the U.S. Senate, to give Iran confidence that a new president won't just pull out (like President Trump did on President Barack Obama's nuclear deal).

This is silly for many reasons. The Senate doesn't ratify treaties nowadays, so any "new deal" submitted as a treaty would never be ratified. As the current president has shown, it doesn't matter if a treaty has been ratified by the Senate. Presidents can and do withdraw from ratified treaties if they want to, and the fact that it is a ratified treaty doesn't prevent them from doing this. Bush pulled out of the ABM Treaty, which was ratified 88-2 in 1972. Trump withdrew from the INF Treaty just last year. The INF Treaty had been ratified with a 93-5 vote. The hawkish complaint that the JCPOA wasn't submitted as a treaty was, as usual, made in bad faith. There was no chance that the JCPOA would have been ratified, and even if it had been that ratification would not have protected it from being tossed aside by Trump. Insisting on making any new agreement a treaty is just another way of announcing that they have no interest in a diplomatic solution.

Menendez and Graham want to make the obstacles to diplomacy so great that negotiations between the U.S. and Iran can't resume. It isn't a serious proposal, and it shouldn't be taken seriously.

Feral Finster 5 hours ago

And even if Iran were to accept and proceed comply in good faith, just as Iran complied scrupulously with the JCPOA, what's to prevent any US administration from tearing up that "new deal" and demanding more?

[Feb 23, 2020] The US Is World Leader In Bio-Weapons Research, Production, Use Against Mankind

This is mostly fear mongering as an affective bioengineered virus will create a pandemic, but the truth is that Anthrax false flag attack after 9/11 was not an accident...
Trump administration beahaves like a completely lawless gang (stealing Syrian oil is one example. Killing Soleimani is another ) , as for its behaviour on international arena, but I do not believe they go that far. Even for for such "ruptured" gangster as Pompeo
Notable quotes:
"... Consider that a deadly virus created by the U.S. and used against another country was found out and verified, and in retaliation, that country or others decided to strike back with other toxic agents against America. Where would this end, and over time, how many billions could be affected in such a scenario? ..."
"... "In vast laboratories in the Ministry of Peace, and in experimental stations, teams of experts are indefatigably at work searching for new and deadlier gases; or for soluble poisons capable of being produced in such quantities as to destroy the vegetation of whole continents; or for breeds of disease germs immunised against all possible antibodies." ..."
"... Additional notes: here , here , here , here , here and here . ..."
Feb 23, 2020 | www.zerohedge.com

... ... ...

Interestingly, in the past, U.S. universities and NGOs went to China specifically to do illegal biological experimentation, and this was so egregious to Chinese officials, that forcible removal of these people was the result. Harvard University, one of the major players in this scandal, stole the DNA samples of hundreds of thousands of Chinese citizens, left China with those samples, and continued illegal bio-research in the U.S. It is thought that the U.S. military, which puts a completely different spin on the conversation, had commissioned the research in China at the time. This is more than suspicious.

The U.S. has, according to this article at Global Research , had a massive biological warfare program since at least the early 1940s, but has used toxic agents against this country and others since the 1860s . This is no secret, regardless of the propaganda spread by the government and its partners in criminal bio-weapon research and production.

As of 1999, the U.S. government had deployed its Chemical and Biological Weapons (CBW) arsenal against the Philippines, Puerto Rico, Vietnam, China, North Korea, Laos, Cambodia, Cuba, Haitian boat people, and our neighbor Canada according to this article at Counter Punch . Of course, U.S. citizens have been used as guinea pigs many times as well, and exposed to toxic germ agents and deadly chemicals by government.

Keep in mind that this is a short list, as the U.S. is well known for also using proxies to spread its toxic chemicals and germ agents, such as happened in Iraq and Syria. Since 1999 there have been continued incidences of several different viruses, most of which are presumed to be manmade , including the current Coronavirus that is affecting China today.

There is also much evidence of the research and development of race-specific bio-warfare agents. This is very troubling. One would think, given the idiotic race arguments by post-modern Marxists, that this would consume the mainstream news, and any participants in these atrocious race-specific poisons would be outed at every level. That is not happening, but I believe it is due to obvious reasons, including government cover-up, hypocrisy at all levels, and leftist agenda driven objectives that would not gain ground with the exposure of this government-funded anti-race science.

I will say that it is not just the U.S. that is developing and producing bio-warfare agents and viruses, but many developed countries around the globe do so as well. But the United States, as is the case in every area of war and killing, is by far the world leader in its inhuman desire to be able to kill entire populations through biological and chemical warfare means. Because these agents are extremely dangerous and uncontrollable, and can spread wildly, the risk to not only isolated populations, but also the entire world is evident. Consider that a deadly virus created by the U.S. and used against another country was found out and verified, and in retaliation, that country or others decided to strike back with other toxic agents against America. Where would this end, and over time, how many billions could be affected in such a scenario?

All indications point to the fact that the most toxic, poisonous, and deadly viruses ever known are being created in labs around the world. In the U.S. think of Fort Detrick, Maryland, Pine Bluff Arsenal, Arkansas, Horn Island, Mississippi, Dugway Proving Ground, Utah, Vigo Ordinance Plant, Indiana, and many others. Think of the fascist partnerships between this government and the pharmaceutical industry. Think of the U.S. military installations positioned all around the globe. Nothing good can come from this, as it is not about finding cures for disease, or about discovering vaccines, but is done for one reason only, and that is for the purpose of bio-warfare for mass killing.

The drive to find biological weapons that will sicken and kill millions at a time is not only a travesty, but is beyond evil. This power is held by the few, but the potential victims of this madness include everyone on earth. How can such insanity at this level be allowed to continue? If any issue could ever unite the masses, governments participating in biological and germ warfare, race-specific killing, and creating viruses with the potential to affect disease and death worldwide, should cause many to stand together against it. The first step is to expose that governments, the most likely culprit being the U.S. government, are planting these viruses purposely to cause great harm. Once that is proven, the unbelievable risk to all will be known, and then people everywhere should put their divisiveness aside, stand together, and stop this assault on mankind.

"In vast laboratories in the Ministry of Peace, and in experimental stations, teams of experts are indefatigably at work searching for new and deadlier gases; or for soluble poisons capable of being produced in such quantities as to destroy the vegetation of whole continents; or for breeds of disease germs immunised against all possible antibodies." ~ George Orwell – 1984

Additional notes: here , here , here , here , here and here .

[Feb 23, 2020] Where Have You Gone, Smedley Butler The Last General To Criticize US Imperialism by Danny Sjursen

Here's a link to a free online copy of War is a Racket if anyone wants to read it. It's a short read. Pretty good too. https://www.ratical.org/ratville/CAH/warisaracket.html
From comments (Is the USA government now a "regime"): In 2018, Republicans (AND Democrats) voted to cut $23 billion dollars from the budget for food stamps (42 million Americans currently receive them). Regimes disobey international law. Like America's habit of blowing up wedding parties with drones or the illegal presence of its troops in Syria, Iraq and God knows where else. Regimes carry out illegal assassination programs – I need say no more here than Qasem Soleimani. Regimes use their economic power to bully and impose their will – sanctioning countries even when they know those sanctions will, for example, be responsible for the death of 500,000 Iraqi children (the 'price worth paying', remember?). Regimes renege on international treaties – like Iran nuclear treaty, for example. Regimes imprison and hound whistle-blowers – like Chelsea manning and Julian Assange. Regimes imprison people. America is the world leader in incarceration. It has 2.2 million people in its prisons (more than China which has 5 times the US's population), that's 25% of the world's prison population for 5% of the world's population, Why does America need so many prisoners? Because it has a massive, prison-based, slave labour business that is hugely profitable for the oligarchy.
Regimes censor free speech. Just recently, we've seen numerous non-narrative following journalists and organisations kicked off numerous social media platforms. I didn't see lots of US senators standing up and saying 'I disagree completely with what you say but I will fight to the death to preserve your right to say it'. Did you?
Regimes are ruled by cliques. I don't need to tell you that America is kakistocratic Oligarchy ruled by a tiny group of evil, rich, Old Men, do I?
Regimes keep bad company. Their allies are other 'regimes', and they're often lumped together by using another favourite presstitute term – 'axis of evil'. America has its own little axis of evil. It's two main allies are Saudi Arabia – a homophobic, women hating, head chopping, terrorist financing state currently engaged in a war of genocide (assisted by the US) in Yemen – and the racist, genocidal undeclared nuclear power state of Israel.
Regimes commit human rights abuses. Here we could talk about…ooh…let's think. Last year's treatment of child refugees from Latin America, the execution of African Americans for 'walking whilst black' by America's militarized, criminal police force or the millions of dollars in cash and property seized from entirely innocent Americans by that same police force under 'civil forfeiture' laws or maybe we could mention huge American corporations getting tax refunds whilst ordinary Americans can't afford decent, effective healthcare.
Regimes finance terrorism. Mmmm….just like America financed terrorists to help destroy Syria and Libya and invested $5 billion dollars to install another regime – the one of anti-Semites and Nazis in Ukraine…
Highly recommended!
Some comments edited for clarity...
Notable quotes:
"... But after retirement, Smedley Butler changed his tune. ..."
"... "I spent thirty-three years and four months in active military service... And during that period, I spent most of my time being a high class muscle-man for Big Business, for Wall Street, and for the Bankers." ..."
"... Smedley Butler's Marine Corps and the military of his day was, in certain ways, a different sort of organization than today's highly professionalized armed forces. History rarely repeats itself, not in a literal sense anyway. Still, there are some disturbing similarities between the careers of Butler and today's generation of forever-war fighters. All of them served repeated tours of duty in (mostly) unsanctioned wars around the world. Butler's conflicts may have stretched west from Haiti across the oceans to China, whereas today's generals mostly lead missions from West Africa east to Central Asia, but both sets of conflicts seemed perpetual in their day and were motivated by barely concealed economic and imperial interests. ..."
"... When Smedley Butler retired in 1931, he was one of three Marine Corps major generals holding a rank just below that of only the Marine commandant and the Army chief of staff. Today, with about 900 generals and admirals currently serving on active duty, including 24 major generals in the Marine Corps alone, and with scores of flag officers retiring annually, not a single one has offered genuine public opposition to almost 19 years worth of ill-advised, remarkably unsuccessful American wars . As for the most senior officers, the 40 four-star generals and admirals whose vocal antimilitarism might make the biggest splash, there are more of them today than there were even at the height of the Vietnam War, although the active military is now about half the size it was then. Adulated as many of them may be, however, not one qualifies as a public critic of today's failing wars. ..."
"... The big three are Secretary of State Colin Powell's former chief of staff, retired Colonel Lawrence Wilkerson ; Vietnam veteran and onetime West Point history instructor, retired Colonel Andrew Bacevich ; and Iraq veteran and Afghan War whistleblower , retired Lieutenant Colonel Danny Davis . All three have proven to be genuine public servants, poignant voices, and -- on some level -- cherished personal mentors. For better or worse, however, none carry the potential clout of a retired senior theater commander or prominent four-star general offering the same critiques. ..."
"... Consider it an irony of sorts that this system first received criticism in our era of forever wars when General David Petraeus, then commanding the highly publicized " surge " in Iraq, had to leave that theater of war in 2007 to serve as the chair of that selection committee. The reason: he wanted to ensure that a twice passed-over colonel, a protégé of his -- future Trump National Security Advisor H.R. McMaster -- earned his star. ..."
"... At the roots of this system lay the obsession of the American officer corps with " professionalization " after the Vietnam War debacle. This first manifested itself in a decision to ditch the citizen-soldier tradition, end the draft, and create an "all-volunteer force." The elimination of conscription, as predicted by critics at the time, created an ever-growing civil-military divide, even as it increased public apathy regarding America's wars by erasing whatever " skin in the game " most citizens had. ..."
"... One group of generals, however, reportedly now does have it out for President Trump -- but not because they're opposed to endless war. Rather, they reportedly think that The Donald doesn't "listen enough to military advice" on, you know, how to wage war forever and a day. ..."
"... That beast, first identified by President Dwight D. Eisenhower, is now on steroids as American commanders in retirement regularly move directly from the military onto the boards of the giant defense contractors, a reality which only contributes to the dearth of Butlers in the military retiree community. For all the corruption of his time, the Pentagon didn't yet exist and the path from the military to, say, United Fruit Company, Standard Oil, or other typical corporate giants of that moment had yet to be normalized for retiring generals and admirals. Imagine what Butler would have had to say about the modern phenomenon of the " revolving door " in Washington. ..."
"... Today, generals don't seem to have a thought of their own even in retirement. And more's the pity... ..."
"... Am I the only one to notice that Hollywood and it's film distributors have gone full bore on "war" productions, glorifying these historical events while using poetic license to rewrite history. Prepping the numbheads. ..."
"... Forget rank. As Mr Sjursen implies, dissidents are no longer allowed in the higher ranks. "They" made sure to fix this as Mr Butler had too much of a mind of his own (US education system also programmed against creative, charismatic thinkers, btw). ..."
"... Today, the "Masters of the Permawars" refer to the international extortion, MIC, racket as "Defending American Interests"! .....With never any explanation to the public/American taxpayer just what "American Interests" the incredible expenditures of American lives, blood, and treasure are being defended! ..."
"... "The Americans follow the principle that when one lies, one should lie big, and stick to it. They keep up their lies, even at the risk of looking ridiculous." - Jospeh Goebbels ..."
"... The greatest anti-imperialist of our times is Michael Parenti: ..."
"... The obvious types of American fascists are dealt with on the air and in the press. These demagogues and stooges are fronts for others. Dangerous as these people may be, they are not so significant as thousands of other people who have never been mentioned. The really dangerous American fascists are not those who are hooked up directly or indirectly with the Axis. The FBI has its finger on those. The dangerous American fascist is the man who wants to do in the United States in an American way what Hitler did in Germany in a Prussian way. The American fascist would prefer not to use violence. His method is to poison the channels of public information. With a fascist the problem is never how best to present the truth to the public but how best to use the news to deceive the public into giving the fascist and his group more money or more power. ..."
"... If we define an American fascist as one who in case of conflict puts money and power ahead of human beings, then there are undoubtedly several million fascists in the United States. There are probably several hundred thousand if we narrow the definition to include only those who in their search for money and power are ruthless and deceitful. Most American fascists are enthusiastically supporting the war effort. ..."
Feb 23, 2020 | www.zerohedge.com

