💯 thanks for your deft analysis. So basically I’m hearing you suggesting that innocent lives lost are the true cost of keeping capitalism from collapsing, yes? If yes then what else is new, since colonialism was rebranded and disguised as capitalism? If yes then this would be another peg to hang one of my favorite mantras on, which is, “endless wars against fabricated enemies to maintain the cult fantasy of endless economic growth”, which I often refer to as the goal of US Empire managers’ and the reason why our socioeconomic system cannot afford health and safety, despite politicians claiming to want to get folks home safely... and reason to revolt with a vote for third party candidates this election cycle like there’s no time to lose. Because climate shocks are here to stay and accelerating, which markets cannot survive… so the collapse of capitalism is inevitable.
It's the same in natural gas. Just look at how the 'scarcity narrative' has propped up prices all summer, contributing to a 75% increase in wholesale gas futures traded on the TTF hub in the Netherlands, even though there was no material change to supply-demand dynamics. Big bucks for hedge funds and money managers, who take bullish positions, precipitate a bull run, cash out and repatriate profits to overseas clients. All funded by hard-pressed consumers who just want to stay warm and keep the lights on.
Hiya Rachel, yes Big Oil is prepping us for a price hike, for no reason, because they can.
I think energy price fixing also complicates matters. It masks the fact that both the cheapness and percentage of renewables within the energy supply is increasing, as both electricity (whatever the source) and gas prices follow the overall trend.
I also think that Iran oil is sanctioned by the US and its vassals, so supply isn't a problem for us. However, the US would be happy to see Iran's oil burn so that she can't trade and profit from it with other countries.
Bills took a great big hike in 2022 and many accepted it was due to the Russian 'invasion'. However, only a time part of UK fuel comes from Russia. Russia also didn't invade in any sense of gaining territory or resources or Empire building. That's exactly what NATO, the US, the CIA and Senator (we're in this together) McCain had been doing prior to the 2014 coup which removed the democratically elected Russian facing president, replaced him with an EU facing one and armed and funded the neonazi Azov battalion who continued their persecution of Russian speakers in the Donbass region. Blowing up Nord Stream also meant that Germany was dependent on highly inflated LNG from the US, but anything to stop a partnership with Russia.
This looks like another example of the short-termism that Ann Pettifor describes in her Substack (https://substack.com/home/post/p-149848804?r=2rwmeb&utm_campaign=post&utm_medium=web) whereby capital is valued in terms of its near-future value while increasingly discounting both value and risk on longer views. Capitalism is extremely short-sighted and refuses to wear glasses....
I would suggest there are some gaps in your analysis.
The first is that 'the markets' represent business activity, but that hasn't been the case since the 1980's. The markets represent the gambling on what businesses do next, both positive and negative (the gamblers make money in either direction). The Markets thrive on volatility that generates big movements in shares as, for example, defense and energy shares rocket and normal company shares, especially international ones, tend to fall.
Secondly, fossil energy production is flatlining, with almost all production at it's maximum. For much of that production both the financial EROI and the energy EROEI are approaching equilibrium.
As an example, American fracking as an industry barely covers it's financial costs of production. But an individual company or few wells may make money, so a bet on those may turn a profit for the investors. And the wells that fail can be written off against taxes. It has reached a point where companies are attaching solar farms and wind turbines for the energy to mine the fossil fuels!
But the energy equation can't be hacked with tax breaks. Many wells and production methods now take as much energy to mine the oil or gas, transport it, process it and get it to market as the energy contained within it. Some are even negative - they use more energy than they produce.
This is like the cartoon character that runs off a cliff and is frozen in mid-air........until he looks down and suddenly plummets to earth!
So, don't look down!
Of course, whatever the cost; financial, energy, social or climate costs, the fossil fuels for the military, the aircraft industries, farming and food production and distribution, key companies, for examples, will continue to be mined. Hard to imagine an electric battlefield tank or an electric Hercules transport plane! But that might not leave enough for the rest of us to use - already the gap between production and demand is growing fast, and renewables are barely filling the gap of additional energy demand.
These are the last years of our fossil empires. Most real companies producing goods, and almost all companies providing them with services, in every imaginable sector, are entirely fossil dependant and few can survive a fossil shortage and price hikes. The Markets will be making money by gambling and shorting those companies and making money, even as the real economy tanks.
The Saudis are the monopoly price setters in the crude oil market, as they are the only ones capable of producing excess capacity.
They are the once controlling the price.
Selling the excess capacity would bring the oil price to zero.
The other side of the coin:
Taking out part of the Saudi oil production capacity would skyrocket oil prices and tumble the world economy.
This is how the balance of terror in the region works today.
This is why Iran defending itself from further US/Israeli attacks only needed to target part of the Saudi oil production to crash the global economy. If the US doesn't understand this, then the proof will be in the pudding.
I'll make the argument that the reason supply-side shocks don't have long-term effects on the stock market is that monetary policy prevents them from doing so. Losses are covered over with new debt. The elephant in the room is in your story--who gets access to oil? As strong nations manipulate their fiscal and monetary policy to keep energy prices stable others find they can't. They're ignored.
