This Coronavirus thing impacts everything. The oil market is no exception. I’ve committed to some pretty strong predictions about the future of the oil market and how it means the end of the current regime in Saudi Arabia. I still stand by all of those predictions, but it’s hard to say whether this current crisis accelerates the timeline, or slows it down. Starting March 6th, Saudi Arabia went to war against every other producer in the world.
I believe that the US oil industry will be the most prominent victim. The sustained period of low oil and gas prices we are about to experience may bring us to an inevitable future more quickly. Saudi Arabia will be the last oil producer. The crucial question remains the price at which they are able to sell that oil for. It’s now possible to envision a future where Saudi Arabia controls price again… but only briefly. Today’s video explains…
I’m not kidding when I say I’ve been agonizing over Coronavirus for months. It’s really quite infuriating how hard it was to get good solid information. China looked terrifying. But all market and government sources in the US seemed pretty relaxed. A couple weeks back only the US government was relaxed, while media was waking up to the shock. It was only two weeks ago that the markets began to reflect what was happening. Now everybody is losing their shit, just as China seems to be recovering. It’s all a mess.
When it comes to history, I usually know as much or more than any journalist I am reading. That’s not the case with diseases and epidemiology. It seemed like everything I read contradicted the last thing I read, making it impossible for me to say anything definitive. Eventually I gave up on talking about the disease. It’s too late to warn folks, we are now at the crisis, which is what today’s video covers. I feel like I’ve kind of let the viewership down. I knew this was coming for a while now, but I’m only now adding to the panic pile with this video. Guess I should bone up on biology for the next plague.
Saudi Arabia is in a terrible trap. Even the things that it thinks will help threaten its demise. As I pointed out in this video’s companion video, they want a US war with Iran because it would lead to a spike in oil prices, and more damage to competitors in Kuwait and Iraq than to themselves. But even this strategy comes with risks, whether they are caught up in the war or not.
I don’t have a ton of sympathy for the Saudi royal family, obviously, but it’s a situation worth appreciating. It’s Kafkaesque. They’ve constructed a paradise that no longer works. Every ploy they employ gets them closer to the edge. This video lays out the problem of the war with Iran, and this series lays out the broader problem.
I often talk about the oil price on this channel. That’s what I do with today’s video. But I don’t think I talk about what incredibly good news the death of the oil market is. For the environmentalists this is a bit of a mixed bag, but I think on balance very good. The whole “peak oil” thing has turned out to not be a problem. 30 years ago it was mostly the US, Japan and Europe that were intensively using other people’s petroleum resources. We’ve more than tripled the number of people, and probably more than tripled the amount of consumption. And we’ve all survived. That’s pretty damn cool. The downside of course is that we’re producing more and more carbon. Cheaper oil prices are not a good thing for those worried about global warming in the short term. Oil is cheaper, more of it gets consumed, and more carbon gets dumped into the atmosphere. But it can actually be a good thing in the long term.
Lower oil prices provide the same sort of good news to environmentalists that it does to geopolitics nerds. Bad people have less power. If oil is permanently cheaper, that provides less money to all the people who used to use oil wealth to steer the world. As I keep pointing out, lower oil prices are leading to a collapse in terrorism. It will also lead to a collapse in oil industry influence in the United States and other countries across the world. We can already see it happening. The fact that electric cars have been allowed to go this far is an indicator of how much power the oil industry has already lost. The days when oil execs could confidently march into the government’s most powerful positions almost certainly ended with Rex Tillerson. The Oil industry’s global warming skeptics are still churning out their reports, but they look laughable to everybody now, including the oil executives who pay for them. The oil industry’s decline in prestige will cede the climate change conversation to the scientists and their friends in the environmental lobby almost entirely. Good news all around!