Category Archives: Energy

Yesterday’s Country: Not to Worry, They Can’t Innovate, by Fred Reed

The US business community is probably more aware of China’s innovative abilities than Fred Reed believes, but the non-business average American probably still thinks, wrongly, that the Chinese don’t innovate. From Fred Reed at lewrockwell.com:

For many years the United States has regarded itself as, and been, the world’s technological leader. One can easily make a long and impressive list of seminal discoveries and inventions coming from America, from the moon landings to the internet. It was an astonishing performance. The US maintains a lead, though usually a shrinking one, in many fields. But:

China has risen explosively, from being clearly a “Third World” country forty years ago to become a very serious and rapidly advancing competitor to America. Anyone who has seen today’s China (I recently spent two weeks there, traveling muchly) will have been astonished by the ubiquitous construction, the quality of planning, the roads and airports and high-speed rail, the sense of confidence and modernity. Compare this with America’s rotting and dangerous cities, swarms of homeless people, deteriorating education, antique rail, deindustrialized midlands, loony government, and the military sucking blood from the economy like some vast leech, and America will seem yesterday’s country. The phrase “national suicide” comes to mind.

A common response to these observations from thunder-thump patriots is the assertion that the Chinese can’t invent anything, just copy and steal. What one actually sees is a combination of rapid and successful adoption of foreign technology (see Shanghai maglev below) and, increasingly, cutting edge science and technology.  More attention might be in order. A few examples: A few examples from many that might be adduced:

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The U.S. Is Losing Influence In The World’s Biggest Oil Region, by Gregory R. Copley

The US is trapped in the Middle East by its own policymakers’ myopia and lack of understanding of the region. From Gregory R. Copley at oilprice.com:

Egyptian President Abdul Fatah al-Sisi’s visit to the White House on April 9, 2019, resulted in one of the worst setbacks for U.S. Middle Eastern policy under the Donald Trump Administration.

What was supposed to be a fence-mending exercise between the two countries essentially ended many of the meaningful strategic aspects of the U.S.-Egyptian relationship, despite the fact that the public appearances between the two presidents appeared to be cordial. There have been significant areas of difference and frustration between Egypt and the US, even since the Trump Administration came to office, but there was at least a concerted effort on both sides to work harmoniously.

The question now is who in the Washington bureaucracy will take the blame for pushing Trump to insist on actions by al-Sisi which any fundamental analysis of the situation points to being infeasible and against Egypt’s view of its own strategic interests.

That is not to say that Egypt wishes to end cordiality and cooperation between Washington and Cairo; it does not. But certain battle lines have been drawn in the greater Middle East, and Cairo and the U.S. are not altogether on the same side. Both sides will need to undertake significant, careful action to put relations back on a positive path before the break becomes calcified.

The failure on this occasion lay at the door of the U.S. for failing to realize that Washington now needs Egypt more than Egypt needs the U.S.

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New Middle East Alliance Shakes World Powers, by Yossef Bodansky

Turkey, Qatar, and Iran are emerging as the leaders of a new Middle Eastern power bloc. From Yossef Bodansky at oilprice.com:

Doha Qatar

A new bloc is emerging in the greater Middle East with the declared objectives of dominating the entire Arab world, confronting and containing the US and its allies; and controlling and benefiting from the entire hydro-carbon economy, from production to transportation.

The leading members of the new bloc are Turkey, Iran, and Qatar; with Iraq, Syria, Lebanon, and Jordan submitting to the new bloc.

Russian experts call the new bloc “the Middle Eastern Entente”.

The key to the success of the bloc is the emerging correlation of influence of the great powers in the af-termath of the wars in Syria and Iraq. Russia and the People’s Republic of China are ready to compromise with the regional powers in order to secure their vital and global interests, while the US, Saudi Arabia and, to a lesser extent, Israel, are the nemeses of the bloc.

The roots of “the Middle Eastern Entente” are in Doha. Qatar in Summer 2017 initiated a myriad of bilat-eral and trilateral discussions with Iran and Turkey after Saudi Arabia and the GCC allies imposed the siege on Qatar in June of that year. However, it was not until the second half of 2018, with the initial impact of the siege largely ameliorated, that the long-term post-war posture of the greater Middle East became a major priority.

It was then that Doha, Tehran, and Ankara started talking about forming a coherent strategic bloc.

According to Iman Zayat, the Managing Editor of The Arab Weekly, in late November 2018, the three coun-tries struck a deal in Tehran to create a “joint working group to facilitate the transit of goods between the three countries”. This was the beginning of a profound realignment of the three regional powers. “Qatar has irrevocably joined with Ankara and Tehran against its former Arab allies. It has conclusively positioned itself in a regional alliance that pursues geopolitical dominance by driving instability,” Zayat noted.

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Time Runs Out on U.S. Opposition to Nordstream 2, by Tom Luongo

The battle over Nordstream 2 is yet another indication that the US empire is splintering. From Tom Luongo at tomluongo.me:

The Nordstream 2 pipeline represents the last stand of U.S. influence over the internal affairs of Europe.

