OPEC cuts, White House panics
and how to make the energy crisis worse
The writing was on the wall when it came to today’s OPEC+ meeting. It was pretty obvious that they were going to cut. They had struggled to meet their production goals for several months.
They were also adamant that this was going to be an in-person meeting. Here’s the breakdown of where the cuts will occur.
Needless to say, this has really put the Biden administration in a panic.
“The Biden administration launched a full-scale pressure campaign in a last-ditch effort to dissuade Middle Eastern allies from dramatically cutting oil production, according to multiple sources familiar with the matter.”
…
“Some of the draft talking points circulated by the White House to the Treasury Department on Monday that were obtained by CNN framed the prospect of a production cut as a "total disaster" and warned that it could be taken as a "hostile act."
This is nothing short of a disaster for the White House. They’ve been draining the SPR like madmen in an attempt to get gas prices down before the midterms.
It is my view that OPEC made these cuts for three reasons. The first is that they weren’t able to make their production quotas to begin with. Second, they see an opportunity to improve the price for their product and are making moves to capture that opportunity. This is were that SPR release is really going to backfire on the Biden administration.
Finally, OPEC wants to assert themselves in the “big” game. They see what is going on with the Fed, Davos, the neocons, and the ECB. They want to remind all the parties involved that they have a seat at the world table and are to be respected.
Now the stage is set for higher oil prices. There are a few options that could alleviate this. First, the US could open up more drilling permits for oil E&P companies. They could extend special financing programs to refiners to expand capacity. They could also suspend RIN compliance. Unfortunately, we all know that none of those things are going to happen.
There are also a few options to make this crisis worse. The EU seems to have jumped out into the lead by declaring a windfall profits tax.
“European Union countries agreed on Friday to impose emergency tax levies on energy firms’ windfall profits.
The leaders also began talks on a possible bloc-wide gas price cap.”
In addition, there are a few US states attempting to provide stimulus money to put more money into the hands of consumers.
“Recipients of California’s Middle Class Tax Refund (MCTR) will start to receive checks as early as Oct. 7, according to the State of California Franchise Tax Board.”
…
“Hawaii’s income-based Act 115 Refund provides checks for $100 or $300 depending on filing status and federally adjusted gross income.”
…
“To receive their 2022 one-time tax rebate of $250 for single filers and $500 for joint filers, Virginia residents must have had a tax liability for tax year 2021. For those eligible who filed by Sep. 5, you should receive your rebate via direct deposit or a mailed paper check by Oct. 31, per the Virginia Tax site.”
This all points to increased demand and lower supply. We are also beginning to see signs that the Chinese economy may be ditching the “zero-covid” rules. There was much chatter about mask-less CCP members at the “National Day gathering”.
This morning Kuppy put out a great article detailing “OPEC’s Counterattack”. I highly recommend a read. He has some great memes and insights.
“…the Fed can crash global GDP in their fight against oil, but OPEC wields a much larger stick and will cut production even faster. In fact, OPEC will DO WHATEVER IT TAKES if the Fed continues on this path. OPEC has drawn a line under the price of oil and told the Fed that it’s wasting its time. OPEC controls the price of oil and oil is the world’s Central Banker, not the Fed.”
We are entering an era of perpetual economic warfare