If:
Oil imports fall by 2 million barrels into the U.S., the U.S. trucking distribution system would break down. Ok, maybe its 2.5 or even 3 million barrels... but it is somewhere in there. Hoarding takes over, stores empty, government rationing begins, things get really f**** up.... and it will be very hard to stuff the shaving cream back in the can. Just imagine what happens to the financial markets. Then the public pension funds for state and local government employees... and tax collections of sales and property taxes... then California defaults, or no one shows up when certain states want to roll over their debt... I could go on, but I am starting to sound like a doomer...
What would it take for that to come to pass? Not much, really. Algeria joins Libya in anarchy... and that just ain't that far removed from where these folks are at this very moment... Yemen and Iran convulse... now remind me again what Russia's incentive is to not hold back some Oil from the export market? Heck, the KSA does not even have to crack up and we can get there... and if they do, look the f***** out.
Nope... we really are in the soup. This really could happen. Of course, it could not happen, too... after all, somebody is taking the other side of the Long Oil trade... maybe the U.N. saves the day by enforcing a no fly zone over Libya and Algeria, the American Left parachutes into North Africa and proclaims "Change you can Believe In!", promising free healthcare, they hold hands with the mercenaries that killed over 1,000 Libyan citizens and sing "Kum Bi Ya" whilst their minions fan out across the country to convince the locals that all their problems will be solved if they will just recognize that American feminists have their best interests at heart and will demonstrate that with Oil funded Planned Parenthood clinics next to every mosque. Hey... ya never know...
On the other hand, maybe Iran's maniacal regime sees the writing (hangman's noose) on the wall and attempts to deflect the people's will (rage) by engaging Israel in hostilities.... look, I'm an imaginative guy... I can paint what-if scenarios all day... the fact is that the situation has become fluid and really freaking dangerous... and nobody saw this coming what, 8 weeks ago? Imagine where we might be in 8 weeks from now.
This is pretty serious, and it can go either way. Do the Right Thing.
7 comments:
One thing that might be important, although never discussed for some reason, is the religious makeup of KSA. The ruling Wahhabi inhabit mainly the center of the peninsula with other sunnis the west along with a pocket of shias. However, the oil bearing regions to the east are predominantly inhabited by the marginalized shias
Map , large map
Also, has anyone else noticed the difference in policy between Egypt and Libya? We were calling for Mubarak to step down once it became apparent he wasn’t going to be able to hang on; while on Libya we are going to address it with the UN, which means we want to look like we are doing something while accomplishing nothing. I’m wondering if it is because of the difference in the nature of the protests.
Both Darnah and Benghazi are terror havens that have seen islamist uprisings before. Amongst captured insurgents in Iraq Libyans are the second most numerous just behind behind the Saudis. Mainly members of The Libyan Fighting Group (LIFG) from the aforementioned cities. Perhaps, unlike Egypt, we aren’t worrying about radicalizing the protesters in Libya because they are already radicalized; and instead we are staying out of the way as our enemies slaughter our enemies, and vice versa.
Best,
Dan
I note that many blogs seem to think that oil goes up, then comes down again. It might not, for several reasons;
Saudi King Abdullah has just promised 37 billion dollars to defuse problems, not least related to 40% unemployment for 18-25 year olds. Who would you guess is going to pay for that?
If Gaddafi stands or falls, Libya will be spending fortunes; on internal security, or calming the masses, or providing all those things a new democracy needs,so the Export Land Model will kick in. Net exports will plunge for years.
In fact ALL the countries in the region and all the oil producers will spend more at home; they have to, either way.
Then there are the other vulnerable countires, also running scared; even Zimbabwe has cracked down and arrested some intellectuals who met to discuss what was happening in the M.E! What happens if Nigeria gets on board with all this? The Delta region has been in turmoil for years.
Then we haven't even started the other commodities......
BTW, its interesting to see the increased spread between Brent and West Texas crude; is that because Europe is more vulnerable to the M.E. situation? Or because the U.S. has falling demand? I see $117 for Brent this morning in Europe!!!
Maybe those special someones in MENA know something we don't.
Perhaps Iran really is only interested in nuke reactors for energy. Perhaps the fields are drier than some suspect. Perhaps there was really no long term need to control Iraq's production so we begin to pull out and let China under bid us for what little is left.
If the gig is all but up maybe it is time for them to move and consolidate.
Or maybe it is all BS. It is getting very interesting fast however.
It certainly looks like almost every major player in the world is "prepping" but the West and I find that a little bit disconcerting.
Donal,
A pipeline from Canada to Cushing, Oklahoma was just completed. Oil is running into Cushing faster than it can be shipped out, creating a local glut. WTI is priced at Cushing. There is a pipeline under construction to the Gulf of Mexico. When it is complete, prices will normalize.
Regards,
Coal Guy
Coal guy,
Ya lost me. We already have a product pipeline from Huston on to Lake Charles then on to Cushing; as well as several petroleum pipelines running from Huston to Cushing via Midland. What difference will another one make?
Best,
Dan
I'm told there is more capacity in than out right now. It is easy for me to be wrong.
Regards,
Coal Guy
They were built with the assumption of one way flow but I would assume that the pipelines could flow in either direction. at the very least it shouldn’t take more than adding a few booster pumps to maintain pressure. However, sometimes seemingly simple things get complicated in a hurry so who knows.
Best,
Dan
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