Authored by Danny Sjursen via TomDispatch.com,

There once lived an odd little man - five feet nine inches tall and barely 140 pounds sopping wet - who rocked the lecture circuit and the nation itself. For all but a few activist insiders and scholars, U.S. Marine Corps Major General Smedley Darlington Butler is now lost to history. Yet more than a century ago, this strange contradiction of a man would become a national war hero, celebrated in pulp adventure novels, and then, 30 years later, as one of this country's most prominent antiwar and anti-imperialist dissidents.

Raised in West Chester, Pennsylvania, and educated in Quaker (pacifist) schools, the son of an influential congressman, he would end up serving in nearly all of America's " Banana Wars " from 1898 to 1931. Wounded in combat and a rare recipient of two Congressional Medals of Honor, he would retire as the youngest, most decorated major general in the Marines.

A teenage officer and a certified hero during an international intervention in the Chinese Boxer Rebellion of 1900, he would later become a constabulary leader of the Haitian gendarme, the police chief of Philadelphia (while on an approved absence from the military), and a proponent of Marine Corps football. In more standard fashion, he would serve in battle as well as in what might today be labeled peacekeeping , counterinsurgency , and advise-and-assist missions in Cuba, China, the Philippines, Panama, Nicaragua, Mexico, Haiti, France, and China (again). While he showed early signs of skepticism about some of those imperial campaigns or, as they were sardonically called by critics at the time, " Dollar Diplomacy " operations -- that is, military campaigns waged on behalf of U.S. corporate business interests -- until he retired he remained the prototypical loyal Marine.

But after retirement, Smedley Butler changed his tune. He began to blast the imperialist foreign policy and interventionist bullying in which he'd only recently played such a prominent part. Eventually, in 1935 during the Great Depression, in what became a classic passage in his memoir, which he titled "War Is a Racket," he wrote:

"I spent thirty-three years and four months in active military service... And during that period, I spent most of my time being a high class muscle-man for Big Business, for Wall Street, and for the Bankers."

Seemingly overnight, the famous war hero transformed himself into an equally acclaimed antiwar speaker and activist in a politically turbulent era. Those were, admittedly, uncommonly anti-interventionist years, in which veterans and politicians alike promoted what (for America, at least) had been fringe ideas. This was, after all, the height of what later pro-war interventionists would pejoratively label American " isolationism ."

Nonetheless, Butler was unique (for that moment and certainly for our own) in his unapologetic amenability to left-wing domestic politics and materialist critiques of American militarism. In the last years of his life, he would face increasing criticism from his former admirer, President Franklin D. Roosevelt, the military establishment, and the interventionist press. This was particularly true after Adolf Hitler's Nazi Germany invaded Poland and later France. Given the severity of the Nazi threat to mankind, hindsight undoubtedly proved Butler's virulent opposition to U.S. intervention in World War II wrong.

Nevertheless, the long-term erasure of his decade of antiwar and anti-imperialist activism and the assumption that all his assertions were irrelevant has proven historically deeply misguided. In the wake of America's brief but bloody entry into the First World War, the skepticism of Butler (and a significant part of an entire generation of veterans) about intervention in a new European bloodbath should have been understandable. Above all, however, his critique of American militarism of an earlier imperial era in the Pacific and in Latin America remains prescient and all too timely today, especially coming as it did from one of the most decorated and high-ranking general officers of his time. (In the era of the never-ending war on terror, such a phenomenon is quite literally inconceivable.)

Smedley Butler's Marine Corps and the military of his day was, in certain ways, a different sort of organization than today's highly professionalized armed forces. History rarely repeats itself, not in a literal sense anyway. Still, there are some disturbing similarities between the careers of Butler and today's generation of forever-war fighters. All of them served repeated tours of duty in (mostly) unsanctioned wars around the world. Butler's conflicts may have stretched west from Haiti across the oceans to China, whereas today's generals mostly lead missions from West Africa east to Central Asia, but both sets of conflicts seemed perpetual in their day and were motivated by barely concealed economic and imperial interests.

Nonetheless, whereas this country's imperial campaigns of the first third of the twentieth century generated a Smedley Butler, the hyper-interventionism of the first decades of this century hasn't produced a single even faintly comparable figure. Not one. Zero. Zilch. Why that is matters and illustrates much about the U.S. military establishment and contemporary national culture, none of it particularly encouraging.

Why No Antiwar Generals

When Smedley Butler retired in 1931, he was one of three Marine Corps major generals holding a rank just below that of only the Marine commandant and the Army chief of staff. Today, with about 900 generals and admirals currently serving on active duty, including 24 major generals in the Marine Corps alone, and with scores of flag officers retiring annually, not a single one has offered genuine public opposition to almost 19 years worth of ill-advised, remarkably unsuccessful American wars . As for the most senior officers, the 40 four-star generals and admirals whose vocal antimilitarism might make the biggest splash, there are more of them today than there were even at the height of the Vietnam War, although the active military is now about half the size it was then. Adulated as many of them may be, however, not one qualifies as a public critic of today's failing wars.

Instead, the principal patriotic dissent against those terror wars has come from retired colonels, lieutenant colonels, and occasionally more junior officers (like me), as well as enlisted service members. Not that there are many of us to speak of either. I consider it disturbing (and so should you) that I personally know just about every one of the retired military figures who has spoken out against America's forever wars.

The big three are Secretary of State Colin Powell's former chief of staff, retired Colonel Lawrence Wilkerson ; Vietnam veteran and onetime West Point history instructor, retired Colonel Andrew Bacevich ; and Iraq veteran and Afghan War whistleblower , retired Lieutenant Colonel Danny Davis . All three have proven to be genuine public servants, poignant voices, and -- on some level -- cherished personal mentors. For better or worse, however, none carry the potential clout of a retired senior theater commander or prominent four-star general offering the same critiques.

Something must account for veteran dissenters topping out at the level of colonel. Obviously, there are personal reasons why individual officers chose early retirement or didn't make general or admiral. Still, the system for selecting flag officers should raise at least a few questions when it comes to the lack of antiwar voices among retired commanders. In fact, a selection committee of top generals and admirals is appointed each year to choose the next colonels to earn their first star. And perhaps you won't be surprised to learn that, according to numerous reports , "the members of this board are inclined, if not explicitly motivated, to seek candidates in their own image -- officers whose careers look like theirs." At a minimal level, such a system is hardly built to foster free thinkers, no less breed potential dissidents.

Consider it an irony of sorts that this system first received criticism in our era of forever wars when General David Petraeus, then commanding the highly publicized " surge " in Iraq, had to leave that theater of war in 2007 to serve as the chair of that selection committee. The reason: he wanted to ensure that a twice passed-over colonel, a protégé of his -- future Trump National Security Advisor H.R. McMaster -- earned his star.

