Ukrainian oil and American sacrifice
I have not commented on Ukraine because I am horrified and have nothing special to say. I would like to think the international community can find an “off ramp” for Putin, but I am pessimistic. I believe the Russians will slowly improve their logistical position, and in any event that the most likely outcome is that the Russian army pulverizes Ukraine with overwhelming force. I so very much hope I am wrong.
On the domestic front . . .
Apparently President Biden is about to ban imports of Russian oil. I confess I don’t know what to make of this. It’s not clear that it will hurt Russia all that much, given the fungibility of oil and the financial sanctions that are already in place. I doubt it will pressure the Europeans to follow suit in the short run. They are too dependent on Russia. (In the long run I am somewhat more optimistic about this.) I am not even sure it’s good strategy to escalate sanctions further at this point (I am not saying it’s bad strategy, I have no idea). But apparently members of Congress are pressuring Biden to act.
Catherine Rampell is worried that it’s a trick: Republicans will turn around and blame Biden for rising gas prices.
Republicans are setting a trap for President Biden. They’re demanding he take actions that will raise gasoline prices — with obvious plans to attack him politically after the prices rise.
To state the obvious, this is an entirely reasonable fear.
It seems to me that President Biden has two ways to blunt this line of attack. One option is to tell Congress to pass bipartisan legislation. This would be easy to justify – in an international crisis the world must see that Americans are united. It would help to solidify Biden’s image as a bipartisan leader.
The second option is to tell us that gas prices (and possibly overall inflation?) will rise due to a ban on Russian oil, and that tightening our belts for a month or three will be our contribution to the Ukrainian cause. (He can also remind people that the economy continues to recover rapidly from COVID, and that the future looks bright.)
Note that this would have the added possibly large political benefit of helping the President shift blame for inflation to a hated external enemy.
Unfortunately, asking Americans to sacrifice for anything is not in vogue these days. No one with income under 400k should pay more in taxes, etc. And President Biden is just not temperamentally inclined to go this way. This is from his State of the Union address:
To all Americans, I will be honest with you, as I’ve always promised. A Russian dictator, invading a foreign country, has costs around the world.
And I’m taking robust action to make sure the pain of our sanctions is targeted at Russia’s economy. And I will use every tool at our disposal to protect American businesses and consumers.
Tonight, I can announce that the United States has worked with 30 other countries to release 60 Million barrels of oil from reserves around the world.
America will lead that effort, releasing 30 Million barrels from our own Strategic Petroleum Reserve. And we stand ready to do more if necessary, unified with our allies.
These steps will help blunt gas prices here at home. And I know the news about what’s happening can seem alarming.
Remember the kid(s) in grade school who would trip someone to keep them from beating them in a foot race?
It isn’t just gas prices that we are looking at being pain point, Ukraine produces a lot of wheat and sunflower oil. Their proximity to the Black Sea and temperate climate allow them to be agriculturally inclined.
It looks at though all commodities are spiking due to input costs and the expectations that less will be planted. The seeds are just now going in the ground so we won’t know until the USDA starts the survey season, but fertilizer up 3-5x over last year, other chemicals 3x as well or unavailable, seed prices up 50%, and labor shortages both in the production side and equipment repair, lack of parts…we are not starting the year on a high point.
I look at energy in two ways, social energy – food, and capital energy – oil, gas, electric, etc. The two are heavily intertwined and one knocks the other around quite heavily. If capital energy is high, social energy has to increase to meet the higher cost of capital to bring that to the market. Four dollar oranges.
As of this morning, there seems to be talks of a tit for tat setup when we embargo oil and start trade with Venezuela and ask the Saudis to pump more as Haliburton fracks the hell out of Texas, the Russians will turn off the taps to western Europe and watch the EU economy collapse and reroute their supplies to south and Central Asia.
In short, I don’t see Biden in a winning place regardless of which position is taken, but I feel embargo is not the proper response; devolution of what little rapport we have with them just leads to even more bitter relations and a worldwide economic death spiral.
The Great Depression coming off the heels of the WW I sanctions where we punished Germany into a third world country, it cost the US and the rest of Europe dearly. Back then, the world was not as interconnected as it is today with complex pipelines and shipping arrangement. Are we about to sink the Lusitania?
