Will the Oil Boom Last? Watch the US / Saudi relationship
How long will the oil boom last? How much of an impact will Russian isolation have on the oil market and overall inflation? Biden has been cool to the Saudi's since he took office, after Trump cultivated an unusually close relationship with them. Unlike Biden, Trump seemed to have a predatory view of oil prices. I mean, he would do whatever it took to keep gas cheap.
The longer this debacle (and its aftermath) goes on in Ukraine the more opportunity and incentive the US will have to tank the oil market. With such a large portion of GDP made up of oil, Russia is very susceptible to a deflationary spiral in oil cost. To a certain extent, oil is financing Russia's military operation since the more trouble they cause, the more their primary export is worth. While the initial inclination of the US is to isolate Russia and its oil sales this move may benefit Russia to some extent, since supply in the world will be lower they'll still likely be able to make deals to move their oil through neutral countries. However, the more this bites at the American inflation problem, the more pressure there will be to increase output. Most of the incentives will run toward increasing output; Russia will hurt more if its primary export drastically decreases in value, and the move will alleviate some inflation in western countries. After all, who will even remember why Biden has shunned the Saudis? When gas is $5+ will you cry about Yemen, especially if you can get cheaper gas and hurt Russia at the same time? Will you think of Khashoggi if it helps Ukraine? Your moral scruples will be intact and gas can be cheaper! And wtf the Climate? Who cares. That is the political calculus of the next 2 years.
When you see Washington getting closer to the Saudis then be skeptical of oil prices. They can really make Russia pay this way. Of course, domestic producers have been betrayed so much over the past decade that they won't just come back online; they'll need assurances.
Also, just for 'fun', here are some more predictions (more like possibilities):
- Without a critical mass Belarussian forces joining, Russia will not take Kyiv and the government will remain intact, but will hold the majority of the eastern country.
- Even if Russia can take Kyiv on it's own, it will take so long that it will undermine its bargaining position and be a strategic (at least politically) defeat.
- Trump will at least make a statement about offering to 'broker' a peace of some sort. No one will accept.
- Inflation will get bad enough that the Biden admin will treat with the Saudi's and try to smooth over their bad relationship in order to convince them to put pressure on oil prices.
- The US will contemplate how they can engender the same resistance morale in Taiwan and there will be talk of resurrecting something like the TPP (Obama era) in order to provide a coalition to oppose China economically.
The longer this debacle (and its aftermath) goes on in Ukraine the more opportunity and incentive the US will have to tank the oil market. With such a large portion of GDP made up of oil, Russia is very susceptible to a deflationary spiral in oil cost. To a certain extent, oil is financing Russia's military operation since the more trouble they cause, the more their primary export is worth. While the initial inclination of the US is to isolate Russia and its oil sales this move may benefit Russia to some extent, since supply in the world will be lower they'll still likely be able to make deals to move their oil through neutral countries. However, the more this bites at the American inflation problem, the more pressure there will be to increase output. Most of the incentives will run toward increasing output; Russia will hurt more if its primary export drastically decreases in value, and the move will alleviate some inflation in western countries. After all, who will even remember why Biden has shunned the Saudis? When gas is $5+ will you cry about Yemen, especially if you can get cheaper gas and hurt Russia at the same time? Will you think of Khashoggi if it helps Ukraine? Your moral scruples will be intact and gas can be cheaper! And wtf the Climate? Who cares. That is the political calculus of the next 2 years.
When you see Washington getting closer to the Saudis then be skeptical of oil prices. They can really make Russia pay this way. Of course, domestic producers have been betrayed so much over the past decade that they won't just come back online; they'll need assurances.
Also, just for 'fun', here are some more predictions (more like possibilities):
- Without a critical mass Belarussian forces joining, Russia will not take Kyiv and the government will remain intact, but will hold the majority of the eastern country.
- Even if Russia can take Kyiv on it's own, it will take so long that it will undermine its bargaining position and be a strategic (at least politically) defeat.
- Trump will at least make a statement about offering to 'broker' a peace of some sort. No one will accept.
- Inflation will get bad enough that the Biden admin will treat with the Saudi's and try to smooth over their bad relationship in order to convince them to put pressure on oil prices.
- The US will contemplate how they can engender the same resistance morale in Taiwan and there will be talk of resurrecting something like the TPP (Obama era) in order to provide a coalition to oppose China economically.