Mainstream national security analysts reported on this affair at the time as if it were a major scandal, since most of them were convinced that Petraeus and his vaunted counterinsurgency or " COINdinista " protégés and their " new " war-fighting doctrine had the magic touch that would turn around the failing wars in Iraq and Afghanistan. In fact, Petraeus tried to apply those very tactics twice -- once in each country -- as did acolytes of his later, and you know the results of that.

But here's the point: it took an eleventh-hour intervention by America's most acclaimed general of that moment to get new stars handed out to prominent colonels who had, until then, been stonewalled by Cold War-bred flag officers because they were promoting different (but also strangely familiar) tactics in this country's wars. Imagine, then, how likely it would be for such a leadership system to produce genuine dissenters with stars of any serious sort, no less a crew of future Smedley Butlers.

At the roots of this system lay the obsession of the American officer corps with " professionalization " after the Vietnam War debacle. This first manifested itself in a decision to ditch the citizen-soldier tradition, end the draft, and create an "all-volunteer force." The elimination of conscription, as predicted by critics at the time, created an ever-growing civil-military divide, even as it increased public apathy regarding America's wars by erasing whatever " skin in the game " most citizens had.

More than just helping to squelch civilian antiwar activism, though, the professionalization of the military, and of the officer corps in particular, ensured that any future Smedley Butlers would be left in the dust (or in retirement at the level of lieutenant colonel or colonel) by a system geared to producing faux warrior-monks. Typical of such figures is current chairman of the Joint Chiefs of Staff Army General Mark Milley. He may speak gruffly and look like a man with a head of his own, but typically he's turned out to be just another yes-man for another war-power -hungry president.

One group of generals, however, reportedly now does have it out for President Trump -- but not because they're opposed to endless war. Rather, they reportedly think that The Donald doesn't "listen enough to military advice" on, you know, how to wage war forever and a day.

What Would Smedley Butler Think Today?

In his years of retirement, Smedley Butler regularly focused on the economic component of America's imperial war policies. He saw clearly that the conflicts he had fought in, the elections he had helped rig, the coups he had supported, and the constabularies he had formed and empowered in faraway lands had all served the interests of U.S. corporate investors. Though less overtly the case today, this still remains a reality in America's post-9/11 conflicts, even on occasion embarrassingly so (as when the Iraqi ministry of oil was essentially the only public building protected by American troops as looters tore apart the Iraqi capital, Baghdad, in the post-invasion chaos of April 2003). Mostly, however, such influence plays out far more subtly than that, both abroad and here at home where those wars help maintain the record profits of the top weapons makers of the military-industrial complex.

That beast, first identified by President Dwight D. Eisenhower, is now on steroids as American commanders in retirement regularly move directly from the military onto the boards of the giant defense contractors, a reality which only contributes to the dearth of Butlers in the military retiree community. For all the corruption of his time, the Pentagon didn't yet exist and the path from the military to, say, United Fruit Company, Standard Oil, or other typical corporate giants of that moment had yet to be normalized for retiring generals and admirals. Imagine what Butler would have had to say about the modern phenomenon of the " revolving door " in Washington.

Of course, he served in a very different moment, one in which military funding and troop levels were still contested in Congress. As a longtime critic of capitalist excesses who wrote for leftist publications and supported the Socialist Party candidate in the 1936 presidential elections, Butler would have found today's nearly trillion-dollar annual defense budgets beyond belief. What the grizzled former Marine long ago identified as a treacherous nexus between warfare and capital "in which the profits are reckoned in dollars and the losses in lives" seems to have reached its natural end point in the twenty-first century. Case in point: the record (and still rising ) "defense" spending of the present moment, including -- to please a president -- the creation of a whole new military service aimed at the full-scale militarization of space .

Sadly enough, in the age of Trump, as numerous polls demonstrate, the U.S. military is the only public institution Americans still truly trust. Under the circumstances, how useful it would be to have a high-ranking, highly decorated, charismatic retired general in the Butler mold galvanize an apathetic public around those forever wars of ours. Unfortunately, the likelihood of that is practically nil, given the military system of our moment.

Of course, Butler didn't exactly end his life triumphantly. In late May 1940, having lost 25 pounds due to illness and exhaustion -- and demonized as a leftist, isolationist crank but still maintaining a whirlwind speaking schedule -- he checked himself into the Philadelphia Navy Yard Hospital for a "rest." He died there, probably of some sort of cancer, four weeks later. Working himself to death in his 10-year retirement and second career as a born-again antiwar activist, however, might just have constituted the very best service that the two-time Medal of Honor winner could have given the nation he loved to the very end.

Someone of his credibility, character, and candor is needed more than ever today. Unfortunately, this military generation is unlikely to produce such a figure. In retirement, Butler himself boldly confessed that, "like all the members of the military profession, I never had a thought of my own until I left the service. My mental faculties remained in suspended animation while I obeyed the orders of higher-ups. This is typical..."

Today, generals don't seem to have a thought of their own even in retirement. And more's the pity...

2 minutes ago
Am I the only one to notice that Hollywood and it's film distributors have gone full bore on "war" productions, glorifying these historical events while using poetic license to rewrite history. Prepping the numbheads.
14 minutes ago
TULSI GABBARD.

Forget rank. As Mr Sjursen implies, dissidents are no longer allowed in the higher ranks. "They" made sure to fix this as Mr Butler had too much of a mind of his own (US education system also programmed against creative, charismatic thinkers, btw).

The US Space Force has been created as part of a plan to disclose the deep state's Secret Space Program (SSP), which has been active for decades, and which has utilized, and repressed, advanced technologies that would provide free, unlimited renewable energy, and thus eliminate hunger and poverty on a planetary scale.

14 minutes ago
14 minutes ago

ALL wars are EVIL. Period .

29 minutes ago

Sadly enough, in the age of Trump, as numerous polls demonstrate, the U.S. military is the only public institution Americans still truly trust. Under the circumstances, how useful it would be to have a high-ranking, highly decorated, charismatic retired general in the Butler mold galvanize an apathetic public around those forever wars of ours. Unfortunately, the likelihood of that is practically nil, given the military system of our moment.

This is why I feel an oath keeping constitutionally oriented American general is what we need in power, clear out all 545 criminals in office now, review their finances (and most of them will roll over on the others) and punish accordingly, then the lobbyist, how many of them worked against the country? You know what we do with those.

And then, finally, Hollywood, oh yes I long to see that **** hole burn with everyone in it.

30 minutes ago
Republicrat: the two faces of the moar war whore.
32 minutes ago

Given the severity of the Nazi threat to mankind

Do tell, from what I've read the Nazis were really only a threat to a few groups, the rest of us didn't need to worry.

35 minutes ago
Today, the "Masters of the Permawars" refer to the international extortion, MIC, racket as "Defending American Interests"! .....With never any explanation to the public/American taxpayer just what "American Interests" the incredible expenditures of American lives, blood, and treasure are being defended!

Why are we sending our children out into the hellholes of the world to be maimed and killed in the fauxjew banksters' quest for world domination.

How stupid can we be!

41 minutes ago
(Edited) "Smedley Butler"... The last time the UCMJ was actually used before being permanently turned into a "door stop"!
49 minutes ago
He was correct about our staying out of WWII. Which, BTW, would have never happened if we had stayed out of WWI.
22 minutes ago
(Edited) Both wars were about the international fauxjew imposition of debt-money central bankstering.

Both wars were promulgated by the Financial oligarchyof New York. The communist Red Army of Russia was funded and supplied by the Financial oligarchyof New York. It was American Financial oligarchythat built the Russian Red Army that vexed the world and created the Cold War. How many hundreds of millions of goyim were sacrificed to create both the Russian and the Chinese Satanic behemoths.......and the communist horror that is now embedded in American academia, publishing, American politics, so-called news, entertainment, The worldwide Catholic religion, the Pentagon, and the American deep state.......and more!

How stupid can we be. Every generation has the be dragged, kicking and screaming, out of the eternal maw of historical ignorance to avoid falling back into the myriad dark hellholes of history. As we all should know, people who forget their own history are doomed to repeat it.

53 minutes ago
Today's General is a robot with with a DNA.
54 minutes ago
All the General Staff is a bunch of #asskissinglittlechickenshits
57 minutes ago
want to stop senseless Empire wars>>well do this

War = jobs and profit..we get work "THEY" get the profit.. If we taxed all war related profit at 99% how many wars would our rulers start? 1 hour ago

Here is a simple straightforward trading maxim that might apply here: if it works or is working keep doing it, but if it doesn't work or stops working, then STOP doing it. There are plenty of people, now poorer, for not adhering to that simple principle. Where is the Taxpayer's return on investment from the Combat taking place on their behalf around the globe? 'Nuff said - it isn't working. It is making a microscopic few richer & all others poorer so STOP doing it. 36 seconds ago We don't have to look far to figure out who they are that are getting rich off the fauxjew permawars.

How can we be so stupid???

1 hour ago

See also:

TULSI GABBARD

1 hour ago

The main reason you don't see the generals criticizing is that the current crop have not been in actual long term direct combat with the enemy and have mostly been bureaucratic paper pushers.

Take the Marine Major General who is the current commander of CENTCOM. By the time he got into the Iraq/Afghanistan war he was already a Lieutenant Colonel and far removed from direct action.

He was only there on and off for a few years. Here are some of his other career highlights aft as they appear on his official bio:

In short, these top guys aren't warriors they're bureaucrats so why would we expect them to be honest brokers of the truth?

51 minutes ago

are U saying Chesty Puller he's NOT? 1 hour ago
(Edited) The purpose of war is to ensure that the Federal Reserve Note remains the world reserve paper currency of choice by keeping it relevant and in demand across the globe by forcing pesky energy producing nations to trade with it exclusively.

It is a 49 year old policy created by the private owners of quasi public institutions called central banks to ensure they remain the Wizards of Oz doing gods work conjuring magic paper into existence with a secret spell known as issuing credit.

How else is a technologically advanced society of billions of people supposed to function w/out this divinely inspired paper?

1 hour ago

Goebbels in "Churchill's Lie Factory" where he said: "The Americans follow the principle that when one lies, one should lie big, and stick to it. They keep up their lies, even at the risk of looking ridiculous." - Jospeh Goebbels, "Aus Churchills Lügenfabrik," 12. january 1941, Die Zeit ohne Beispiel

1 hour ago

The greatest anti-imperialist of our times is Michael Parenti:

Imperialism has been the most powerful force in world history over the last four or five centuries, carving up whole continents while oppressing indigenous peoples and obliterating entire civilizations. Yet, it is seldom accorded any serious attention by our academics, media commentators, and political leaders. When not ignored outright, the subject of imperialism has been sanitized, so that empires become "commonwealths," and colonies become "territories" or "dominions" (or, as in the case of Puerto Rico, "commonwealths" too). Imperialist military interventions become matters of "national defense," "national security," and maintaining "stability" in one or another region. In this book I want to look at imperialism for what it really is.

https://www.historyisaweapon.com/defcon1/imperialism.html

49 minutes ago
"Imperialism has been the most powerful force in world history over the last four or five centuries, carving up whole continents while oppressing indigenous peoples and obliterating entire civilizations. Yet, it is seldom accorded any serious attention by our academics, media commentators, and political leaders."

