What's fair in love and war?

Investment Analysis Clubs Macro Economic Trends and Risks
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OK - so I’ll leave the love part of the discussion for another day but the US, UK and EU are in some sort of a limited war with rules that seem to be “fuzzy” with Russia over their invasion of Ukraine.

We (collectively) are supplying Ukraine with weapons of a limited nature designed to make it nearly impossible for them to use the weapons for deep penetration into Russia itself. We have applied a number of random sanctions, some of which are porous, some of them counterproductive and some not addressing the issues at hand.

The name of the game is “chicken”. Both sides have the ability to incinerate the others, so while they can shadowbox, and feign, it is important to both that they limit the fear or disruption that they overtly cause in those on the other side.

In the meantime:

More than a dozen public-facing airport websites, including those for some of the nation’s largest airports, appeared inaccessible Monday morning, and Russian-speaking hackers claimed responsibility.

The group claimed responsibility last week for knocking offline US state governments websites. Killnet is blamed for briefly downing a US Congress website in July and for cyberattacks on organizations in Lithuania after the country blocked shipment of goods to the Russian enclave of Kaliningrad in June.

In addition, OPEC has shown its “true colors” (pretty obvious for decades, considering its membership) by structuring pricing to clearly benefit Russia (currently in a leadership position in the cartel) while providing a political headwind to the current US administration which is not only considered the enemy of Russia, but the Saudis as well (as well as the Venezuelans, Iraqis and Iranians). So we can grovel at the feet of the Saudi Crown Prince (as his personal entertainment) or beg the Venezuelans for assistance, but we can expect rising energy costs and inflation as retaliation for our sanctions on Russia.

So the Russians are clearly letting us know that they can play with our cyber services without making an attempt to be overly destructive. What is missing in our understanding what is happening is what retaliation the US et al is taking - and while Russia can practice deniability by saying the attacks on the US are by independent third parties, can we do the same?

While presumably our government understands the game being played, there are many aspects which are opaque to the outside observer.

As Ukraine wars with Russia as our proxy, Russia is fighting back. The question is how far they will attempt to take things and what we will do in response - neither side wanting to push the other over the line of a direct military confrontation al a World War III.

Jeff

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The thought came to me that, like the indications that Russia could, if they wanted to, place significant strain on our domestic cyber infrastructure, there have recently been cases of sabotage to two electric cables causing blackouts in northern Germany and leaks in the Nord Stream pipelines causing concerns in the Baltic area, Russia is reminding everyone not to mess with them.

It’s like the lady who sat in the dentist’s chair. As he leaned over to start to poke at her, she grabbed him by his “private parts”, Shocked, he asked “What did you do that for”? to which she answered “We’re not going to hurt each other are we”?

Jeff

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…or we can free-up our own energy resources and companies to make production of oil and gas here do exactly what it did last time dramatically increase production and drive prices down…hurting Russian income from energy, and our energy production is cleaner than the foreign sources.

We are amazingly hypocritical and downright stupid if we choose Venezuelan or Iranian oil production over US sources.

Cheers!
Murph

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I’m wondering if you have specifics rather than platitudes.

I ask because I have read that oil companies are sitting on 9,000 unused oil leases which they could open up at any time, but choose not to. Whether that is for economic reasons, or they have just bought the leases to “park them” to keep them out of competitors hands I do not know, but it seems that the issue is not the government somehow mismanaging, but corporations not working in the public interest. (5,000 of those 9,000 were issued in 2021 alone, the most in a single year in decades.)

Since it takes 4 years, on average, for a lease to begin producing - if the company exploits it at all - it would seem that “opening up” will do nothing in the short term. A faster way to energy independence would be to massively ramp up certain renewables, and use them to substitute for fossil fuels being burned to produce electricity.

You can put up a solar farm in a year. A windmill farm in two, depending on location. (Midwest farmland is cheap and pretty exploitable. Best of all, at least for wind power, you don’t lost any sizable fraction of farmland in the deal.)

None of this will solve the problem, but then neither will airy complaints about “freeing up our own energy resources”, which as best I can tell, we have already done.

