US INFLATION / Oil prices, from Opec + and G7 two bitter mouthfuls for Biden

US INFLATION / Oil prices, from Opec + and G7 two bitter mouthfuls for Biden
US INFLATION / Oil prices, from Opec + and G7 two bitter mouthfuls for Biden
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Having done the quantitative framing for the entire planet, let us now examine why oil is the main and most important factor in US inflation.

Let’s start by saying that the US economy’s gross demand for barrels per day is equal to 20.5 million barrels per day (1 barrel is approximately 155 liters); 10.5 million on average is the daily production of barrels of the USA, which makes them part of the triad, together with Saudi Arabia and Russia, of those nations that have achieved on average a daily production exceeding 10 million barrels. Just to remember, in the early 2000s the US was able to produce up to 5 million barrels a day from the fields of Alaska and the Gulf of Mexico, then with the shale gas revolution they managed to become net exporters of gas and bring oil production from 5 million barrels a day to 10 million; it remains therefore that about half of barrels are missing to satisfy the rest of the demand, which obviously must be imported.

The luck of the US is that 3.5-4 million barrels of imports come from Canada, for 1 million the supply comes from Mexico, so in the end, 3-4 million barrels of imports come from the rest of the world, where the importance of the Persian Gulf countries is evident and, as previously mentioned, before the sanctions were effective, 700/800 thousand barrels a day from Russia. We then talked about gross demand, because the US exports about 3 million refined barrels (ie diesel and gasoline) to the world.

The numbers give us a clear and complete scenario of the situation: although the USA are net exporters of 150/200 billion cubic meters of gas deriving from shale oil production, given the technological impossibility of this fuel to replace oil in all its applications, the crude that America lacks must be imported from outside. Having, however, that in today’s international context, Opec + production is driven by reasons that are not only strictly economic, oil prices are approximately 100% higher than the ordinary price of 50-55 dollars per barrel WTI, and these prices have an impact on the American domestic market, because it is not possible to isolate oneself from the prices of the factors that are imported.

For this reason, if the United States and Russia do not reach a new strategic agreement this autumn / winter, there is a risk of seeing, around February / March, a trend rate of inflation of 13% in the United States. Moreover, OPEC + through its secretary, a Saudi prince, duly warned the United States to put an end to the speculation on Brent and WTI oil futures conducted under the direction of the American Treasury to bring down prices, on pain of the fact that the OPEC + will significantly reduce production in the presence of volatile and harmful demand (operations under the direction of the US Treasury).

Unfortunately, the decision of the G7 on 2 September to apply a price cap scheme on exports of Russian crude oil from 5 December should not be overlooked. The deep reasons, however, come out not from President Biden’s formal speeches, who reiterate that in this way the dynamics of the gigantic Moscow surpluses with which he then finances the war in Ukraine will be ended, but from the declarations of the US Treasury Secretary, Yellen, who candidly stated that the Russian oil price cap is the most powerful tool against the current European and American inflation, so that the role of the Fed becomes clear in this whole scenario.

Null, and it is null, because the Fed can do nothing against supply inflation, as also the Nobel laureate Stiglitz argues, and among other things, even if it had been a demand-only inflation, the presence of inflation rates in the area of 9% implied a large loss of effectiveness and linearity of the increase in interest rates alone to decrease it.

But the icing on the cake, which leaves truly incredulous and astonished, is that in the final declarations of the G7 (after all, everyone also had the opportunity to hear the EU Commissioner, Gentiloni), it is candidly admitted that for the effective functioning of this measure requires the broadest possible consensus and membership of all countries outside the G7.

Leaving aside the tired and stale play of the European Union to a script written for the use and consumption of the Americans, I offer you the list of countries that must join only to hope that the price ceiling for Russian oil starts: China, India, Brazil , Indonesia, Iran, Pakistan, Turkey, Argentina, Mexico, Venezuela, Algeria, Egypt, Zaire, South Africa, Bangladesh, Persian Gulf countries and Nigeria

In my opinion, in Moscow, behind the angry and retaliatory official statements, they laugh and laugh big, but they do not scruple in implementing increasing retaliation: the beginning is the failure to restart North Stream 1, but imagine a statement in which Moscow claims to cut crude oil production by 2 million barrels a day. And in fact, on 5 September, the OPEC + decision came to cut the daily production by 100 thousand barrels a day.

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It is useless to give the numbers of what is happening, rather it is better to focus on the quality of what is happening: dark, complex scenarios, wars in every dimension, will to power and lack of balance.

In other words, the G7 decision on the Russian oil price cap formally marks the end of globalization. And it goes without saying that the price cap will be a total failure.

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The article is in Italian

Tags: INFLATION Oil prices Opec bitter mouthfuls Biden

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