Futures Markets are a lot more interesting than you’d think. They are a key piece of financial infrastructure, that helped us build the modern world. If you’re interested, William Cronon’s book, “Nature’s Metropolis” is fascinating on the way that futures markets freed farmers and other economic actors from the tyranny of uncertainty and time. On Monday we got a rare, frightening look at what can happen when a futures market breaks. In this video we lay out why US oil prices fell into the -30s on Monday April 20th.
Despite what much of the business press has told you, this price fall wasn’t just a financial oddity. If certain things don’t happen, these prices risk becoming a monthly occurrence. As the Coronavirus depression proceeds, we are likely to see further examples of financial machinery breaking down. Get a preview by watching today’s video.
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 feel like the broader arc of Trump’s Iran policy has been ignored recently. The incredibly flashy and violent gyrations of escalation have gotten a lot of coverage, but there isn’t enough emphasis on why we’re here. Sure, I suppose it’s fun to get bogged down on the question of whether or not assassinating the general of a country we are not at war with is a good idea, but we’re kind of missing the forest for the trees. No matter what you think of the Soleimani killing, we should be more focused on how we got here. And that’s what I try to do today with this video. I attempt to evaluate Trump’s “Maximum Pressure” policy against Iran, and I find it wanting.
My guess is that today’s video will get lots of comments along the lines of “You’re only realizing this now?” and “Obviously!”. For many observers of the Middle East over the past two decades it is transparently obvious that the United States has been the problem. Nobody else has been overthrowing governments and sowing chaos with the abandon that the Bush, Obama and Trump administrations have. At least a million lives have been lost, and an entire region of the world has lost out on two decades of economic development because the US wanted to cover up for the fact that their client state, Saudi Arabia, had done 9-11. So yeah, we’re the bad guys. Obviously. But that doesn’t mean it can’t get worse.
Our bad guy status is not so obvious to the US public at large. And it’s certainly not so obvious to the US media. That’s why I think it’s worthwhile to mark the trajectory here. The US isn’t just a damaging actor, it’s been getting progressively worse. Many argue that Obama was better than Bush, and his attempt at an Iran Nuclear Deal really was a serious attempt at peace, but everything else he did was a continuation of the horrors of the Bush presidency. More than that, it was an intensification of them. Obama destroyed Libya and Syria without even pretending to rebuild them. His drone program led to fewer US casualties, but its scope and brutality put us into even more morally fraught territory that its initially smaller bodycount hid from us. And Trump, with his gleeful embrace of war crimes is obviously another big step down the path to heck. Things really are getting worse. That’s worth marking, which is one of the things I attempt to do with today’s video…
One of the most frustrating aspects of coverage of Syria is the extreme disconnect between what the standard story is, and what is actually happening. “Assad and Russia are Winning!”
Despite the fact that a long-standing Russian ally has been destroyed over an eight year period. “Assad has murdered Half a million people!” Even though 150,000 of that half million are his own soldiers, and the civilian casualties are nowhere near as one sided as they are portrayed. My usual approach to this is quietly angry, and my next and last videos on the topic of Syria and the US-Turkey alliance are no exception to that. With this week’s video, however, I chose a different approach. I like this video because it is calm, detailed, brief and to the point. Anger is important, but I think this type of video is also useful for cutting through the bullshit. What do you think?
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.
One of the many irritating things about US foreign policy is its complete lack of imagination. We just keep running the same old scripts over and over. World War II, probably the US’s best war, and really the only one that can be called “good” in the 20th century, still provides the mental models for most foreign policy practitioners. This comes about in very conscious ways, such as the closing in on a century long insistence that everybody the US doesn’t like is Hitler, but I think it comes about in unconscious ways too.
In today’s video, I talk about the way that US National Security Adviser John Bolton’s foreign policy directly echoes FDR’s. They both wanted war, though for very different reasons. John Bolton is using similar tools, and as the past week illustrates he’s getting perilously close to bringing about the same results. But unlike FDR, he has no noble purpose. This is some scary stuff. But it’s also pitiful. We’ve advanced so much as a world over the past 70 years. It’s profoundly disappointing that the most powerful people in it are playing out scripts from another era.