Why would it when they who control academia, media and most of our politicians are our enemies.

1 hour ago

"The big three are Secretary of State Colin Powell's former chief of staff, retired Colonel Lawrence Wilkerson ; ..."

Yep, Wilkerson, who leaked Valerie Plame's name, not that it was a leak, to Novak, and then stood by to watch the grand jury fry Scooter Libby. Wilkerson, that paragon of moral rectitude. Wilkerson the silent, that *******.

sheesh,

1 hour ago
(Edited)

" A standing military force, with an overgrown Executive will not long be safe companions to liberty. The means of defence against foreign danger, have been always the instruments of tyranny at home. Among the Romans it was a standing maxim to excite a war, whenever a revolt was apprehended. Throughout all Europe, the armies kept up under the pretext of defending, have enslaved the people."

James Madison Friday June 29, 1787

https://avalon.law.yale.edu/18th_century/debates_629.asp

"What, Sir, is the use of a militia? It is to prevent the establishment of a standing army, the bane of liberty.... Whenever Governments mean to invade the rights and liberties of the people, they always attempt to destroy the militia, in order to raise an army upon their ruins." (Rep. Elbridge Gerry of Massachusetts, spoken during floor debate over the Second Amendment [I Annals of Congress at 750, August 17, 1789])

http://press-pubs.uchicago.edu/founders/documents/amendIIs6.html

1 hour ago

A particularly pernicious example of intra-European imperialism was the Nazi aggression during World War II, which gave the German business cartels and the Nazi state an opportunity to plunder the resources and exploit the labor of occupied Europe, including the slave labor of concentration camps. - M. PARENTI, Against empire

See Alexander Parvus

1 hour ago

Collapse is the cure. It's too far gone.

1 hour ago

Russia Wants to 'Jam' F-22 and F-35s in the Middle East: Report

https://nationalinterest.org/blog/buzz/russia-wants-jam-f-22-and-f-35s-middle-east-report-121041

1 hour ago

ZH retards think that the American mic is bad and all other mics are good or don't exist. That's the power of brainwashing. Humans understand that war in general is bad, but humans are becoming increasingly rare in this world.

1 hour ago

The obvious types of American fascists are dealt with on the air and in the press. These demagogues and stooges are fronts for others. Dangerous as these people may be, they are not so significant as thousands of other people who have never been mentioned. The really dangerous American fascists are not those who are hooked up directly or indirectly with the Axis. The FBI has its finger on those. The dangerous American fascist is the man who wants to do in the United States in an American way what Hitler did in Germany in a Prussian way. The American fascist would prefer not to use violence. His method is to poison the channels of public information. With a fascist the problem is never how best to present the truth to the public but how best to use the news to deceive the public into giving the fascist and his group more money or more power.

If we define an American fascist as one who in case of conflict puts money and power ahead of human beings, then there are undoubtedly several million fascists in the United States. There are probably several hundred thousand if we narrow the definition to include only those who in their search for money and power are ruthless and deceitful. Most American fascists are enthusiastically supporting the war effort.

https://truthout.org/articles/the-dangers-of-american-fascism/

2 hours ago
The swamp is bigger than the military alone. Substitute Bureaucrat, Statesman, or Beltway Bandit for General and Colonel in your writing above and you've got a whole new article to post that is just as true.
2 hours ago
(Edited) War = jobs and profit..we get work "THEY" get the profit..If we taxed all war related profit at 99% how many wars would our rulers start?
2 hours ago [edited for clarity]
War is a racket. And nobody loves a racket more than Financial oligarchy. Americans come close though, that's why Financial oligarchy use them to project their own rackets and provide protection reprisals.

[Feb 21, 2020] Russia is playing the White Knight saving nations from marauding hordes

Feb 21, 2020 | www.nakedcapitalism.com

VietnamVet February 20, 2020 at 5:02 am

This article is war porn that assumes controlling oil fields is power. Instead Russia is playing the White Knight saving nations from marauding hordes. NBC News is twisting itself into tighter knots over Syria retaking Idlib Province back from the rebels. Turkey is threatening to send in its Army.

Strategically a full-blown war between a NATO member Turkey and Russian ally Syria would surpass the adverse effects of the quarantine of China or the rising temperatures that are sliding huge glaciers off of Western Antarctica into the sea (if the war engulfs Europe). The USA remains today in Syria and Iraq to control their oil fields since to Donald Trump it means more money for the USA. Actually, America's position there is militarily untenable. Both countries want the US gone. Iran's precision conventional ballistic missiles have mutually assured destruction with Israel and Saudi Arabia and can destroy US bases there at will.

When the Wuhan coronavirus engulfs the West, killing the elderly and the ill, for-profit healthcare will be overwhelmed. With nothing to sell, the global economy stops dead. There will be a glut of oil and natural gas. If they still have money, the trip to the grocery store will be Russian Roulette for senior citizens hoping there will be food to live for another month and not get viral pneumonia. The Doomsday Clock will be at midnight. American troops will have to find their way home. The forever wars and neoliberalism died with globalism.

The Rev Kev February 20, 2020 at 6:25 am

This article sounds like the Russians have just started to go into Iraq but they were there before the invasion nearly twenty years ago. In fact, in 2007 the US tried to get the Iraqis to void a contract the Iraqis had with Russia for the massive West Qurna oil field but that failed as the Iraqis would have been on the hook for all $13 billion in debt they owed Russia and the US would not help. But there is a military aspect to being rich in resources – there always is – and for Iraq it is particularly acute.

The Middle East is a rough neighbourhood and any country there has to be strong enough to defend itself or else be vulnerable. After the invasion the Coalition tried to organize Iraq so that they had no military but the Iraqi resistance put aid to that idea. But what would make the Iraqis think hard was when ISIS was marching on Baghdad. The US refused to use its air power to stop them and refused the Iraqis the use of pilots & paid-for aircraft training in Texas until the government would fulfill a laundry list of demands. It was the Russians – and the Iranians -that sent military equipment and specialists that helped stop ISIS before they got to Baghdad.

More recently the Iraqis had to buy Russian tanks to fight ISIS as the American tanks they had purchased were being deliberately not being serviced until the Iraqis fulfilled an American demand. There is a shift now to buy Russian equipment because of American fickleness with military gear. If that was not enough, the US has never gotten Iraqi electricity production back to pre-war levles in spite of billions spent. To add insult to injury, Trump demanded recently that Iraq hand over half of Iraqi oil production to repair the electrical grid with of course no guarantees that they would ever do the work.

So the long and the short is that there is no trust with the US and Russia is seen as a more reliable partner – as is China – and that there is no net benefit with going to the US. And you never know if a second-term Trump might not seize the Iraqi oil fields if he felt he could get away with it. It is a matter of being reliable-capable and it seems that the Russians are proving themselves that, hence their success here. Reliability is vital and cannot be replaced.

Polar Socialist February 20, 2020 at 7:36 am

Russia has been using soft power in Middle East ever since Peter the Great started fighting the Ottomans. Ever since the western powers (read: great Britain) always came to the rescue of turks if Russia had military success, so they seriously used the other alternative: economical, diplomatic and cultural influence in arab countries.
During the cold war they supported any regime in Middle East opposed to US-Israeli influence (or downright aggression).
After the cold war the Russian foreign minister, later prime minister Primakov, was an Arabist by training and personally knew almost every principal actor in Middle East. He is presumed to be the architect of the current Russian policy (which is a continuation of the old Soviet policy, which was based on the old Russian Empire policy).
It's a long, long history of using culture, diplomacy, economical help and weapon sales to have influence in an area important to the Russian security in their southern sphere.

Norb February 20, 2020 at 8:23 am

The US pats itself on the back and always talks about being the worlds "policeman". The American elite also want it both ways too- to bemoan having to do the police work in the first place, while also endlessly stressing that the world would go to pieces if her armed forces were not in foreign lands. Make up your mind please.

It would be very ironic if Russia proves to truly be an effective world "policeman"- as seems more evidently to be the case.

Propaganda aside, who brings more stability and peace.

In one respect, the war profiteers are the least of the problem. If Space Force and Nuclear rearmament are just more money boondoggles, while tragic, still survivable. If there is a faction that actually believes in this stuff as a viable national policy for defense- and offense- then when reality hits the road as the saying goes, the American psyche might not survive the impact, let alone the rest of the world.

Americans are shielded from the horrors of war to the nations detriment.

Kiers February 20, 2020 at 11:09 am

You guys are NOT thinking venally nor strategically enough. The US powers that be, love to put on this news story of foreign powers eating US cake. It's simply not credible imho. Post Iraq war in 2003, "W" bush played the same "eating our cake" story out about China taking Iraq oil for example. There are definitely other arrangements in place beneath the surface we are never told. Iraq is now US piggbank. It can trade that asset as it desires, sadly. Stories like this are just smoke.

John Wright February 20, 2020 at 11:29 am

I am struck by the size of the Russian investment ($20 billion) while the USA has "invested" nearly 6 trillion (300x) as much in war expenditure in the region.

And this has the Russians bettering the USA in Iraq with their relatively small strategic investment.

Maybe it is long overdue for the USA political class to reassess how it spends its citizens' resources in the Middle East.

But I'm not expecting that to occur.

[Feb 16, 2020] The highwater mark in SEAsia was the helicopters evacuating the last invaders from Saigon. The highwater mark in the ME is going to be similar scenes in Iraq.

Feb 16, 2020 | off-guardian.org

Dungroanin ,

It seems that history is about to repeat. The highwater mark in SEAsia was the helicopters evacuating the last invaders from Saigon. The highwater mark in the ME is going to be similar scenes in Iraq.

A final warning has been issued to US troops there – 40 days after Soleimanis assassination – the Resistance is ready to move, an irresistible force about to meet a not so immovable object.

Along with Idlib and Allepo its been amazing start to 2020. And its not even spring!

[Feb 16, 2020] Africa's largest oil nation could see production drop 35%

Feb 16, 2020 | www.rt.com

Africa's largest oil producer could see oil production fall by 35 percent as low oil prices and regulatory uncertainty threaten to prompt oil majors to postpone final investment decisions. OPEC member Nigeria is the largest oil producer in Africa and it pumped 1.776 million barrels of oil per day (bpd) in January 2020, according to OPEC's secondary sources in its monthly report published this week. Adding condensate production, Nigeria's total oil output exceeds 2 million bpd.

