Monday, July 23, 2018



Anonymous Anonymous said...

First lol.

Second, one thing about Trump's effectiveness is diversion of criticism to himself as a person. I bet 90% of the criticism he gets is for using caps lock, because it's an internet faux pax. But the real concern is the JCPOA withdrawal was really poorly considered in terms of it's secondary effects. Not because he's ratcheting the chance of war (I think a decent measure of the probability of that is quite low), but he greatly underestimated the supply risk of destroying Iranian oil exports, which is what they're actually fighting over. Prior to the withdrawal, the oil market was actually pretty undersupplied, and worse, the pipeline of capital devoted to new production has completely dried up. Basically we have been walking into a supply crunch.

Sanctions on Iran pulled the supply crunch into the present, and since it happened, Trump has been frantically trying to have his cake and eat it too. He's tried to get Saudi to increase production (but they really can't) and he's even floated an SPR release, which would really be the ultimate admission of failure, as we'd be selling our reserves on a supply crunch of our own making. It'll be very interesting to see how it plays out.

11:39 AM  
Blogger Winston Smith said...

Thanks Anon, I was only vaguely aware of wasn't in focus for me at all.

I did not hear him mention utilizing the SPR. Is this a real possibility?

11:48 AM  
Anonymous Anonymous said...

It's being considered.

There's active opposition to it because current conditions do not quite satisfy the emergency situation normally seen in SPR releases (Hurricane Katrina, Arab Spring collapse of Libya, Invasion of Kuwait, etc). But a significant drop in Iranian exports, which will likely hit around Sept-Nov under current policy conditions, will make oil markets dangerously tight, and Cushing storage is already really damn low, so we might hit emergency levels whether we like it or not.

12:42 PM  
Anonymous Anonymous said...

I should note this is not entirely Trump's fault. He was working under poor information generated by the EIA and IEA saying the oil market was balanced to oversupply (because of incoming shale growth). This was always bogus, and could be easily refuted by looking at plummeting storage levels. Once Iran sanctions hit, the complacency lifted and they realized things were really in bad shape supply-wise.

12:46 PM  

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