Take Israel. It can no longer afford to operate Gaza as a prison. The inmates revolted. It decided eliminating them would be the best financial option (not going into the morality here). It exchanged weapons with Azerbaijan for fuels and Azerbaijan took Nagorno-Karabakh. The main thing is, Israel has no real access to fossil fuels. It's economy started heading south in 2015, like most in the world, IMO.
This is a long way of saying supply-side shocks ARE effecting markets, they just aren't markets we care about. Eventually, as war spreads, they will effect ours too. If there's so much oil, so much excess capacity as you say, why is the SPR shrinking?
The Palestinian Authority has control of a billion dollars worth of off-shore gas off the Gaza coast. They had more-or-less negotiated "giving" that to Israel, but Hamas vetoed that agreement.
Thus, Hamas had to go, and the Israeli intelligence community that can reportedly locate individual Hamas leaders and target them for assassination knew nothing about October 7th.
There are no supply side shocks in the global oil market. Even the 1970 oil shock was a domestic supply shortage only driven by #OPEC not selling their excess capacity to the market.
A little "excess capacity" here, a little "excess capacity" there and soon every human on the planet is begging the government to come pick up the overflowing gas containers in their garage ;)
Hiya, Israel is (almost) entirely dependent on the US for funding and weapons without which its economy would already have collapsed. The reason the US does this is because Israel is an unsinkable US aircraft carrier in a fossil fuel rich region and would have (according to Biden) been created if it hadn't already existed. Oil producers who are not vassals of the US are sanctioned by it. It cares very much for the energy markets in West Asia and around the world that it can't control directly and is intent on suppressing them. War is not spreading like an out of control virus- it's the fact that the deliberate presence of a white supremacist state and the fossil fuel Imperialism that sustains it will no longer be tolerated by the 'rest of the world' .
💯 thanks for your deft analysis. So basically I’m hearing you suggesting that innocent lives lost are the true cost of keeping capitalism from collapsing, yes? If yes then what else is new, since colonialism was rebranded and disguised as capitalism? If yes then this would be another peg to hang one of my favorite mantras on, which is, “endless wars against fabricated enemies to maintain the cult fantasy of endless economic growth”, which I often refer to as the goal of US Empire managers’ and the reason why our socioeconomic system cannot afford health and safety, despite politicians claiming to want to get folks home safely... and reason to revolt with a vote for third party candidates this election cycle like there’s no time to lose. Because climate shocks are here to stay and accelerating, which markets cannot survive… so the collapse of capitalism is inevitable.
Exactly.
It's the same in natural gas. Just look at how the 'scarcity narrative' has propped up prices all summer, contributing to a 75% increase in wholesale gas futures traded on the TTF hub in the Netherlands, even though there was no material change to supply-demand dynamics. Big bucks for hedge funds and money managers, who take bullish positions, precipitate a bull run, cash out and repatriate profits to overseas clients. All funded by hard-pressed consumers who just want to stay warm and keep the lights on.
Lots more on that here: https://www.energyflux.news/p/from-risk-premium-to-risk-off
And here: https://www.energyflux.news/p/podcast-draghi-e-fwd-event
Hiya Rachel, yes Big Oil is prepping us for a price hike, for no reason, because they can.
I think energy price fixing also complicates matters. It masks the fact that both the cheapness and percentage of renewables within the energy supply is increasing, as both electricity (whatever the source) and gas prices follow the overall trend.
I also think that Iran oil is sanctioned by the US and its vassals, so supply isn't a problem for us. However, the US would be happy to see Iran's oil burn so that she can't trade and profit from it with other countries.
Bills took a great big hike in 2022 and many accepted it was due to the Russian 'invasion'. However, only a time part of UK fuel comes from Russia. Russia also didn't invade in any sense of gaining territory or resources or Empire building. That's exactly what NATO, the US, the CIA and Senator (we're in this together) McCain had been doing prior to the 2014 coup which removed the democratically elected Russian facing president, replaced him with an EU facing one and armed and funded the neonazi Azov battalion who continued their persecution of Russian speakers in the Donbass region. Blowing up Nord Stream also meant that Germany was dependent on highly inflated LNG from the US, but anything to stop a partnership with Russia.
This looks like another example of the short-termism that Ann Pettifor describes in her Substack (https://substack.com/home/post/p-149848804?r=2rwmeb&utm_campaign=post&utm_medium=web) whereby capital is valued in terms of its near-future value while increasingly discounting both value and risk on longer views. Capitalism is extremely short-sighted and refuses to wear glasses....
I would suggest there are some gaps in your analysis.
The first is that 'the markets' represent business activity, but that hasn't been the case since the 1980's. The markets represent the gambling on what businesses do next, both positive and negative (the gamblers make money in either direction). The Markets thrive on volatility that generates big movements in shares as, for example, defense and energy shares rocket and normal company shares, especially international ones, tend to fall.