However, three deepwater projects offshore Nigeria, operated by oil majors Exxon, Shell, and Total, could see their start-up dates delayed by two to four years to the late 2020s, according to the research WoodMac shared with Reuters ahead of publishing it on Friday.

Also on rt.com Russia to bring back to life Nigeria's major steel plant project, abandoned for decades

The regulatory changes in Nigeria's oil industry and the still pending final approval of a petroleum bill - after two decades of delays and wrangling - act as deterrents to the oil majors' investment decisions, according to Wood Mackenzie.

Moreover, the three deepwater projects - which could add a combined 300,000 bpd to Nigeria's production - are not profitable at current oil prices with Brent Crude below $60 a barrel, the consultancy noted.

Just this week, Nigeria assured foreign oil investors that the country is open to business and can guarantee high returns on investment, the country's President Muhammadu Buhari told an energy conference on Monday.

Nigeria is set to finally pass a new bill regulating the petroleum industry by the middle of this year, after nearly two decades of delays, the country's Minister of Petroleum Timipre Sylva said at the same event.

Also on rt.com Africa to become 'land of opportunity' if US & China strike trade deal – Bank of America

Mele Kyari, Group Managing Director at the Nigerian National Petroleum Corporation (NNPC), said at the conference that "We are, more than ever before, committed to working with stakeholders to increase our crude oil production from 2.3 million bbl per day to 3 million bbl per day."

The recent amendment to the Deep Offshore Act will improve financial stability and investor confidence, NNPC's head said.

This article was originally published on Oilprice.com

[Feb 10, 2020] Location, location, location Why Russian LNG can beat competition from US Australia

Feb 10, 2020 | www.rt.com

Russia's geographical position makes its exports of liquefied natural gas (LNG) more profitable and competitive with American and Australian supplies, according to Russia's Energy Minister Alexander Novak. Russia ships most of its LNG (around 69 percent) to Asian markets, where the bulk of global LNG supplies are sent. The country could also export its LNG via traditional Russian pipeline gas European routes, due to low cost and short transportation distance, the minister wrote, in an article for the Energy Policy journal.

Also on rt.com Trump urges Europe to buy American natural gas to ensure their energy security

"Russia's convenient geographical position between Europe and Asia allows our LNG to be profitable at current prices and to win competition from the US and Australia," Novak said. "If necessary, we can deliver liquefied gas to any European country, and it will be faster and cheaper than many other suppliers."

The Northern Sea Route (NSR) could be a key transport link to connect massive Arctic energy projects Russia is currently developing with target markets. The route, which lies in Arctic waters and within Russia's Exclusive Economic Zone, could cut the transportation time by a third, compared to shipments via the Suez Canal.

Also on rt.com India could become first non‑Arctic state to develop Russia's Arctic resources

Russia is one of the world's leading exporters of natural gas. Last year, it produced more than 40 billion cubic meters of LNG – a nearly 50 percent increase from 27 billion cubic meters it had in 2018. By 2035, Novak expects the country to boost production to 120 million tons, amounting to around a fifth of the forecasted global LNG production.

For more stories on economy & finance visit RT's business section

[Feb 09, 2020] Trump demand for 50% of Iraq oil revenue sound exactly like a criminal mob boss

Highly recommended!
Jan 21, 2020 | www.unz.com

Tucker , says: Show Comment January 21, 2020 at 12:27 pm GMT

I've heard and read about a claim that Trump actually called PM Abdul Mahdi and demanded that Iraq hand over 50 percent of their proceeds from selling their oil to the USA, and then threatened Mahdi that he would unleash false flag attacks against the Iraqi government and its people if he did not submit to this act of Mafia-like criminal extortion. Mahdi told Trump to kiss his buttocks and that he wasn't going to turn over half of the profits from oil sales.

This makes Trump sound exactly like a criminal mob boss, especially in light of the fact that the USA is now the world's #1 exporter of oil – a fact that the arrogant Orange Man has even boasted about in recent months. Can anyone confirm that this claim is accurate? If so, then the more I learn about Trump the more sleazy and gangster like he becomes.

I mean, think about it. Bush and Cheney and mostly jewish neocons LIED us into Iraq based on bald faced lies, fabricated evidence, and exaggerated threats that they KNEW did not exist. We destroyed that country, captured and killed it's leader – who used to be a big buddy of the USA when we had a use for him – and Bush's crime gang killed close to 2 million innocent Iraqis and wrecked their economy and destroyed their infrastructure. And, now, after all that death, destruction and carnage – which Trump claimed in 2016 he did not approve of – but, now that Trump is sitting on the throne in the Oval office – he has the audacity and the gall to demand that Iraq owes the USA 50 percent of their oil profits? And, that he won't honor and respect their demand to pull our troops out of their sovereign nation unless they PAY US back for the gigantic waste of tax payers money that was spent building permanent bases inside their country?

Not one Iraqi politician voted for the appropriations bill that financed the construction of those military bases; that was our mistake, the mistake of our US congress whichever POTUS signed off on it.

melpol , says: Show Comment January 21, 2020 at 1:41 pm GMT
...Trump learned the power of the purse on the streets of NYC, he survived by playing ball with the Jewish and Italian Mafia. Now he has become the ultimate Godfather, and the world must listen to his commands. Watch and listen as the powerful and mighty crumble under US Hegemony.
World War Jew , says: Show Comment January 21, 2020 at 1:42 pm GMT
Right TG, traditionally, as you said up there first, and legally too, under the supreme law of the land. Economic sanctions are subject to the same UNSC supervision as forcible coercion.

UN Charter Article 41: "The Security Council may decide what measures not involving the use of armed force are to be employed to give effect to its decisions, and it may call upon the Members of the United Nations to apply such measures. These may include complete or partial interruption of economic relations and of rail, sea, air, postal, telegraphic, radio, and other means of communication, and the severance of diplomatic relations."

https://www.un.org/en/charter-united-nations/index.html

US "sanctions" require UNSC authorization. Unilateral sanctions are nothing but illegal coercive intervention, as the non-intervention principle is customary international law, which is US federal common law.

The G-192, that is, the entire world, has affirmed this law. That's why the US is trying to defund UNCTAD as redundant with the WTO (UNCTAD is the G-192's primary forum.) In any case, now that the SCO is in a position to enforce this law at gunpoint with its overwhelmingly superior missile technology, the US is going to get stomped and tased until it complies and stops resisting.

Charlie , says: Show Comment January 21, 2020 at 7:53 pm GMT
@Tucker This idea that the US is any sort of a net petroleum exporter is just another lie.

https://www.eia.gov/tools/faqs/faq.php?id=268&t=6

In 2018 total US petroleum production was under 18 million barrels per day, total consumption north of 20 mmb/d. What does it matter if the US exports a bunch of super light fracked product the US itself can't refine if it turns around and imports it all back in again and then some.

The myths we tell ourselves, like a roaring economy that nevertheless generates a $1 trillion annual deficit, will someday come back to bite us. Denying reality is not a winning game plan for the long run.

Christophe GJ , says: Show Comment January 21, 2020 at 8:00 pm GMT
I long tought that US foreign policies were mainly zionist agenda – driven, but the Venezuelan affair and the statements of Trump himself about the syrian oil (ta be "kept" (stolen)) make you think twice.

Oil seems to be at least very important even if it's not the main cause of middle east problems

So maybe it's the cause of illegal and cruel sanctions against Iran : Get rid of competitor to sell shale oil everywhere ?( think also of Norstream 2 here)

Watch out US of A. in the end there is something sometimes referred to as the oil's curse . some poor black Nigerians call oil "the shit of the devil", because it's such a problem – related asset Have you heard of it ? You get your revenues from oil easily, so you don't have to make effort by yourself. And in the end you don't keep pace with China on 5G ? Education fails ? Hmm
Becommig a primary sector extraction nation sad destiny indeed, like africans growing cafe, bananas and cacao for others. Not to mention environmental problems
What has happened to the superb Nation that send the first man on the moon and invented modern computers ?
Disapointment
Money for space or money for war following the Zio. Choose Uncle Sam !
Difficult to have both

OverCommenter , says: Show Comment January 21, 2020 at 8:24 pm GMT
Everyone seems to forget how we avoided war with Syria all those years ago It was when John Kerry of all people gaffed, and said "if Assad gives up all his chemical weapons." That was in response to a reporter who asked "is there anything that can stop the war?" A intrepid Russian ambassador chimed in loud enough for the press core to hear his "OK" and history was averted. Thinking restricting the power of the President will stop brown children from dying at the hands of insane US foreign policy is a cope. "Bi-partisanship" voted to keep troops in Syria, that was only a few months ago, have you already forgotten? Dubya started the drone program, and the magical African everyone fawns over, literally doubled the remote controlled death. We are way past pretending any elected official from either side is actually against more ME war, or even that one side is worse than the other.

The problem with the supporters Trump has left is they so desperately want to believe in something bigger than themselves. They have been fed propaganda for their whole lives, and as a result can only see the world in either "this is good" or "this is bad." The problem with the opposition is that they are insane. and will say or do anything regardless of the truth. Trump could be impeached for assassinating Sulimani, yet they keep proceeding with fake and retarded nonsense. Just like keeping troops in Syria, even the most insane rabid leftoids are just fine with US imperialism, so long as it's promoting Starbucks, Marvel and homosex, just like we see with support for HK. That is foreign meddling no matter how you try to justify it, and it's not even any different messaging than the hoax "bring democracyhumanrightsfreedom TM to the poor Arabs" justification that was used in Iraq. They don't even have to come up with a new play to run, it's really quite incredible.

Just passing through , says: Show Comment January 21, 2020 at 8:44 pm GMT
@OverCommenter A lot of right-wingers also see military action in the Middle East as a way for America to flex its muscles and bomb some Arabs. It also serves to justify the insane defence budget that could be used to build a wall and increase funding to ICE.

US politics has become incredibly bi-partisan, criticising Trump will get you branded a 'Leftist' in many circles. This extreme bipartisanship started with the Obama birth certificate nonsense which was being peddled by Jews like Orly Taitz, Philip J. Berg, Robert L. Shulz, Larry Klayman and Breitbart news – most likely because Obama was pursuing the JCPOA and not going hard enough on Iran – and continued with the Trump Russian agent angle.

Now many Americans cannot really think critically, they stick to their side like a fan sticks to their sports team.