Michael, could be your worst fears are about to play out:
Putin has also approved an embargo on Russian exports, but it is up to the Russian parliament as to which commodities they will withhold.
I too am horrified, but that doesn’t stop me from posting.
Perhaps it should.
The latest topic that needs airing, for me, is the likelihood of Poland providing old Mig jets (of Russian origin of course) to Ukraine, probably in exchange for US-made F16s, which would be much more modern weaponry, but the Ukrainians know how to fly the old Migs. This is under the guise of FDR’s ‘Lend-Lease’ program which provided Britain with naval destroyers before the US entered WW2. This will presumably make Putin go ballistic, as they say.
Why can’t Poland give its old warplanes to Ukraine?
Christian Science Monitor – March 6
The way that Putin threatens is ordinarily a tell for bluffing. Worst case is that China has a lot of people, so could use some more land after the residual radiation dies back to tolerable levels. Besides that, nuclear winter may be our best chance to reverse global warming :<)
The notion that Putin is bluffing is beginning to seem naive.
It was silly to think that Putin was bluffing about invading Ukraine, but it is just as silly to think that Putin wants to engage the US in thermonuclear war. Nothing has changed regarding mutually assured destruction, the ultimate Kobayashi Maru.
This assessment of Putin as rational presupposes his evil temperament is a artifact of narcissistic personality disorder. Sociopaths or NPD cases possess rational minds and want to live, despite their malevolent nature. OTOH, if Putin is a paranoid schizophrenic, then all bets are off.
Putin’s War of the Mind
A celebrated Ukrainian psychiatrist and Soviet dissident explains the KGB officer’s psyche
John Sweeney John Sweeney is a British investigative journalist who’s worked for The Observer newspaper and the BBC’s Panorama and Newsnight series
February 21, 2022
….Putin is threatening war against Ukraine. Is he mad? The wrinkled face opposite me clouded. A stupid question. Still, he gave me an answer: “No, he is not mad. He is very bad. I am certain he is totally healthy. He has a very peculiar personality. Not that of a KGB officer. He’s different, sadistic, not thinking about other people, not even the Russian people, only himself. He has these predecessors like Hitler and Stalin. We can say they did bad things but that they didn’t do them because a voice told them to do it. They were evil doers. They were sadistic people. But they weren’t insane.”
Is there a problem with people like me thinking he’s mad? “As a psychiatrist I strongly dislike this question,” Semyon began. “I get asked it also by Ukrainian journalists. If we say that a person is insane, by doing that, we also distance this person from liability for their actions. This person is no longer responsible for what they do. They’re just sick, and they committed incredible evil because of voices inside their head or hallucinations. In this case, this person is evil, not because of voices inside his head, but because of his own actions.”
Angela Merkel’s reflections on what goes on inside Putin’s head interest Semyon: “She said that the arguments she used did not resonate with Putin. He could understand them, but he didn’t let them into his mind. It’s easy to explain away Putin’s specific personality from his experience, that he used to serve with the KGB. But, in fact, he wasn’t a typical KGB officer, the kind who used to work with dissidents.” Semyon knew their type all too well…
[Lots longer article at the link. Semyon knows his stuff, but the piece rambles too much to just copy it all over.]
[Google informed me that Putin analysis tops the charts of pop psychology greatest all time hits. This is older and one of the few hits that is not complete BS.]
Putin Personality Disorder
Clifford G. Gaddy and Fiona Hill Friday, February 15, 2013
….But Putin is a product of his environment — a man whose past experiences have clearly informed his present outlook. Indeed, Putin is best understood as a composite of multiple identities that stem from those experiences, and which help explain his improbable rise from KGB operative and deputy mayor of St. Petersburg to the pinnacle of Russian power. Of these multiple identities, six are most prominent: Statist, History Man, Survivalist, Outsider, Free Marketeer, and Case Officer. None of the single-word labels people usually attach to Putin — KGB thug, kleptocrat, autocrat — offer a satisfactory explanation for the phenomenon of his rule. It is the combination of all his identities that made Putin an effective behind-the-scenes operator in Russian politics and helped propel him into the Kremlin. Today, however, these identities have become a source of weakness. The country has changed since 1999; Putin has not….