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Jeff,

I it is my experience that most people targeted by a professional intelligence operation will be compromised. As every U. S. Government employee has had their personal file compromised in a cyber attack, every department in every place in the country is vulnerable.

We could see massive clandestine attacks into the heart of the USA if state actors chose.

Cheers
Qazulight

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This is politics. Also it is not “over”. It is not an either/or.

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The number of leases being held is a red herring and you know it, Goofy.

The problem is the time and costs to bring the leases to production, said time and costs being made more onerous by the current administration.

There is a ton of info out there ( as you know) on this issue.

Please fetch your own rocks. :wink:

Cheers!
Murph

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Of course producing electricity to reduce oil usage only works if vast numbers of the EV fence sitters and EV skeptics go out and buy an EV in the next year. I doubt that there is enough EV production capacity to matter in the next year.

(Could also be people replacing NG furnaces with heat pumps, etc.)

Mike

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What makes you think we are doing that? The US is a The US is a net oil exporter. We produce more than we consume. However, oil is a fungible commodity and the price is set on the world market. If Saudi Arabia and Putin decide to cut back on production, we feel it at the pump. Same thing in Canada, their gas prices move in lockstep with ours, and they’ve an oil independent for decades. See this interactive chart at Gas Buddy for details.

What you won’t hear on Foxnews is the real limitation on increasing US oil and gas production had 0.0 to do with leasing, although that’s the narrative they are selling. The true limitation is financing. Banks and private equity lost boatloads of money in fracking and they are not eager to repeat the experiment. Approximately 400 of the 500 private fracking companies are losing money and are unlikely ever to repay their debts.

Unless there is a sustained, long term increase in oil prices, the economics don’t support significant new oil and gas development in the United States. This was all playing out well before the last election, by the way.

Edit: Thank Odin for an edit button!

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I do not perceive that there is a macro economic model that would predict sustained long term increases in oil
prices. Prices above economically neutral (my estimate is about 60 dollars per barrel in today’s dollars) will slow the economy driving down demand, increase production marginally, and shift consumption to other forms of energy and increase energy efficiency across the economy.

These reactions will drive the price of oil down and so sustained high prices simply not posible.

Cheers
Qazulight

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We are all talking about oil at its highs. And past its previous highs in the $130s.

Next year wont be good for equities or commodities. It will be good for consumers.

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I :heart: the edit button too!!

But, who’s Odin? Inquiring minds want to know!!!

'38Packard

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Who is Odin? WHO IS ODIN??!!!???

Blasphemy! Clearly you need to watch more Marvel movies. :smiley:

(Norse “King” of gods, father of Thor and Loki)

–Peter

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I clearly need to watch more movies. Period.

'38Packard

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I don’t pretend to know how it really works. But doesn’t the world market set the price (instantly) just for the oil sold on the margins? Many suppliers and consumers (refineries?) probably have contracted prices, at least in the short to medium term.

Mike

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Besides having a day of the week named after him, he runs Valhalla, is the father of Thor, we have a major holiday celebrating him, and he’s the deity of frustrated message board users.

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@syke6 - Thanks for the info - never knew! That’s why I come here. To learn and be exposed to stuff I wouldn’t normally be exposed to. This place “broadens my horizons”.

I hope to broaden some folks horizons once in a while too :wink:

'38Packard

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Funny, I do not go to movies. I like to exclude popular culture. The lowest common denominator is good for most folks.

I do not read either. No TV.

I socialize a lot. Women over 50 are always around. :smiley:

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So, where do they usually hang out?

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Some 50-odd years ago, a couple CIA ops were blown. The CIA became a joke overnight as a gang that can’t do anything right. One sage pointed out at that time, that we never hear about their really successful operations. How long did it take to declassify the CIA’s role in breaking the embassy employees out of Tehran? Thirty years? Back when it happened, all I heard was that it was a 100% Canadian op.

If Putin’s interests were soundly honked up by CIA hackers, would he admit it? Would the US admit it, as admitting it would disclose USian capabilities?

Steve

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