Weston Waroda , says: Show Comment January 21, 2020 at 9:11 pm GMT
The first person I ever heard say sanctions are acts of war was Ron Paul. The repulsive Madeleine Albright infamously said the deaths of 500,000 Iranian children due to US sanctions was worth it. She ought to be tried as a war criminal. Ron Paul ought to be Secretary of State.

[Feb 07, 2020] How They Sold the Iraq War by Jeffrey St. Clair

Highly recommended!
Notable quotes:
"... Americans were the victims of an elaborate con job, pelted with a daily barrage of threat inflation, distortions, deceptions and lies, not about tactics or strategy or war plans, but about justifications for war. The lies were aimed not at confusing Saddam's regime, but the American people. By the start of the war, 66 per cent of Americans thought Saddam Hussein was behind 9/11 and 79 per cent thought he was close to having a nuclear weapon. ..."
"... This charade wouldn't have worked without a gullible or a complicit press corps. Victoria Clarke, who developed the Pentagon plan for embedded reports, put it succinctly a few weeks before the war began: "Media coverage of any future operation will to a large extent shape public perception." ..."
"... During the Vietnam War, TV images of maimed GIs and napalmed villages suburbanized opposition to the war and helped hasten the U.S. withdrawal. The Bush gang meant to turn the Vietnam phenomenon on its head by using TV as a force to propel the U.S.A. into a war that no one really wanted. ..."
"... When the Pentagon needed a heroic story, the press obliged. Jessica Lynch became the war's first instant celebrity. Here was a neo-gothic tale of a steely young woman wounded in a fierce battle, captured and tortured by ruthless enemies, and dramatically saved from certain death by a team of selfless rescuers, knights in camo and night-vision goggles. ..."
"... Back in 1988, the Post felt much differently about Saddam and his weapons of mass destruction. When reports trickled out about the gassing of Iranian troops, the Washington Post's editorial page shrugged off the massacres, calling the mass poisonings "a quirk of war." ..."
"... The Bush team displayed a similar amnesia. When Iraq used chemical weapons in grisly attacks on Iran, the U.S. government not only didn't object, it encouraged Saddam. ..."
"... Nothing sums up this unctuous approach more brazenly than MSNBC's firing of liberal talk show host Phil Donahue on the eve of the war. The network replaced the Donahue Show with a running segment called Countdown: Iraq, featuring the usual nightly coterie of retired generals, security flacks, and other cheerleaders for invasion. ..."
Mar 20, 2018 | www.counterpunch.org

The war on Iraq won't be remembered for how it was waged so much as for how it was sold. It was a propaganda war, a war of perception management, where loaded phrases, such as "weapons of mass destruction" and "rogue state" were hurled like precision weapons at the target audience: us.

To understand the Iraq war you don't need to consult generals, but the spin doctors and PR flacks who stage-managed the countdown to war from the murky corridors of Washington where politics, corporate spin and psy-ops spooks cohabit.

Consider the picaresque journey of Tony Blair's plagiarized dossier on Iraq, from a grad student's website to a cut-and-paste job in the prime minister's bombastic speech to the House of Commons. Blair, stubborn and verbose, paid a price for his grandiose puffery. Bush, who looted whole passages from Blair's speech for his own clumsy presentations, has skated freely through the tempest. Why?

Unlike Blair, the Bush team never wanted to present a legal case for war. They had no interest in making any of their allegations about Iraq hold up to a standard of proof. The real effort was aimed at amping up the mood for war by using the psychology of fear.

Facts were never important to the Bush team. They were disposable nuggets that could be discarded at will and replaced by whatever new rationale that played favorably with their polls and focus groups. The war was about weapons of mass destruction one week, al-Qaeda the next. When neither allegation could be substantiated on the ground, the fall back position became the mass graves (many from the Iran/Iraq war where the U.S.A. backed Iraq) proving that Saddam was an evil thug who deserved to be toppled. The motto of the Bush PR machine was: Move on. Don't explain. Say anything to conceal the perfidy behind the real motives for war. Never look back. Accuse the questioners of harboring unpatriotic sensibilities. Eventually, even the cagey Wolfowitz admitted that the official case for war was made mainly to make the invasion palatable, not to justify it.

The Bush claque of neocon hawks viewed the Iraq war as a product and, just like a new pair of Nikes, it required a roll-out campaign to soften up the consumers. The same techniques (and often the same PR gurus) that have been used to hawk cigarettes, SUVs and nuclear waste dumps were deployed to retail the Iraq war. To peddle the invasion, Donald Rumsfeld and Colin Powell and company recruited public relations gurus into top-level jobs at the Pentagon and the State Department. These spinmeisters soon had more say over how the rationale for war on Iraq should be presented than intelligence agencies and career diplomats. If the intelligence didn't fit the script, it was shaded, retooled or junked.

Take Charlotte Beers whom Powell picked as undersecretary of state in the post-9/11 world. Beers wasn't a diplomat. She wasn't even a politician. She was a grand diva of spin, known on the business and gossip pages as "the queen of Madison Avenue." On the strength of two advertising campaigns, one for Uncle Ben's Rice and another for Head and Shoulder's dandruff shampoo, Beers rocketed to the top of the heap in the PR world, heading two giant PR houses: Ogilvy and Mathers as well as J. Walter Thompson.

At the State Department Beers, who had met Powell in 1995 when they both served on the board of Gulf Airstream, worked at, in Powell's words, "the branding of U.S. foreign policy." She extracted more than $500 million from Congress for her Brand America campaign, which largely focused on beaming U.S. propaganda into the Muslim world, much of it directed at teens.

"Public diplomacy is a vital new arm in what will combat terrorism over time," said Beers. "All of a sudden we are in this position of redefining who America is, not only for ourselves, but for the outside world." Note the rapt attention Beers pays to the manipulation of perception, as opposed, say, to alterations of U.S. policy.

Old-fashioned diplomacy involves direct communication between representatives of nations, a conversational give and take, often fraught with deception (see April Glaspie), but an exchange nonetheless. Public diplomacy, as defined by Beers, is something else entirely. It's a one-way street, a unilateral broadcast of American propaganda directly to the public, domestic and international, a kind of informational carpet-bombing.

The themes of her campaigns were as simplistic and flimsy as a Bush press conference. The American incursions into Afghanistan and Iraq were all about bringing the balm of "freedom" to oppressed peoples. Hence, the title of the U.S. war: Operation Iraqi Freedom, where cruise missiles were depicted as instruments of liberation. Bush himself distilled the Beers equation to its bizarre essence: "This war is about peace."

Beers quietly resigned her post a few weeks before the first volley of tomahawk missiles battered Baghdad. From her point of view, the war itself was already won, the fireworks of shock and awe were all after play.

Over at the Pentagon, Donald Rumsfeld drafted Victoria "Torie" Clarke as his director of public affairs. Clarke knew the ropes inside the Beltway. Before becoming Rumsfeld's mouthpiece, she had commanded one of the world's great parlors for powerbrokers: Hill and Knowlton's D.C. office.

Almost immediately upon taking up her new gig, Clarke convened regular meetings with a select group of Washington's top private PR specialists and lobbyists to develop a marketing plan for the Pentagon's forthcoming terror wars. The group was filled with heavy-hitters and was strikingly bipartisan in composition. She called it the Rumsfeld Group and it included PR executive Sheila Tate, columnist Rich Lowry, and Republican political consultant Rich Galen.

The brain trust also boasted top Democratic fixer Tommy Boggs, brother of NPR's Cokie Roberts and son of the late Congressman Hale Boggs of Louisiana. At the very time Boggs was conferring with top Pentagon brass on how to frame the war on terror, he was also working feverishly for the royal family of Saudi Arabia. In 2002 alone, the Saudis paid his Qorvis PR firm $20.2 million to protect its interests in Washington. In the wake of hostile press coverage following the exposure of Saudi links to the 9/11 hijackers, the royal family needed all the well-placed help it could buy. They seem to have gotten their money's worth. Boggs' felicitous influence-peddling may help to explain why the references to Saudi funding of al-Qaeda were dropped from the recent congressional report on the investigation into intelligence failures and 9/11.

According to the trade publication PR Week, the Rumsfeld Group sent "messaging advice" to the Pentagon. The group told Clarke and Rumsfeld that in order to get the American public to buy into the war on terrorism, they needed to suggest a link to nation states, not just nebulous groups such as al-Qaeda. In other words, there needed to be a fixed target for the military campaigns, some distant place to drop cruise missiles and cluster bombs. They suggested the notion (already embedded in Rumsfeld's mind) of playing up the notion of so-called rogue states as the real masters of terrorism. Thus was born the Axis of Evil, which, of course, wasn't an "axis" at all, since two of the states, Iran and Iraq, hated each other, and neither had anything at all to do with the third, North Korea.

Tens of millions in federal money were poured into private public relations and media firms working to craft and broadcast the Bush dictat that Saddam had to be taken out before the Iraqi dictator blew up the world by dropping chemical and nuclear bombs from long-range drones. Many of these PR executives and image consultants were old friends of the high priests in the Bush inner sanctum. Indeed, they were veterans, like Cheney and Powell, of the previous war against Iraq, another engagement that was more spin than combat .

At the top of the list was John Rendon, head of the D.C. firm, the Rendon Group. Rendon is one of Washington's heaviest hitters, a Beltway fixer who never let political affiliation stand in the way of an assignment. Rendon served as a media consultant for Michael Dukakis and Jimmy Carter, as well as Reagan and George H.W. Bush. Whenever the Pentagon wanted to go to war, he offered his services at a price. During Desert Storm, Rendon pulled in $100,000 a month from the Kuwaiti royal family. He followed this up with a $23 million contract from the CIA to produce anti-Saddam propaganda in the region.

As part of this CIA project, Rendon created and named the Iraqi National Congress and tapped his friend Ahmed Chalabi, the shady financier, to head the organization.

Shortly after 9/11, the Pentagon handed the Rendon Group another big assignment: public relations for the U.S. bombing of Afghanistan. Rendon was also deeply involved in the planning and public relations for the pre-emptive war on Iraq, though both Rendon and the Pentagon refuse to disclose the details of the group's work there.

But it's not hard to detect the manipulative hand of Rendon behind many of the Iraq war's signature events, including the toppling of the Saddam statue (by U.S. troops and Chalabi associates) and videotape of jubilant Iraqis waving American flags as the Third Infantry rolled by them. Rendon had pulled off the same stunt in the first Gulf War, handing out American flags to Kuwaitis and herding the media to the orchestrated demonstration. "Where do you think they got those American flags?" clucked Rendon in 1991. "That was my assignment."

The Rendon Group may also have had played a role in pushing the phony intelligence that has now come back to haunt the Bush administration. In December of 2002, Robert Dreyfuss reported that the inner circle of the Bush White House preferred the intelligence coming from Chalabi and his associates to that being proffered by analysts at the CIA.