Once finished it will stand as a testament to the fundamental split between the European Union and the United States.

Europe will this as its first successful defense of its newly-declared independence. And the U.S. will have to come to terms with no longer having control overseas.

This is a theme repeating itself all around the world right now.

Your view of Nordstream 2 depends on who you are.

If you are the U.S. it is a massive rebuke of the post-WWII institutional order mostly paid for by the U.S. to rebuild Europe and protecting it from the scourge of the U.S.S.R.

From Europe’s perspective it’s, “Job well done and all that but Russia isn’t a threat anymore and it is time for us to come out from underneath the U.S.’s shadow.”

And if you are Russia Nordtream 2 is the wedge driving these two adversaries apart while improving national security on your western border.

Europe has imperial ambitions of its own and Nordstream 2 is a very important part of that. Those ambitions, however, are not in line with those in the U.S., particularly under the “leadership” of Donald Trump.

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Time’s Running Out for World’s Most Indebted Oil Company, by Don Quijones

Venezuela is not the only country with “problems” in its oil company. Mexico’s appears to be going down the drain, too. From Don Quijones at wolfstreet.com:

US rating agencies pressure Pemex and the new Mexican government. But Pemex is too big to fail. 

The financial pains and strains continue to grow for the world’s most indebted oil company, Petroleos de Mexico (Pemex). Standard & Poor’s became the latest in a succession of rating agencies to downgrade the company. Pemex is state-owned. So S&P has two credit ratings for the company: One, as if it were a stand-alone company; and one for the company as part of the Mexican state.

S&P slashed its stand-alone rating of Pemex three notches to ‘B-‘ from ‘BB-‘ on growing worries that financial support pledged by the government might not be enough to prop up the company and might not be enough revive declining production. Anything below ‘BBB-‘ is non-investment grade, or “junk.” ‘B-‘ is six notches into junk (see our corporate credit rating scales by Moody’s, S&P, and Fitch).

S&P left unchanged its rating of Pemex-as-part-of-the-Mexican-state, at ‘BBB+’, the same as its rating of Mexican government debt, but lowered its outlook for both to negative from stable, and warned that Mexico faces a one-in-three chance of being downgraded in the coming year. This, in turn, triggered a cascade of outlook downgrades for many of Mexico’s biggest corporations and 72 financial institutions, including the country’s biggest banks and insurance companies.

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Be Wary Of Unrealistic Shale Growth Expectations, by Nick Cunningham

It turns out the shale oil story isn’t quite the miracle it’s touted to be. From Nick Cunningham at oilprice.com:

U.S. shale drillers are facing a serious problem: Their wells are not producing as much oil and gas as they had anticipated.

When facing shareholder scrutiny, shale drillers have countlessly hyped the litany of technological breakthroughs, efficiency gains and innovative drilling techniques. Indeed, production from U.S. E&Ps has skyrocketed over the past decade, save for interruption during the 2014-2016 bust. But even then, shale executives argued that the downturn made them lean and mean, and that they would use their newfound frugality to ramp up production and profits.

But the hype has slammed into reality on a few fronts. First, after years of bankrolling the shale industry in hopes of juicy profits, Wall Street is starting to lose patience. Some companies turn a profit, but the industry on the whole has been losing money since its inception in the mid-2000s. Executives are once again promising that enormous profits are just around the corner, but you could forgive the skeptics for questioning whether that will turn out to be the case.

A second – and no less damning – development is starting to occur on the operational side of things. Shale companies are finding that the returns on pushing their drilling practices to evermore intense frontiers are beginning to fizzle. For years, drillers increased the length of their laterals, injected more and more sand and water underground, and packed wells closer and closer together. These techniques of intensification promised to produce more oil and gas for less money.

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The Slippage Continues – India Resists Trump On Everything, by Tom Luongo

The US’s confederated empire is slip-sliding away. From Tom Luongo at tomluongo.me:

With the U.S.’s attempt at regime change in Venezuela going nowhere fast it’s becoming increasingly obvious that major vassals allies aren’t scared of the consequences of defying us.

India, in particular, has been quite clear in its opposition to Trump’s edicts on who they can and cannot trade with. And with Prime Minister Narendra Modi reeling from a corruption scandal it’s clear he isn’t going to give Trump an inch on important trade issues, especially with Modi in full re-election mode.

Not only has India defied the U.S. over buying Iranian oil and Russian S-400 missile defense systems but now they continue to flaunt U.S. sanctions on Venezuela upping its purchases from 400,000 barrels per day to more than 600,000.

The quantity of exports to India has jumped 66 per cent to 620,000 barrels a day and the boost is being driven by refiners like Reliance Industries Ltd and Nayara Energy Ltd, backed by Rosneft, Russia.

Overall though, Venezuela’s crude exports have taken a dip as the US has intensified the sanctions against the Latin American nation’s oil company.

The response from the U.S. was the nearly inconsequential removing India from the Generalized System of Preferences which created tariff-free trade on a number of products between the U.S. and India.

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