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The Geopolitical Forces Driving Today’s Oil Market

The Geopolitical Forces Driving Today’s Oil Market

Authored by Simon Watkins via OilPrice.com,

There are three key determinants of how high…

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The Geopolitical Forces Driving Today's Oil Market

Authored by Simon Watkins via OilPrice.com,

There are three key determinants of how high oil prices will go from here.

  • First, whether it is in the financial interests of the key players who have been pushing them higher to keep doing so.

  • Second, whether it is in their geopolitical interests to keep doing so.

  • And third, what other oil market players negatively affected by rising oil prices can do to bring them lower again.

The first determinant is that it remains absolutely in the financial interests of Saudi Arabia, Russia, and the rest of the OPEC+ cartel to keep oil prices going up – the higher the better.

Over and above the nonsense about balancing oil markets, the real reason that Saudi Arabia has for driving oil prices higher is simply that it needs the money. The money from oil (and from its hydrocarbons sector more widely) is the foundation stone of all funding for the Saudi state and for the ongoing power of the Royal Family, as analyzed in full in my new book on the new global oil market order. It is used to effectively subsidize large swathes of the economy, without which employment would fall, taxes would rise, and the social benefits of housing, education, and health, would cease to function properly. This money is funneled not just directly into subsidies for these areas but also into major projects that have nothing to do with the oil sector from which the funds emanated. Examples of such projects include developing a US$5 billion ship repair and building complex on the East Coast, creating the King Abdullah University of Science and Technology, and the US$500 billion Neom project. Any failure to keep delivering on these massive socio-economic projects funded almost entirely from hydrocarbon revenues would dramatically increase the likelihood of the removal of the Royal Family, and they know it. Consequently, the official fiscal breakeven oil price of US$78 per barrel (pb) of Brent for Saudi Arabia is irrelevant. In practice - as the fiscal breakeven oil price is the minimum price per barrel that an oil-exporting country needs to meet its expected spending needs while balancing its official budget - its true fiscal breakeven oil price has no set limit. The same considerations apply to virtually all other members of the OPEC grouping of OPEC+.

For the key player in the ‘+’ part of OPEC+, Russia, the same irrelevance applies to the official fiscal breakeven price. For around 20 years, it had a fiscal breakeven oil price of around US$40 pb. Following its invasion of Ukraine on 24 February 2022, this jumped to an official US$115 pb. Unofficially, though, as wars do not adhere to easily quantifiable and strictly adhered to budgets, the fiscal breakeven oil price is whatever President Vladimir Putin thinks it should be at any given moment. An additional element at play in Russia’s support for ever-higher oil prices is that it undercuts the oil prices offered by Saudi Arabia and other OPEC+ members with direct deals done with major buyers, such as China – so, again, the higher the oil price the better for it. Russia began to determinedly push Saudi Arabia and OPEC+ members into driving oil prices higher from the moment that a general US$60 pb oil price cap on Russian oil was introduced in December 2022. The higher OPEC+ members push the oil price, the higher Russia can secretly sell its oil above that US$60 pb cap. 

On the second determinant, though, there is a key geopolitical reason that such oil price rises cannot keep going on forever, and this is China – the core geopolitical ally of both Saudi Arabia and Russia.

Part of the reason why China will not continue to support oil price rises from OPEC+ is that it is a net importer of oil, gas, and petrochemicals, so higher prices negatively affect its economy too. Even now, its recovery from three years of over-tightly managed Covid is in question, and continued rises in energy prices will not help this. Certainly, it enjoys deeply discounted oil from Russia and from several other OPEC+ members, including Iran, Iraq, and even Saudi Arabia from time to time, but there is a limit on how much more prices can be increased without China really beginning to feel the economic pinch, even with discounts applied. China, though, will also feel enormous economic fallout from higher energy prices indirectly through the effect they have on the economies of the West – and these remain its key export bloc. The U.S., even with elements of the ongoing Trade War still in place, accounts for over 16 percent of China’s export revenues on its own. According to a senior source in the European Union’s (E.U.) energy security complex, and another source in a similar role in the U.S., the economic damage to China – directly through its own energy imports and indirectly through damage to the economies of its key export markets in the West – would dangerously increase if the Brent oil price remained over US$90-95 pb beyond the end of this year.