So Rendon and his circle represented a new kind of off-the-shelf PSYOPs , the privatization of official propaganda. "I am not a national security strategist or a military tactician," said Rendon. "I am a politician, and a person who uses communication to meet public policy or corporate policy objectives. In fact, I am an information warrior and a perception manager."

What exactly, is perception management? The Pentagon defines it this way: "actions to convey and/or deny selected information and indicators to foreign audiences to influence their emotions, motives and objective reasoning." In other words, lying about the intentions of the U.S. government. In a rare display of public frankness, the Pentagon actually let slip its plan (developed by Rendon) to establish a high-level den inside the Department Defense for perception management. They called it the Office of Strategic Influence and among its many missions was to plant false stories in the press.

Nothing stirs the corporate media into outbursts of pious outrage like an official government memo bragging about how the media are manipulated for political objectives. So the New York Times and Washington Post threw indignant fits about the Office of Strategic Influence; the Pentagon shut down the operation, and the press gloated with satisfaction on its victory. Yet, Rumsfeld told the Pentagon press corps that while he was killing the office, the same devious work would continue. "You can have the corpse," said Rumsfeld. "You can have the name. But I'm going to keep doing every single thing that needs to be done. And I have."

At a diplomatic level, despite the hired guns and the planted stories, this image war was lost. It failed to convince even America's most fervent allies and dependent client states that Iraq posed much of a threat. It failed to win the blessing of the U.N. and even NATO, a wholly owned subsidiary of Washington. At the end of the day, the vaunted coalition of the willing consisted of Britain, Spain, Italy, Australia, and a cohort of former Soviet bloc nations. Even so, the citizens of the nations that cast their lot with the U.S.A. overwhelmingly opposed the war.

Domestically, it was a different story. A population traumatized by terror threats and shattered economy became easy prey for the saturation bombing of the Bush message that Iraq was a terrorist state linked to al-Qaeda that was only minutes away from launching attacks on America with weapons of mass destruction.

Americans were the victims of an elaborate con job, pelted with a daily barrage of threat inflation, distortions, deceptions and lies, not about tactics or strategy or war plans, but about justifications for war. The lies were aimed not at confusing Saddam's regime, but the American people. By the start of the war, 66 per cent of Americans thought Saddam Hussein was behind 9/11 and 79 per cent thought he was close to having a nuclear weapon.

Of course, the closest Saddam came to possessing a nuke was a rusting gas centrifuge buried for 13 years in the garden of Mahdi Obeidi, a retired Iraqi scientist. Iraq didn't have any functional chemical or biological weapons. In fact, it didn't even possess any SCUD missiles, despite erroneous reports fed by Pentagon PR flacks alleging that it had fired SCUDs into Kuwait.

This charade wouldn't have worked without a gullible or a complicit press corps. Victoria Clarke, who developed the Pentagon plan for embedded reports, put it succinctly a few weeks before the war began: "Media coverage of any future operation will to a large extent shape public perception."

During the Vietnam War, TV images of maimed GIs and napalmed villages suburbanized opposition to the war and helped hasten the U.S. withdrawal. The Bush gang meant to turn the Vietnam phenomenon on its head by using TV as a force to propel the U.S.A. into a war that no one really wanted.

What the Pentagon sought was a new kind of living room war, where instead of photos of mangled soldiers and dead Iraqi kids, they could control the images Americans viewed and to a large extent the content of the stories. By embedding reporters inside selected divisions, Clarke believed the Pentagon could count on the reporters to build relationships with the troops and to feel dependent on them for their own safety. It worked, naturally. One reporter for a national network trembled on camera that the U.S. Army functioned as "our protectors." The late David Bloom of NBC confessed on the air that he was willing to do "anything and everything they can ask of us."

When the Pentagon needed a heroic story, the press obliged. Jessica Lynch became the war's first instant celebrity. Here was a neo-gothic tale of a steely young woman wounded in a fierce battle, captured and tortured by ruthless enemies, and dramatically saved from certain death by a team of selfless rescuers, knights in camo and night-vision goggles. Of course, nearly every detail of her heroic adventure proved to be as fictive and maudlin as any made-for-TV-movie. But the ordeal of Private Lynch, which dominated the news for more than a week, served its purpose: to distract attention from a stalled campaign that was beginning to look at lot riskier than the American public had been hoodwinked into believing.

The Lynch story was fed to the eager press by a Pentagon operation called Combat Camera, the Army network of photographers, videographers and editors that sends 800 photos and 25 video clips a day to the media. The editors at Combat Camera carefully culled the footage to present the Pentagon's montage of the war, eliding such unsettling images as collateral damage, cluster bombs, dead children and U.S. soldiers, napalm strikes and disgruntled troops.

"A lot of our imagery will have a big impact on world opinion," predicted Lt. Jane Larogue, director of Combat Camera in Iraq. She was right. But as the hot war turned into an even hotter occupation, the Pentagon, despite airy rhetoric from occupation supremo Paul Bremer about installing democratic institutions such as a free press, moved to tighten its monopoly on the flow images out of Iraq. First, it tried to shut down Al Jazeera, the Arab news channel. Then the Pentagon intimated that it would like to see all foreign TV news crews banished from Baghdad.

Few newspapers fanned the hysteria about the threat posed by Saddam's weapons of mass destruction as sedulously as did the Washington Post. In the months leading up to the war, the Post's pro-war op-eds outnumbered the anti-war columns by a 3-to-1 margin.

Back in 1988, the Post felt much differently about Saddam and his weapons of mass destruction. When reports trickled out about the gassing of Iranian troops, the Washington Post's editorial page shrugged off the massacres, calling the mass poisonings "a quirk of war."

The Bush team displayed a similar amnesia. When Iraq used chemical weapons in grisly attacks on Iran, the U.S. government not only didn't object, it encouraged Saddam. Anything to punish Iran was the message coming from the White House. Donald Rumsfeld himself was sent as President Ronald Reagan's personal envoy to Baghdad. Rumsfeld conveyed the bold message than an Iraq defeat would be viewed as a "strategic setback for the United States." This sleazy alliance was sealed with a handshake caught on videotape. When CNN reporter Jamie McIntyre replayed the footage for Rumsfeld in the spring of 2003, the secretary of defense snapped, "Where'd you get that? Iraqi television?"

The current crop of Iraq hawks also saw Saddam much differently then. Take the writer Laura Mylroie, sometime colleague of the New York Times' Judy Miller, who persists in peddling the ludicrous conspiracy that Iraq was behind the 1993 bombing of the World Trade Center.

How times have changed! In 1987, Mylroie felt downright cuddly toward Saddam. She wrote an article for the New Republic titled "Back Iraq: Time for a U.S. Tilt in the Mideast," arguing that the U.S. should publicly embrace Saddam's secular regime as a bulwark against the Islamic fundamentalists in Iran. The co-author of this mesmerizing weave of wonkery was none other than Daniel Pipes, perhaps the nation's most bellicose Islamophobe. "The American weapons that Iraq could make good use of include remotely scatterable and anti-personnel mines and counterartillery radar," wrote Mylroie and Pipes. "The United States might also consider upgrading intelligence it is supplying Baghdad."

In the rollout for the war, Mylroie seemed to be everywhere hawking the invasion of Iraq. She would often appear on two or three different networks in the same day. How did the reporter manage this feat? She had help in the form of Eleana Benador, the media placement guru who runs Benador Associates. Born in Peru, Benador parlayed her skills as a linguist into a lucrative career as media relations whiz for the Washington foreign policy elite. She also oversees the Middle East Forum, a fanatically pro-Zionist white paper mill. Her clients include some of the nation's most fervid hawks, including Michael Ledeen, Charles Krauthammer, Al Haig, Max Boot, Daniel Pipes, Richard Perle, and Judy Miller. During the Iraq war, Benador's assignment was to embed this squadron of pro-war zealots into the national media, on talk shows, and op-ed pages.

Benador not only got them the gigs, she also crafted the theme and made sure they all stayed on message. "There are some things, you just have to state them in a different way, in a slightly different way," said Benador. "If not, people get scared." Scared of intentions of their own government.

It could have been different. All of the holes in the Bush administration's gossamer case for war were right there for the mainstream press to expose. Instead, the U.S. press, just like the oil companies, sought to commercialize the Iraq war and profit from the invasions. They didn't want to deal with uncomfortable facts or present voices of dissent.

Nothing sums up this unctuous approach more brazenly than MSNBC's firing of liberal talk show host Phil Donahue on the eve of the war. The network replaced the Donahue Show with a running segment called Countdown: Iraq, featuring the usual nightly coterie of retired generals, security flacks, and other cheerleaders for invasion. The network's executives blamed the cancellation on sagging ratings. In fact, during its run Donahue's show attracted more viewers than any other program on the network. The real reason for the pre-emptive strike on Donahue was spelled out in an internal memo from anxious executives at NBC. Donahue, the memo said, offered "a difficult face for NBC in a time of war. He seems to delight in presenting guests who are anti-war, anti-Bush and skeptical of the administration's motives."

The memo warned that Donahue's show risked tarring MSNBC as an unpatriotic network, "a home for liberal anti-war agenda at the same time that our competitors are waving the flag at every opportunity." So, with scarcely a second thought, the honchos at MSNBC gave Donahue the boot and hoisted the battle flag.

It's war that sells.

There's a helluva caveat, of course. Once you buy it, the merchants of war accept no returns.

This essay is adapted from Grand Theft Pentagon.

[Jan 12, 2020] MIC along with Wall Street controls the government and the country

Highly recommended!
Jan 12, 2020 | angrybearblog.com
  1. likbez , January 12, 2020 5:30 pm

    Everyone keeps dancing around it: Iraqi PM Abdul-Mahdi has reported that Soleimani was on the way to see him with a reply to a Saudi peace proposal. Who profits from Peace? Who does not?

    The killing of Soleimani, while a tragic even with far reaching consequences, is just an illustration of the general rule: MIC does not profit from peace. And MIC dominates any national security state, into which the USA was transformed by the technological revolution on computers and communications, as well as the events of 9/11.

    The USA government can be viewed as just a public relations center for MIC. That's why Trump/Pompeo/Esper/Pence gang position themselves as rabid neocons, which means MIC lobbyists in order to hold their respective positions. There is no way out of this situation. This is a classic Catch 22 trap.

    The fact that a couple of them are also "Rapture" obsessed religious bigots means that the principle of separation of church and state does no matter when MIC interests are involved.

    The health of MIC requires maintaining an inflated defense budget at all costs. Which, in turn, drives foreign wars and the drive to capture other nations' resources to compensate for MIC appetite. The drive which is of course closely allied with Wall Street interests (disaster capitalism.)

