- History may not repeat, but it rhymes.
- Theodor Reik or Mark Twain (confusion does not distract the wit).
Recession Delayed
It is no secret that the world is losing 20% of the economic commodity, oil due to the Iran / US-Israel conflict. The big summit between the US and China did little to nothing to change the outlook except to agree that no nation can place a toll on waterways. So, how are nations coping under the stress of this important supply chain disruption?
Strategic Oil Reserves
The US learned way back in 1973 with the OPEC oil embargo to have an oil reserve for emergencies. Currently, it is estimated the SPR stand at 392 million barrels of oil. The figure represents the weekly decline from 397 million barrels of oil. President Trump has also kicked around the idea to provide an oil tax holiday during this conflict. This is the federal tax on each gallon that consumers pump.
We believe the tax holiday is foolish. The US needs this money for road service. Trump made a critical error in forgiving Russia of the oil sanction imposed on them due to Ukraine conflict. He must accept responsibility for his actions. His decision has caused oil prices to rocket higher. We all suffer together until this mess clears itself and peace is restored.
You may not like our stand against the oil tax holiday, but our national deficit does not need any more juice. The fact that our yearly budget now has to pay $1 trillion every year just to cover the interest on our debt. The total still compounds every day, week, month and year. To give you a perspective of this sin consider this point. In 1981, the total debt under President Reagan was $1 trillion. Flash forward. Now, it accounts for 10% of our yearly budget. Our nation has many problems. This is one of the most serious.
IEA
It stands for International Energy Association. This was the global community's answer to develop an energy policy after the OPEC oil embargo. It started in 1974. It has 32 member nations and 13 associate members. They represent 75% of the global demand for energy. They have deployed 164 million barrels of oil to its members. They are ready to release another 210 million barrels more. This is how the West has been getting by due to the oil disruption.
However...
...the West was not ready for the sharp oil price increases to its economy, especialy with jet fuel and deisel. The tipping point is at hand. Then, we have to take into account the Asian nations. China has an SPR. Many, if not all the other Asian nations do not. President Trump has told China it could buy US oil because almost all of its oil comes from Persia. China keeps secret all the oil it buys from Russia. That oil can be delivered by train and over land routes. All those other Asian economies are in peril due to the lack of oil to keep their economic engine running. The worst has the largest population. India is contemplating ways to stop its citizens from buying imports like precious metals to concerve currency. The country not only lacks a SPR, but currency reserves to purchase oil. They are in a bind.
Looking Ahead...
...we can easily see an oil spike to $140 a barrel. Not good for anybody. JFL is old enough to remember seeing signs like "no gas" on service stations. If the conflict continues and at the moment, it appears to do so, he says this will happen...
Odd / Even
It is a designation by the last number on your license plate. If the number is odd, you can buy gas on odd number calendar days. If even, the same way to buy gas. I wonder what vanity plates will do? Anyway, let's hope things do not deteriorate to that point? ...Peace
