The Changing Face of Oil Markets

I have a habit of buying gasoline at $15 per fill up. I have convenient locations on my daily flight path and so I don’t mind the constant stops. But as prices have fallen I have noticed that in the beginning I barely got one-third of a tank. Today for my $15 I got more than one-half tank and paid less that $2 per gallon (--)  Thank you President Obama!

The worldwide glut of oil is a fairly small differential; the overproduction is not dramatic, but as better spoken by Shakespeare- paraphrasing here- tis not so deep as a well nor so wide as a church door…But tis enough.  The critical factor is the U.S. market, it was the U.S. market after all that began the illegal control of oil prices by the oil producers in a nation whose basic laws require the opposite- The fundamental legal policy here is to oppose monopoly control and trusts.  By allowing the producers to control the price and supply of crude oil, we auctioned our national future for the sake of a few oil companies and their stockholders.  Finally, the flown birds have come back to roost.
The trigger was U.S. Shale oil production and the noxious hydraulic fracturing technology. The kicker was the technological refinements in that technology that significantly increased production efficiencies and yield per well, per day.

There are many international scenarios intertwined in the changing face of oil markets, and even as the price of oil continues to fall, there are signs of a further economic slowdown in Europe, a profound slow-down in Russia, and the lessened strategic value of oil as a political and military weapon. Consider the extraordinary effectiveness of Western sanctions against the Russian Invasion and Occupation of Ukraine. A Republican U.S. President would have ignored it with no more than passing bits of harsh language. The weak-kneed Republican response would have been to increase arms sales to the satellite nations that could afford to buy more. But Obama established a definitive global impact that has had a profound effect on the Russian economy; oil is the engine for its military aggression. A shrouded public in Russia will not understand that the invasion of Ukraine and Occupation of Crimea has little to do with national pride and a lot to do with creating vast luxuries for his network of fellow Russian billionaires. But controlled media cannot douse the growing hungers, unemployment, and shrinking purchasing power. The face of oil has changed in Russia, from the great fountain to a meager flow.
 In the U.S. drivers enjoy low priced gasoline, some ancillary consumer benefits may come in the form of lower production costs for goods and agriculture- intertwined with petroleum-based chemical processes- may also see some commodity price benefits. More than anything, the drain of petroleum prices was a drag on economic growth; along with insurance, petroleum siphoned much of the lifeblood of the U,S, economy, which can have substantial periods of consumer-driven expansion(--) or simply pay $4 at the pump and stagnate- we see growth and it is impelled by  lower fuel costs and increased discretionary spending. The face of oil markets has changed in America.
Lower prices may eventually shut down some new production, and this is the floor for oil prices; when production declines. However, as an insular market - we do not export crude oil- there is an insulating price factor too. Domestic shale oil can survive below $60 per barrel, and low prices will encourage greater efficiency.  There is a window of production efficiency that is a by-product of the rush to establish production, Not enough care to some, but certainly room for improvement in capturing useful substances that were initially cast aside as wastes.  While some projects will close and other will never open, the impact has been felt, and production will continue even as prices fall below $50 per barrel.
In the near future, as alternative energy continues to grow, many structural users of petroleum and natural gas will adjust their reliance on crude oil, electric cars too will have some immediate force, and then a far more pronounced market impact. The U.S. will once again face an opportunity to move further past oil. Whether hydrogen powered vehicle as envisioned by Toyota or national deployment of solar production, a set of panels on every roof, we will have opportunities to use national policies to further change the face of oil markets.

The XL Pipeline has become obsolete before its construction, and this is a telling impact of change. The dirty, difficult-to-process mountains of tar sands have no place in the world's markets, and only continue due to the influence of money on the U.S. Congress. Seen in the light of changed oil markets, it appears to be a nearly corrupt abrogation of national interests. To burden the world with un-needed, life choking levels of pollution, and to abuse the precious American heartland to deliver Canadian oil profits. Even in news and truth-sheltered and limited American public will begin to wonder why we would do such a thing, inflict such a scar on this beautiful country. They will wonder of the patriotism of the corporate Senators and Congress-persons, and they will wonder why we would make such an effort to raise oil prices, there is no cheap way to process tar sands.

Sources:
Chevron Shuts Down Arctic Deep Water
http://switchboard.nrdc.org/blogs/ddroitsch/reality_bites_chevron_indefini.html?utm_source=fb&utm_medium=post&utm_campaign=socialmedia

XL Pipeline is no longer financially sound
http://www.latimes.com/nation/la-na-keystone-20141216-story.html

http://www.politico.com/story/2014/12/oil-keystone-xl-113551.html

hydrogen cars from Toyota
http://www.businessweek.com/articles/2014-12-17/toyota-embraces-fuel-cell-cars-for-post-gasoline-future

Normalization With Cuba Is The Right Policy

Cuba sits on our southern doorstep, except for the common border countries; it is the most prominent nation in our geographic neighborhood with which we do not have diplomatic and commercial relationships.  We have watched for decades as we deployed our punitive policy against the Dictator Fidel Castro against the Cuban population. Castro’s brutal rule forced millions to flee, and it is for that reason the large Cuban community in the U.S. is largely comprised of people who have been victimized by Castro. History justifies the  Cuban community's deep resentment  but history also supports change. Isolation has not produced progress, and the people of Cuba suffer from our policies that truly are aimed at the political leadership there.

We have people in leadership in the United States who have been as brutal and doctrine driven as Castro. It is not a reach to suggest that an entire generation of Americans has been victimized by U.S. aggression in Iraq. Trillions of dollars wasted, hundreds of thousands of lives lost. Many thousands of American families suffered from the combat causalities there. It was reckless and misguided; it was brutal in its impact. The semblance of society that remains in Iraq is a sad tribute to the destruction of war.  There must be better ways to remove a few criminal dictators, and to provide free choice for a population. If there are, then they must begin with engagement.

Normalization Will Boost The U.S Economy
Opening travel and trade with Cuba will boost the U.S. economy. It will perhaps reduce one additional source of trade for the sanctioned Russian government. It will provide opportunities for cultural and educational enrichment for both nations. And it will improve economic opportunity for the current generations of Cuban people who have done nothing to deserve  international isolation.  Punishing the people for the perceived misdeeds of an autocratic government makes little sense. The Cuban people- by our theory of the world- are political captives.

Republican Critics Have a Reflex and No Reason
By all accounts, the Republican party leaders will condemn the policy because it is the Obama policy. They will ignore the President’s splendid role, and historic achievements  as the leader of Western Democracy and claim he has weakened the U.S. by dealing with a dictator.  These same people have promoted Putin’s war in Eastern Europe; soft-pedaled Bin Laden and Al Qaeda, and played politics with ISIL while they cut a swath of terror in the Middle East. They have, thus far, failed to advance a legislative policy to contain the global threat of an oil-rich ISIL. There is little reason to pay attention to them. To assert that they care for the poor in Cuba is clouded by the way they treat the poor in America. It is as if they forget, in the global stage, you are what you do, and not what you say.

U.S. Cubans Can Make a Difference
The Cuban ex-patriot community has skin n the game. They have family ties, cultural roots, and ultimately a love of their native country. Engagement will be an opportunity to reach the Cuban community and foster ideals that can bring change. Opening relations with Cuba is an opportunity for involvement and the Cuban American community, there is no group better positioned to influence democracy in Cuba.

FREEFALLING…Putin Style (Opinion)

The rouble has crashed, it has fallen to 80 then resuscitated to 70 to one dollar. The Russian government is unable to support the currency.   People rush to dump roubles and salvage goods for them as best they can. Rising interest rates seem to have failed to stabilize banks or the currency. While not admitting a financial panic, watching local behavior, the conclusion is hard to avoid. People are urgently trying to maintain themselves while the currency loses value before their eyes.

This is the true price of Putin’s invasion of Ukraine, it is a price paid by the average Russian citizen, their pensions and salaries becoming more and more meaningless as the consumerism they have grown to cherish is pushed further away from their reach. The people have been told by their leaders and the state-controlled media that the economy has been attacked by the West, and that they will prevail by being morally strong. The call to patriotism and pride resonates with the common people; they believe they will defeat the West. Some stories are heart warming reminders that people will find silver linings no matter how foolhardy their leader’s behaviors might be.  

Oil Prices Continue the Slide

The Russian plans for $95 per barrel benchmark prices have been buried beneath a gusher of U.S. oil production. Oil shale projects with low interest financing have proven influential and persistent despite low market prices. As benchmarks fall below $60, there are few signs of falling U.S. production, and the world still has an oversupply of crude. The ironies are not lost here. It resembles a Russian tragedy of its ages, and played out many times before. Whether by Czarists aristocrats, class and privilege conscious communists, or as now, billionaire oligarchs, the common people find the reasons to go on believing. They buy into a dream that they will never share, or, perhaps as in America, the poor feel it is their role- to be loyal to the rich. While appealing to patriotism, It appears that much of the international aggression is aimed at creating greater luxuries for the oligarchs.

The motto emblazoned across this prow of this sinking ship is that:  the Crimea is ours…. This is little comfort to the growing bottom economic layer where inflation and a crashed currency have made comfort less obtainable. It is not a substitute for the middle class preferences that keep them preoccupied with personal progress, it is not a substitute for the capital flight from Russia as investors have withheld or withdrawn nearly a trillion dollars in investment capacity from the Russian economy since the invasion of Ukraine. While Putin makes news by elaborate gestures to Turkey, China, and India this path to diversification is characterized by weakness and desperation. It is not the high-tech super warship cancelled by France, or the elaborate gas pipeline into central Europe.  All over the world, fast money moves are building new Russia-free linkages, and this is the true damage brought by Putin, he has set Russia on a path of isolation as the global economy grows exponentially around his military aggression.