    In such conditions fake "imminent threat" assassinations necessarily start happening. Although the personality of Pompeo and the fact that he is a big friend of the current head of Mossad probably played some role.

    It's really funny that Trump (probably with the help of his "reference group," which includes Adelson and Kushner), managed to appoint as the top US diplomat a person who was trained as a mechanic engineer and specialized as a tank repair mechanic. And who was a long-time military contractor. So it is quite natural that he represents interests of MIC.

    IMHO under Trump/Pompeo/Esper trio some kind of additional skirmishes with Iran are a real possibility: they are necessary to maintain the current inflated level of defense spending.

    State of the US infrastructure, the actual level of unemployment (U6 is ~7% which some neolibs call full employment ;-), and the level of poverty of the bottom 33% of the USA population be damned. Essentially the bottom 33% is the third world country within the USA.

    "If you make more than $15,000 (roughly the annual salary of a minimum-wage employee working 40 hours per week), you earn more than 32.2% of Americans

    The 894 people that earn more than $20 million make more than 99.99989% of Americans, and are compensated a cumulative $37,009,979,568 per year. "

    ( https://www.huffpost.com/entry/income-inequality-crisis_n_4221012 )

[Jan 12, 2020] Luongo Fears "An Abyss Of Losses" As Iraq Becomes MidEast Battleground

Highly recommended!
Jan 12, 2020 | www.zerohedge.com

Authored by Tom Luongo via Gold, Goats, 'n Guns blog,

The future of the U.S.'s involvement in the Middle East is in Iraq. The exchange of hostilities between the U.S. and Iran occurred wholly on Iraqi soil and it has become the site on which that war will continue.

Israel continues to up the ante on Iran, following President Trump's lead by bombing Shia militias stationed near the Al Bukumai border crossing between Syria and Iraq.

The U.S. and Israel are determined this border crossing remains closed and have demonstrated just how far they are willing to go to prevent the free flow of goods and people across this border.

The regional allies of Iran are to be kept weak, divided and constantly under harassment.

Iraq is the battleground because the U.S. lost in Syria. Despite the presence of U.S. troops squatting on Syrian oil fields in Deir Ezzor province or the troops sitting in the desert protecting the Syrian border with Jordan, the Russians, Hezbollah and the Iranian Quds forces continue to reclaim territory previously lost to the Syrian government.

Now with Turkey redeploying its pet Salafist head-choppers from Idlib to Libya to fight General Haftar's forces there to legitimize its claim to eastern Mediterannean gas deposits, the restoration of Syria's territorial integrity west of the Euphrates River is nearly complete.

The defenders of Syria can soon transition into the rebuilders thereof, if allowed. And they didn't do this alone, they had a silent partner in China the entire time.

And, if I look at this situation honestly, it was China stepping out from behind the shadows into the light that is your inciting incident for this chapter in Iraq's story.

China moving in to sign a $10.1 billion deal with the Iraqi government to begin the reconstruction of its ruined oil and gas industry in exchange for oil is of vital importance.

It doubles China's investment in Iraq while denying the U.S. that money and influence.

This happened after a massive $53 billion deal between Exxon-Mobil and Petrochina was put on hold after the incident involving Iran shooting down a U.S. Global Hawk drone in June.

With the U.S balking over the Exxon/Petrochina big deal, Iraqi Prime Minster Adel Abdul Mahdi signed the new one with China in October. Mahdi brought up the circumstances surrounding that in Iraqi parliaments during the session in which it passed the resolution recommending removal of all foreign forces from Iraq.

Did Trump openly threaten Mahdi over this deal as I covered in my podcast on this? Did the U.S. gin up protests in Baghdad, amplifying unrest over growing Iranian influence in the country?

And, if not, were these threats simply implied or carried by a minion (Pompeo, Esper, a diplomat)? Because the U.S.'s history of regime change operations is well documented. Well understood color revolution tactics used successfully in places like Ukraine , where snipers were deployed to shoot protesters and police alike to foment violence between them at the opportune time were on display in Baghdad.

Mahdi openly accused Trump of threatening him, but that sounds more like Mahdi using the current impeachment script to invoke the sinister side of Trump and sell his case.

It's not that I don't think Trump capable of that kind of threat, I just don't think he's stupid enough to voice it on an open call. Donald Trump is capable of many impulsive things, openly threatening to remove an elected Prime Minister on a recorded line is not one of them.

Mahdi has been under the U.S.'s fire since he came to power in late 2018. He was the man who refused Trump during Trump's impromptu Christmas visit to Iraq in 2018 , refusing to be summoned to a clandestine meeting at the U.S. embassy rather than Trump visit him as a head of state, an equal.

He was the man who declared the Iraqi air space closed after Israeli air attacks on Popular Mobilization Force (PMF) positions in September.

And he's the person, at the same time, being asked by Trump to act as a mediator between Saudi Arabia and Iran in peace talks for Yemen.

So, the more we look at this situation the more it is clear that Abdul Madhi, the first Iraqi prime minister since the 2003 U.S. invasion push for more Iraqi sovereignty, is emerging as the pivotal figure in what led up to the attack on General Soleimani and what comes after Iran's subsequent retaliation.

It's clear that Trump doesn't want to fight a war with Iran in Iran. He wants them to acquiesce to his unreasonable demands and begin negotiating a new nuclear deal which definitively stops the possibility of Iran developing a nuclear weapon, and as P atrick Henningsen at 21st Century Wire thinks ,

Trump now wants a new deal which features a prohibition on Iran's medium range missiles , and after events this week, it's obvious why. Wednesday's missile strike by Iran demonstrates that the US can no longer operate in the region so long as Iran has the ability to extend its own deterrence envelope westwards to Syria, Israel, and southwards to the Arabian Peninsula, and that includes all US military installations located within that radius.

Iraq doesn't want to be that battlefield. And Iran sent the message with those two missile strikes that the U.S. presence in Iraq is unsustainable and that any thought of retreating to the autonomous Kurdish region around the air base at Erbil is also a non-starter.

The big question, after this attack, is whether U.S. air defenses around the Ain al Assad airbase west of Ramadi were active or not. If they were then Trump's standing down after the air strikes signals what Patrick suggests, a new Middle East in the making.

If they were not turned on then the next question is why? To allow Iran to save face after Trump screwed up murdering Soleimani?

I'm not capable of believing such Q-tard drivel at this point. It's far more likely that the spectre of Russian electronics warfare and radar evasion is lurking in the subtext of this story and the U.S. truly now finds itself after a second example of Iranian missile technology in a nascent 360 degree war in the region.

It means that Iran's threats against the cities of Haifa and Dubai were real.

In short, it means the future of the U.S. presence in Iraq now measures in months not years.

Because both China and Russia stand to gain ground with a newly-united Shi'ite Iraqi population. Mahdi is now courting Russia to sell him S-300 missile defense systems to allow him to enforce his demands about Iraqi airspace.

Moqtada al-Sadr is mobilizing his Madhi Army to oust the U.S. from Iraq. Iraq is key to the U.S. presence in the region. Without Iraq the U.S. position in Syria is unsustainable.

If the U.S. tries to retreat to Kurdish territory and push again for Masoud Barzani and his Peshmerga forces to declare independence Turkish President Recep Tayyip Erdogan will go ballistic.

And you can expect him to make good on his threat to close the Incerlik airbase, another critical logistical juncture for U.S. force projection in the region.

But it all starts with Mahdi's and Iraq's moves in the coming weeks. But, with Trump rightly backing down from escalating things further and not following through on his outlandish threats against Iran, it may be we're nearing the end of this intractable standoff.

Back in June I told you that Iran had the ability to fight asymmetrically against the U.S., not through direct military confrontation but through the after-effects of a brief, yet violent period of war in which all U.S., Israeli and Arab assets in the Middle East come under fire from all directions.

It sent this same message then that by attacking oil tankers it could make the transport of oil untenable and not insurable. We got a taste of it back then and Trump, then, backed down.

And the resultant upheaval in the financial markets creating an abyss of losses, cross-asset defaults, bank failures and government collapses.

Trump has no real option now but to negotiate while Iraq puts domestic pressure on him to leave and Russia/China come in to provide critical economic and military support to assist Mahdi rally his country back towards some semblance of sovereignty

* * *

Join My Patreon if you want help making sense of this insane world. Install the Brave Browser if you want to build an internet free to allow us to do so.


MalteseFalcon , 3 minutes ago link

OK kids,

Play time is over.

China needs Iraqi oil to build the BRI.

Last one into Africom is a rotten egg!!!!

daveeemc2 , 14 minutes ago link

This is the most delicious of irony

https://en.wikipedia.org/wiki/Financial_cost_of_the_Iraq_War

The american imperial style of intervention is dead.

China debt trap model of belt and road is the path forward.

They will win hearts and minds, and not a single shot fired.

USA gets debt from paying war machine and killed and maimed soldiers whose personal psychiatry will haunt them for an entire lifetime.

In the end, Americans get nothing but debt and risk their own soverignty as a population ages and infrastructure crumbles....kinda like now.

MalteseFalcon , 1 minute ago link

The last 30 years of American foreign policy has been an unmitigated disaster.

yerfej , 26 minutes ago link

How about "what is the goal?" There is none of course. The assholes in the Washington/MIC just need war to keep them relevant. What if the US were to closed down all those wars and foreign bases? THEN the taxpayer could demand some accounting for the trillions that are wasted on complete CRAP. There are too many old leftovers from the cold war who seem to think there is benefit to fighting wars in shithole places just because those wars are the only ones going on right now. The stupidity of the ****** in the US military/MIC/Washington is beyond belief. JUST LEAVE you ******* idiots.

Rusticus2.0 , 22 minutes ago link

Your comment should have been directed at Trump, the commander in chief.

I guess that's still a bridge too far, but sooner than later you're going to have to cross it.

BobEore , 29 minutes ago link

Excellent Smithers, excellent:

Sometimes, in treading thru the opaque, sandstorm o ******** swept wastes of the ' desert of the really real '...

one must rely upon a marking... some kind of guidepost, however tenuous, to show you to be still... on the trail, not lost in the vast haunted reaches of post-reality. And you know, Tommy is that sort of guide; the sort of guy who you take to the fairgrounds, set him up with the 'THROW THE BALL THRU THE HOOP... GUARANTEED PRIZE TO SCOOP' kiosk...

and he misses every time. Just by watching Tom run through his paces here... zeroing in on the exact WRONG interpretation of events ... every dawg gone time... one resets their compass to tru course and relaxes into the flow agin! Thanks Tom! Let's break down ... the Schlitzy shopping list of sloppy errors: