The return of gasoline politics

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Back in February 2009, when I was a foreign affairs writer for an American news magazine, I was The decline of the oil czarThe agency studied how the plunge in oil prices (from US$147 to US$37 in six months) suppressed the power and geopolitical aspirations of oil dictators, such as Vladimir Putin in Russia and Hugo Chave in Venezuela Sri Lanka and Mahmoud Ahmadi-Nejad of Iran. They went from causing trouble on the global stage to eagerly accepting the invitation to talk to the Barack Obama administration. How the times have changed. . .

I wonder if we will not go in the opposite direction today.Oil prices and many commodities are rising (our colleague Martin Wolf wrote an article about why we Should worry about inflation). Although we are still in the bubble field, we have reason to worry that we may be at the beginning of a new, long-term commodity boom.

First, in the past decade, neither Russia nor Saudi Arabia has increased production-most of the new supply has come from the production of shale oil in the United States. All of this shows that we have experienced decades of oil boom-bust cycles. As I wrote in my 2009 article:

In one case, the oil czar will benefit from its own incompetence, while the West will suffer heavy losses. As PFC Energy Chairman Robin West pointed out, their mismanagement will eventually reduce global supply. “The danger then is that as the global economy starts to emerge from recession within a few years, you may see oil prices skyrocket, partly because these countries have not invested as expected.”

This is similar to the current situation. As early as 2014, when oil prices fell, shale oil production fell because you needed high prices to make this supply move. The petrol czars themselves did not make the investments they deserved (because they rarely do), which further restricted supply.

Most importantly, the global push for a carbon-neutral economy has led people to call for a carbon-neutral economy. End new oil and gas exploration By the International Energy Agency.In the long run, this is of course a good thing, but ironically, in the short term, Joe Biden’s climate change plan and similar targets in Europe and Asia may actually be increase The initial demand for fossil fuels to produce all green vehicles was necessary for the transition.

Rising oil prices mean rising gasoline prices, which is by no means a good thing ahead of the controversial midterm elections. The Chairman of the Federal Reserve (Fed) Powell (Jay Powell) can certainly tighten monetary policy to curb inflation. But this in turn may lead to stock market adjustments, which will have its own political impact. (As I wrote, if the net capital gains plus the taxable distribution of individual retirement accounts equals a 200% year-on-year increase in personal consumption, it will be difficult for the economy to grow without high stock prices. of two).

I actually disagree with Larry Summers’s argument that we are back in the 1960s and will continue to experience inflation for many years (I think technology will be an incredible deflationary force). But I do think that the trade-off between low inventory and high price of gasoline pumps is difficult. I tend to think that the Fed and the Treasury Department should give more consideration to commodity inflation, because they hit the poor and the middle class more than they hit the stock market bubble, and the latter will hurt the stockholder class.

At the same time, I see the oil dictator feel timid: for example, Iran is Transport more oil, Despise the United States and despise U.S. sanctions.

Ed, do you have any suggestions for the White House and/or the Treasury Department on these issues?

Recommended reading/watching

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  • People who haven’t seen fatherAnthony Hopkins (Anthony Hopkins) played the leading role in the elderly, slowly sinking into dementia, and the brilliant Olivia Coleman (Olivia Coleman) as his daughter, will soon be available on Netflix Watch it on. I thought it would be frustrating, but it is not the case. It was a heartbreaking beauty, especially the last scene.

  • Ed, I really like your work Urban crime rate rises, Around the 1970s. This is true, and it happened in real time in my own Brooklyn area. As a friend who has lived in New York City for five years recently told me, “We have not yet reached the 1970s, but we will definitely return to the 1980s.”

Edward Luce responds

As early as 1999, “The Economist” published a notorious cover story in which he predicted that oil would no longer exceed $10 per barrel.I am sure Daniel Yergin (Energy analyst and writer Rana Quoted last week) Can tell us that even the smartest people in the industry cannot avoid embarrassment from time to time. But in general, the higher the price of oil, the faster the market will shift to cheaper and cleaner alternatives. Therefore, rising oil prices should be seen by those who wish to solve the problem of global warming. In the event of an outage (such as the recent Colonial Pipeline ransomware attack), the federal government can increase domestic supply, but it cannot affect total global demand and supply in the short term.

The best thing Biden can do in the long run is to price carbon. Unfortunately, his promise is not to raise taxes on people with incomes less than $400,000, which puts him in jail, which he interprets as implying any kind of tax, including gasoline tax or mileage tax. This is his main obstacle to reducing emissions, and I hope he can fulfill his promise. There is no need to impose a carbon tax on the middle class because he can keep the carbon tax neutral and send annual carbon dividend checks to households with an annual income of less than $100,000. This idea has been around for a while, and I hope Biden can see its logic.

Many years ago, Tom Friedman (Tom Friedman) put forward his “first law of oil politics”, that is, the higher the oil price, the deeper the political repression of oil exporting countries, and vice versa. There is nothing we can do about it. However, this provides another compelling reason why staying away from oil diversification should be an overriding goal.

Your feedback

Now, our swamp man said a word. . .

Respond to “Benjamin Netanyahu’s Legacy Legacy”:
“I have always been a Democrat, but I have long been concerned about ultra-left anti-Semitism (rather than’just anti-Israel’)… However, Israel has been divided by Bibi, just like the United States has been divided by Tron. The generals are the same. The extremes of both countries should be ashamed of themselves, but of course they only care about themselves. As I grow older, I am gratified by the fact that Bibi and Trump are also aging, and I hope the young people of both countries Become more inclusive and focus on social health and cohesion. It may be a pipe dream, but I need hope!” —Rick Solway, New York, New York

We would be happy to hear from you.You can send an email to the team in the following ways [email protected], Please contact Ed [email protected] With Lana [email protected]And follow them on Twitter at @RanaForoohar with @EdwardGLuce.We may extract your response in the next newsletter

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