[Again just a brief excerpt from a much longer article – but this one well organized and composed.]
Poland offers MiG fighters to the U.S. as Ukraine asks for help
Politico – March 8
Pentagon says Poland’s jet offer for Ukraine ‘not tenable’
(IOW, ‘We are not going to get into WW3 by turning a few old MiGs over to Ukraine that would only be shot out of the sky in a few minutes. Got any better ideas?’ Maybe avoid the whole WW3 thing.)
At my house and around town the talk is please help Ukraine even if it means over $5/G for gas. For many of us the higher petroleum prices were what we wanted to spur development of alternative energy to GHG emitters.
I hear from Mrs Fred that oil will go for $300 per barrel soon enuf, so that would push gasoline toward $10 per gallon most likely. Or $2.50 per liter. Make it $3 maybe. At last, we will go metric!
If oil goes to $300 per barrel with any signs of staying there, then that would change a world of things from abandoning GHG pollution to localizing rather than globalizing supply chains. It has always been just a matter of time, but better methods of locating and extracting petroleum has kept that goal post moving down field. We are definitely playing in the second half of the petroleum game if not the fourth quarter. I have not yet heard the two minute warning though.
It’s coming, the defense are struggling to get players on the field fast enough to thwart the hail Mary about to happen from the 40.
Yep. Necessity is the mother of invention, while people seem to prefer a more monkey see – monkey do approach. We will reluctantly do whatever that we are forced to do for the sake of maintaining some semblance of the familiar, the status quo. This does not work out well for dealing with longer term problems.
A trap for Biden? Under what circumstances would the Republicans not have blamed Biden for anything and everything?
My thoughts exactly. It’s their only political strategy.
Eric, let me address this little bit first:
“fungibility of oil” – the trouble is that not all oil is created equal…here’s the Platts periodic table of over 100 different crude grades:
it’s interactive; click on the North America map to see grades produced here..
a lot of our Gulf Coast refineries were built to handle the heavy sour crude from Venezuela or similar Mexican Maya at a time when we were importing a lot from those countries…but we have since sanctioned Venezuela and Mexico stopped exporting, so those refineries, including those owned by the Koch brothers, had to look elsewhere for the kinds of oil they needed…some heavy sours from the Middle East and Russian Urals fit the bill, so our imports from Russia rose to keep those refineries running…here’s an explanation of that, also from Platts:
the light sweet, almost watery oil we get from shale is useless in most of those refineries, even though it gets a better buck as exports…trying to find a replacement for Russian oil is why our state department sent negotiators to Venezuela over the weekend, and why we’ll probably see a treaty with Iran that will lift the sanctions on that country soon…i’m not sure most Americans would favor letting Iran have nukes in order to sanction Russia, but that’s the kind of deal we’re facing…
It’s not clear that it will hurt Russia all that much; rignt, they still have the oil, and will likely to sell it to China, India, or someone else eventually…on the other hand, if we can’t make a deal for a suitable replacement for what we’re getting from them, our refineries will face the tedious chore of blending other grades of oil in order to operate, and maybe operate at less than capacity..
so why is Biden doing this? my sense is that his advisors understand what i’ve just explained, but that he was facing a bipartisan supermajority who wanted to ban Russian imports even if, as Manchin said, his price for gasoline went up a dime….so he got out in front of it, instead of leading from behind..
i’ve quietly made my view clear on releasing our SPR reserves in posts here since the first round, with phrases like “in order to incentive continued use of US gas guzzlers”….
