The oil market is facing a major crisis with limited options for world leaders to correct the mess. Reuters. Global supplies are falling steadily as production is unable to keep up with demand. This will likely lead to a major depression if efforts aren't taken to lower prices but there are few options on the table. One of those options is to increase production, but most OPEC nations are already at or near full production. Shale producers will increase production but are unlikely to make up the difference. The only other option is to lift energy sanctions on countries such as Iran, Venezuela and Russia, which would require a major foreign policy change.
My Comment:
It certainly looks like America is facing a reckoning when it comes to energy prices. Prices are already out of control with gas averaging around $5 a gallon with diesel being even more expensive. This has had a major impact on basically every facet of economic life. I know I have cut back on my spending and canceled tentative vacation plans this fall and I doubt I am the only one.
This is largely a man-made crisis by the Biden administration and his European allies. The sanctions on Russian energy has caused prices to explode, though they were increasing even before the war in Ukraine. It's not so much that the sanctions are causing this but the fact that there was no plan for some kind of alternative.
And I don't think there is much that can be done as far as OPEC is concerned. The above video was a hot mic moment between Biden and French President Emmanuel Macron saying that Saudi Arabia is about at peak production already. Most OPEC nations are as well and it does not seem like that is a solution. Plus, I have to point out, the Saudis absolutely despise Biden, to the point where they haven't been taking his phone calls. At this point they probably want to see us collapse.
The other options have a better chance of working but I don't see them working out. Lifting sanctions on Russia would greatly increase supply and would solve much of the problem, but I can't see Biden ever doing that even if the war ends tomorrow. And that's considering the fact that fuel sanctions have actually helped Russia's economy. They haven't had trouble finding new buyers for their oil, and though they aren't selling as much they are making bank from it. Ironically, lifting sanctions would do a ton to hurt the Russian economy as it would dramatically lower prices.
Lifting sanctions on Iran and Venezuela would help as well, but that seems politically impossible. Efforts have been made but nothing much has come from it. There is also the fact that Venezuela would take forever to ramp up production. They have nationalized their oil industry and that action left it in shambles. Long term it would help but in the short term it isn't going to do much.
Domestic production could have been the solution, but we haven't even started to ramp up production. Even if we did it today it wouldn't help for a year or so. The problem would be solved but again, it's a long term solution, not a short term one.
But Biden would never go for it. He is beholden to the climate change industry and isn't going to stand up to them anytime soon. He's in the cult of global warming and they have wanted to destroy the US oil industry for years now and they aren't going to give it up now while they are on the verge of success.
Things are going to get ugly and get ugly soon. I don't think we will see gas rationing like we have been seeing in Sri Lanka, but I don't think that is impossible. At the very least we are going to see skyrocketing prices and we will likely see a recession. The Biden Admin is unlikely to take the steps to reverse this and it's too late anyways.
Also keep in mind that the government's silver bullet to this mess has already been fired. The Strategic Oil Reserve is already being drained and will probably run out this fall. Releasing it did not do much to end the crisis but it did make it better, if it wasn't done we might already be in a major recession..
So things are going to get worse before they get better. I am expecting prices to go back up soon, past the record levels they have already reached. The fever will eventually break when the prices become so high that people simply stop buying things, but that is a ways off, and that recession will have its own major problems.
All of this makes me wonder if the peak oil people were right in the end. They got proven wrong in the past due to the revolution that was fracking, but I don't know if we have another technological breakthrough in the pipeline. Eventually we will run out of oil, so our current situation might be the status quo at best...
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