The Powers of Political Media

Like the United States, Russia has a propaganda machine that feeds a constant stream of counter-reality to its people. In the United States for example, they were fed a multi-billion dollar deluge of ant-Obama, ISIS, and Ebola.  Many believed that the U.S. was under siege by Obama, ISIS and a flood of immigrants from Latin America, who also carried ISIS and Ebola.  The hysteria worked and despite a booming economy and amid excellent signs of economic recovery, the American people recently voted a radical, pro-corporate government into place that is determined to depress the middle-class. There is a similar dynamic in Russia, where news media have created a narrative that holds Obama to blame for Putin’s aggressions. While Putin may be building seaside resorts for his rich allies, the average Russian believes they are in a Holy test of will and patriotism.  The problem in both the U.S. and Russia is simply this, under media influence people support political causes that will limit progress and do permanent damage to their future prospects.

Sanctions Accelerate Damage

The world owes a debt of gratitude to President Obama’s leadership on Ukraine sanctions. The Obama response to the invasion of Ukraine marks a noticeable first: oil is not a fuel for military aggression.  The oil-money powered Russian military has not achieved its objectives so far. The simple and easy conquest of Ukraine has brought instead an economic maelstrom.  War is a failure of reason; historically, it has been a tool of base convenience and essential evil.  Sanctions are an effort to bring about reason, debate, and positive change. In Russia, there is a gravity–defying syndrome of patriotism and bravery in the face of growing economic chaos. The people, their hopes and political will, all committed to keeping the society moving forward. However, like any objects spinning in air, there is a good chance that, in the end, gravity will prevail.

Ukraine and the Wounded Russian Economy

The Ruble rose to 57 against the dollar, however the nation's reserve of 400 billion U.S. dollars seems dwarfed by more than 700 billion in debt to Western Banks. Because of the Ruble's slide into the 40 range and domestic inflation in the range of 9 percent, state pensions have lost buying power. But ordinary citizens will stand in line behind the powerful state corporations running oil, gas, and banking  who need all of the Russian $90 billion  rainy day fund to meet current demands.  The Russian economy teeters on the edge of recession, which in truth means it is already in recession and waits only the state of un-deniability to take hold.



Sanctions and Leadership

The Western sanctions led by the persistent vision of President Obama has delivered a telling blow to Russian international aggression. Sanctions have often been ridiculed by the international war machine because it does the work claimed by war business without the blood and other-worldly level of costs. The approximately $2 trillion adventure in Iraq under Bush  is a lingering cloud on the U.S. future, a mountain of debt that President Obama has also managed quite well. The U.S. has been on a growth path despite Republican efforts to stall the economy.

Russia in a Spiral

The triumphant messaging of State TV and Radio- Putin's personal version of the Republican Fox News in the U.S.- has turned to a more defiant tone, The nation must endure against the American onslaught. Putin may indeed launch new wars to deflect the economic suffering that has begun with thousands of layoffs in the health care sector. The new connection with China  has rapidly approaching limits; China cannot finance Russian ambitions nor relieve the current debt situation. In fact, China has scored record value on recent gas and oil contracts with Russia, that will become a factor in the event of rising oil prices.  Today's desperate Russian oil business deals are the lost economic opportunities in a rising economic cycle.



 Russian Privileged Elites

Russian aggression in the Ukraine and now also in Georgia has a theme identified by some experts as a focus on territory on the Black Sea.  A prevailing line of thought is that Putin has designs on creating luxury real estate development for the Oligarch class. A territory designed like the European Riviera's  to cater to Russian Millionaires.  This thought cannot penetrate the state-controlled media, but as casualties from warfare rise, eventually some Russians will wonder if the Putin ideal of a greater Russia is simply  a plan for greater luxury for a few Russians.  If so, is the loss of life among civilians and military a reasonable trade-off?  Russians who will never see the Black Sea luxuries asked to give the lives of their children, and  thousands of refugees from war zones like Donetsk made to surrender their places and ways of life.  It is a weighty sacrifice for the good of the rich, even in the calculus of Putin's New Russia.



 A Safer, Wiser Future

The overall impact of sanctions today can strengthen U.S. resolve to use economic strategies rather than leap into costly humanitarian disasters like the implosion of Iraq into the rise of ISIL. The Bush Doctrine of perpetual war and oil hegemony can, hopefully, fade into memory, except for the cautionary tale of greed and fall. In a more civilized future, the current use of Western economic tools will stand as a bold beginning. It has been an instructive lesson on alternative dispute resolution on an international scale, it is  a model for further development and expansion wherever possible.