We Can All Be Grateful Nothing Exciting Has Happened In 2021 So Far…
I don’t know about you, but I was certainly hoping for a less belligerent 2021. Sure, I knew in my heart of hearts COVID-19 wasn’t magically going to go away. And let’s face it, I am so far down on the “essential population” category that it will be 2046 before I am eligible for a vaccine. I suspected the fracas from the November presidential election would get sorted out and life would go on. After all, 2020 started off fairly optimistic before deteriorating into chaos and nonsense. Granted, a part of me worried that 2020 was merely the warmup for the year to follow. Merely 26 days into this new year and let’s see what we’ve got.
The Capitol Riot, because, regardless of what Gil Scott Heron says – the revolution would be televised. Following that, newly minted President Biden has signed so many executive orders that the doctors at Walter Reed are treating him for acute carpal tunnel syndrome. Among those was rejoining the Paris Climate Accords and a ‘temporary’ ban on oil and gas permitting on federal lands which has cause some concern among the operators in New Mexico. Oh yes, and let’s not forget the Keystone XL pipeline.
But that’s not all. Saudi Arabia decided to give the oil markets what their energy minister deemed a “wonderful surprise” and cut 1 million bpd in production. I suppose gone are the days of Vladimir Putin and MBS getting into a slap fight over market share. Or…are they? Well, not if Iran has anything to say about it.
In addition to continuing to harass shipping in the Strait of Hormuz, posting inappropriate pictures of former-President Trump on Twitter, and propping up Houthi insurgency in Yemen, our good friends in Iran have decided to ramp up their oil production to more than 2 million bpd when Saudi decided to cut back in order to keep prices higher. This, of course, predictably caused prices to drop. No good deed goes unpunished it seems. Which begs another question – isn’t just about everyone in the world placing sanctions on Iran? If so, who will they be selling this additional production to? Well, probably China, I suppose. But seeing as China’s chief export today is COVID-19 and naval belligerence I’m not sure how well that is going to affect the Iranian balance of trade.
Factor in that the Saudi government has announced a commitment to end their internal reliance on oil-based energy and ‘go green’ does make one wonder how long they see the oil markets viable. Saudi also has insisted their ailing economy will no longer be reliant on oil has its chief revenue stream by 2030. Oh boy, I’m no economist, but I’m not sure how that is going to happen either. What exactly are they expecting to supplant oil with in order to prop up the prolific-sized royal family or the endless bout of state welfare?
I’ve been to Saudi Arabia. You can’t drink, you can’t smoke, and if you talk to a woman you’ll get locked in jail and beheaded. And not necessarily in that order. And the vistas? Not great, unless you like endless expanses of sand. So, I don’t know what the plan for 2030 is, but I can bet it won’t be tourism. Either way, Saudi has a long row to hoe over the next nine years.
And we’ve got more immediate problems besides.
Yes, oil has crested the $50 per barrel mark, which is good considered we are coming up on the one-year anniversary of $-40.00. But with meddling governmental regulation, the lingering pandemic and a schizophrenic Saudi relationship with their principal export, well, let’s just say the next couple of months are going to be interesting in the US Oil Patch. Investors have been hedging for a year, but with a rebound in prices and more uncertainty in the industry than water in the Pacific, people are starting to dip their toes back into the pool. Whether through boredom or enthusiasm it seems like some people are seeing an opportunity. The question is, when the chips are down, and the stakes are high – will they bet it all on black?