Some videos come pretty easy, and today’s video is one of them. I really like it when new ways of looking at stuff pop into my head. The more I think about it though, there are other aspects to this I should have included. The shift in the oil market here is pretty extraordinary. It’s actually the birth of a sort of “Super OPEC”. It’s also an OPEC that’s a lot more dangerous for its members. With a US president in charge, especially a US president listening to Texas oilmen, military operations become a potent tool of market making.
The world, and the US, used to have a minimal investment in the stability of petro-states. In the long term, these places should be happier without US supported perma-leaders, but the short term looks increasingly grim. As oil demand peaks, the ballooning US petroleum industry will need to be protected. The US can do this by knocking off competitors one by one. This could be an underappreciated aspect of Libya’s permanent oil crisis since 2011. Petro-states on each side of the conflict have no incentive to get their proxies on the same page and producing more. Venezuela is being knocked out. So is Iran. Destabilizing Iraq would be very easy. Saudi Arabia is super shaky. A broader war in the Middle East would be horrible, but it would be pretty great for the new head of OPEC… The US president.
I don’t like covering breaking news topics. I’m happy to produce a video on a deep seated issue that gets sparked by something in the news, but I don’t like making predictions or doing video takes about an on-going story (that’s what twitter’s for!). Mid-stream analysis, the bread and butter of the cable news networks, is largely bullshit. Unfortunately, for today’s video, Khalifa Haftar of Libya ambushed me. On March 26th, I promised to do a video on Libya, a topic I had already been researching for a week or two. On April 4th, Khalifa Haftar invaded Western Libya, throwing everything up in the air.
Half of this video was drafted before April 4th. As the news has rolled in, my estimate of Haftar, already pretty negative, continued to plummet. I have tried to make this video consistent and informative in its presentation, but I’m not sure I pulled it off. A video’s title is very much a part of the experience. Usually it just advertises and reflects the content, but I think with today’s video, more buffeted by events than I like, the title may present the conclusion. I shot this video last Thursday, and have continued to research and follow developments as they have come. Haftar is not the savior he is sometimes presented to be. I hope today’s video gets that across.
This video would not have been possible without the International Crisis Group’s Libya coverage. On country after country I have found their work invaluable. They tend to be my starter source for one-shot videos like this where I won’t be reading multiple books.
After today’s video had been shot, the Wall Street Journal confirmed that Haftar has Saudi Arabia’s full support in his destruction of Libya’s chances for a settlement.
I used this headline on Haftar and the Muslim Brotherhood in the video. Keep in mind that the National is a United Arab Emirates publication, so this article may be more useful for what the UAE wants you to think about Libya, than what is actually going on.
I also used this headline from Reuters, and the article provides a nice discussion of Egypt’s shady bombing campaigns in Libya. Reuters is a US publication, so of course it’s going to downplay the fact that Washington, DC is, at root, the responsible party in this nightmare.
Today’s video sort of unintentionally ended up being the second video in a series dealing with the ramifications of Donald Trump’s destruction of the Iran Nuclear Deal last year. The more I think about it, the better an “Iran Sanctions” series sounds. It’s interesting how much that one terrible decision will end up driving world politics for the next couple years, if not the next couple decades. Almost every day we see things happening that can in part be traced back to it, including Germany’s reluctance to act against Huawei the way the US wants, reported today.
Today’s video focuses on INSTEX, the new European exchange that is the first stab at building a post-dollar trading and banking system. It may seem like a boring topic, but if you understand it, whole volumes of current and future geopolitical maneuvering will be revealed to you. Today’s video does what very few do, and attempts to describe the history of the secondary sanctions imposed by the US in an engaging way. Supposedly journalism is a first draft of history. I’m kind of excited by the fact that nobody else is attempting that draft this way. I could be wrong, but I’m guessing that a history focusing through the lens of the Iran Sanctions will provide a clearer picture of the 2020s than anything else.