Secondly, fossil energy production is flatlining, with almost all production at it's maximum. For much of that production both the financial EROI and the energy EROEI are approaching equilibrium.
As an example, American fracking as an industry barely covers it's financial costs of production. But an individual company or few wells may make money, so a bet on those may turn a profit for the investors. And the wells that fail can be written off against taxes. It has reached a point where companies are attaching solar farms and wind turbines for the energy to mine the fossil fuels!
But the energy equation can't be hacked with tax breaks. Many wells and production methods now take as much energy to mine the oil or gas, transport it, process it and get it to market as the energy contained within it. Some are even negative - they use more energy than they produce.
This is like the cartoon character that runs off a cliff and is frozen in mid-air........until he looks down and suddenly plummets to earth!
So, don't look down!
Of course, whatever the cost; financial, energy, social or climate costs, the fossil fuels for the military, the aircraft industries, farming and food production and distribution, key companies, for examples, will continue to be mined. Hard to imagine an electric battlefield tank or an electric Hercules transport plane! But that might not leave enough for the rest of us to use - already the gap between production and demand is growing fast, and renewables are barely filling the gap of additional energy demand.
These are the last years of our fossil empires. Most real companies producing goods, and almost all companies providing them with services, in every imaginable sector, are entirely fossil dependant and few can survive a fossil shortage and price hikes. The Markets will be making money by gambling and shorting those companies and making money, even as the real economy tanks.
Historical evidence for Saudis trying to sell their excess capacity:
US oil has dropped to below $0 dollars a barrel.
Apr 21, 2020
https://www.weforum.org/agenda/2020/04/oil-barrel-prices-economic-supply-demand-coronavirus-covid19-united-states/
Watch Warren Mosler
https://youtu.be/lChuLO3ETis?si=6Gg7edOvSO3rjVgI
The Saudis are the monopoly price setters in the crude oil market, as they are the only ones capable of producing excess capacity.
They are the once controlling the price.
Selling the excess capacity would bring the oil price to zero.
The other side of the coin:
Taking out part of the Saudi oil production capacity would skyrocket oil prices and tumble the world economy.
This is how the balance of terror in the region works today.
This is why Iran defending itself from further US/Israeli attacks only needed to target part of the Saudi oil production to crash the global economy. If the US doesn't understand this, then the proof will be in the pudding.
I'll make the argument that the reason supply-side shocks don't have long-term effects on the stock market is that monetary policy prevents them from doing so. Losses are covered over with new debt. The elephant in the room is in your story--who gets access to oil? As strong nations manipulate their fiscal and monetary policy to keep energy prices stable others find they can't. They're ignored.
Take Israel. It can no longer afford to operate Gaza as a prison. The inmates revolted. It decided eliminating them would be the best financial option (not going into the morality here). It exchanged weapons with Azerbaijan for fuels and Azerbaijan took Nagorno-Karabakh. The main thing is, Israel has no real access to fossil fuels. It's economy started heading south in 2015, like most in the world, IMO.
This is a long way of saying supply-side shocks ARE effecting markets, they just aren't markets we care about. Eventually, as war spreads, they will effect ours too. If there's so much oil, so much excess capacity as you say, why is the SPR shrinking?
"Israel has no real access to fossil fuels."
That's the back-story on Gaza.
The Palestinian Authority has control of a billion dollars worth of off-shore gas off the Gaza coast. They had more-or-less negotiated "giving" that to Israel, but Hamas vetoed that agreement.
Thus, Hamas had to go, and the Israeli intelligence community that can reportedly locate individual Hamas leaders and target them for assassination knew nothing about October 7th.
https://iacenter.org/2023/11/15/behind-israels-end-game-for-gaza-theft-of-offshore-gas-reserves/
Dig deep enough these days, and *every* political problem turns out to really be a fossil sunlight struggle.
Thanks for link. I knew a little bit about it, but not to that depth.
There are no supply side shocks in the global oil market. Even the 1970 oil shock was a domestic supply shortage only driven by #OPEC not selling their excess capacity to the market.
A little "excess capacity" here, a little "excess capacity" there and soon every human on the planet is begging the government to come pick up the overflowing gas containers in their garage ;)
Hiya, Israel is (almost) entirely dependent on the US for funding and weapons without which its economy would already have collapsed. The reason the US does this is because Israel is an unsinkable US aircraft carrier in a fossil fuel rich region and would have (according to Biden) been created if it hadn't already existed. Oil producers who are not vassals of the US are sanctioned by it. It cares very much for the energy markets in West Asia and around the world that it can't control directly and is intent on suppressing them. War is not spreading like an out of control virus- it's the fact that the deliberate presence of a white supremacist state and the fossil fuel Imperialism that sustains it will no longer be tolerated by the 'rest of the world' .
What is the SPR: Society for Psychial Research?
Strategic Petroleum Reserves https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCSSTUS1&f=M
In comparison: US demand is about 19 million barrel per day, global demand about 100 million barrel.
Of course, we're 20% of the global population, duh ;)