The third key determinant is that other oil market players do have options open to them to bring oil prices down again.

Over and above the plans in place to bring Iran’s 3 million barrels per day (bpd) back into the oil market through a new version of the ‘nuclear deal’, other supply increases are also in the offing. According to the U.S. Energy Information Administration (EIA), combined non-OPEC producers are expected to increase production by 2.1 million bpd in 2023 and 1.2 million bpd in 2024. The agency expects U.S. oil production to exceed 12.9 million bpd of monthly crude production for the first time in late 2023 and expects output growth to continue into 2024 to put U.S. crude production at 13.09 million bpd. Other major non-OPEC increases are set to come from Brazil, Canada, Guyana, and Norway, according to the agency. The ongoing recalibration of demand towards gas is also likely to reduce demand for oil, and therefore help to bring down prices going forward as well.

An additional weapon for the U.S. to use against the OPEC group of OPEC+ is the final ratification of the ‘No Oil Producing and Exporting Cartels’ (NOPEC) bill. This legislation would open the way for sovereign governments to be sued for predatory pricing and any failure to comply with the U.S.’s antitrust laws. OPEC is a de facto cartel, Saudi Arabia is its de facto leader, and Saudi Aramco is Saudi Arabia’s key oil company. The enactment of NOPEC would mean that trading in all Saudi Aramco’s products – including oil – would be subject to the antitrust legislation, meaning the prohibition of sales in U.S. dollars. It would also mean the eventual break-up of Aramco into smaller constituent companies that are not capable of influencing the oil price. Adding to the unwillingness of the U.S. and its allies to tolerate further rises in oil prices is that several major European countries – including Germany - have been investing substantially more in non-fossil technology, which has been seen in a notable decline in their OPEC+ dependency.

The oil price being targeted within the next six months by the West, according to the E.U. and U.S. energy security sources spoken to exclusively by Oilprice.com last week, is a maximum of US$75-80 pb of Brent. During the presidency of Donald Trump, this was the top of the range analyzed in depth in my new book, as it was seen as the price after which economic threat becomes apparent to the U.S. and its allies, and a political threat looms for sitting U.S. presidents. The floor of the range was a Brent price of US$40-45 pb, which was regarded as the price at which U.S. shale oil producers can survive and make decent profits. When Saudi Arabia (with the help of Russia) was pushing oil prices up over the US$80 pb of Brent level in the second half of 2018, Trump in a speech before the United Nations General Assembly said: “OPEC and OPEC nations are, as usual, ripping off the rest of the world, and I don’t like it. […] We defend many of these nations for nothing, and then they take advantage of us by giving us high oil prices. Not good. We want them to stop raising prices. We want them to start lowering prices and they must contribute substantially to military protection from now on.” In short, during Trump’s entire presidency, the US$80 pb oil price ceiling was breached only once for a period of around three weeks toward the end of September 2018 to the middle of that October.

Tyler Durden Tue, 10/03/2023 - 17:25

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Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super…

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Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.

(Left) President Joe Biden delivers remarks on canceling student debt at Culver City Julian Dixon Library in Culver City, Calif., on Feb. 21, 2024. (Right) Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas in Las Vegas, Nev., on Jan. 27, 2024. (Mario Tama/Getty Images; David Becker/Getty Images)

With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.

The primary results have spotlighted some of both nominees’ weaknesses.

Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.

Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).

Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.

When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.

High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.

There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.

Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.

Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.

The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.

More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.

St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.

Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.

In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.

2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.

Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.

Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sat, 03/09/2024 - 23:20

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The…

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.

Doses of a COVID-19 vaccine in Washington in a file image. (Jacquelyn Martin/Pool/AFP via Getty Images)

VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”

He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”

Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”

The agency searched for such data and did not find any.

The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.

“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.

The VA’s mandate remains in place to this day.

The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.

There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.

President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.

President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.

“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.

Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.

By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.

The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.

“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.

This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”

The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.

A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.

Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”

Tyler Durden Sat, 03/09/2024 - 22:10

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate…

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.

(Shutterstock)

A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.

Long COVID Patients Have Low Iron Levels

Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.

In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.

According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.

But it can jeopardize a person’s recovery.

When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”

The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.

It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”

The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.

1 in 5 Still Affected by Long COVID

COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.

Tyler Durden Sat, 03/09/2024 - 12:50

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