“politically motivated program” and “repeated tapping of our emergency supplies for political reasons or to “pay for” other programs had already drained those supplies” to a 19 1/2 year low…the day he made the announcement you cite above, US oil prices rose $7.69 a barrel…the problem isn’t the amount of oil we have available, it’s refinery throughput…and we aren’t helping that by banning Russian imports..
forgot to mention that i agree with you and Catherine Rampell that the Republicans will blame Biden for rising gas prices; gasoline for April delivery was up another 11 cents @$3.6826 a gallon (in 42,000 gallon lots) today, while April diesel/heat oil was up more than 50 cents to $4.4241 a gallon…think the truckers were mad about vaccine mandates? wait til they start paying $6 a gallon for fuel…
Canada Says Its Oil Could Replace U.S. Imports Of Russian Crude | OilPrice.com
i’d agree with Canada on that, run; West Canada Select certainly seems to be a suitable replacement for Russian Urals on paper, but i don’t know all the details on the refineries in question, or why the state department is pushing so hard to get Venezuelan crude…i disagree with putting the blame on the cancellation of Keystone XL, though; the expansion of Enbridge Line 3 and the reversal of the Marathon Capline from Patoka Illinois to St James Louisiana, completed this year, can now move 50% more Canadian oil to the Gulf Coast than Keystone XL ever would have; see here: Capline Pipeline reversal fully online with extra Canadian crude….don’t let the Republicans hang Biden on that Keystone cancellation; it’s already moot…
here is the latest on a potential Venezuelan deal:
here’s just a few headlines supporting my argument:
those were all from before the 50% expansion of Enbridge Line 3 was completed a couple months ago…but there’s still a lot of people trying to score political points on the Keystone XL cancellation…
Awesome job, Dude.
here’s news on a potential Iran deal; they are said to have 30 million gallons of oil already loaded on tankers ready to go once sanctions are lifted…that could give the oil markets a week or two of respite from the Russian shortfalls:
Iran Nuclear Deal Awaits Final Decision As Negotiators Return To Their Capitals – Diplomats familiar with the situation say that the Vienna talks on the Iranian nuclear deal are effectively over, and that the top Iranian negotiator has returned to Tehran for consultations, which are effectively the final decision on making the deal or not. Iran downplayed the consultations, but EU officials say that over the next few days, the real focus is on political decisions. It was a long time getting here, but a deal is within reach, finally.
Exact terms aren’t clear, but its been said to be close, minus a few specifics. Details resolving concerns from Russia were one of the last issues, and it’s not clear what they did about it.
US officials warn there is little time left to make a deal, while French officials say everyone needs to make a deal while they still can, and that delays could risk the position they found themselves in.
Any number of things can come up and derail the talks, with things like the Ukraine War suddenly becoming an issue just because Russia is involved in the talks. There are high hopes in the US that an Iran deal could ease oil prices, something needed as they surge to medium-term highs.
Everything out of the EU nations suggest they’re satisfied, and assuming nothing prevents Russia sanctions getting in the way, they and China should similarly be comfortable. That leaves the decision to Iran, which stands to benefit most from sanctions relief.
Meanwhile Israel is working hard to derail the likely imminent deal. Israeli officials have at times tried to present themselves as neutral to the ongoing Iran nuclear talks, but they also regularly step up to angrily condemn diplomacy and issue calls to action.
Monday was Defense Minister Benny Gantz’s turn, as he called for the world to mobilize against Iran, and said Israeli actions against Iran, including military action, would happen whether or not a nuclear deal was reached. Israeli officials have been saying that for awhile, but it may not be so easy. If Israel indeed attacks Iran unilaterally after a functioning nuclear deal is reached with the P5+1, they’d face a substantial backlash.
Israel has spent decades lobbying against deals with Iran, and agitating for military action. The US has suggested they are on the eve of a deal, and while the Biden Administration has warned Israel against being too hostile to the deal, no one could be surprised at the response so far.
Russia’s Other Contest With the West: Economic Endurance
NY Times – March 9
Russia’s ruble continues its slide as new curbs restrict access to foreign currency
The Kremlin accuses US of ‘economic war,’ but looks ahead to talks with Ukraine.
NY Times – March 9
After Ukraine, Europe wonders who’s next Russian target
Boston Globe – March 10
by their initial opposition to the ban of Russian imports, and by their followup actions in trying to secure oil supplies from Venezuela and Iran, it’s clear to me that someone in the administration understands what the problem is…but they’re failing to communicate it to the public, leaving themselves open for this kind of attack:
Psaki or someone should be out in front of this, explaining that the Gulf Coast refineries in question can’t use that onshore US oil they’re touting…we have limited quantities of two grades of offshore oil, Mars and Poseidon, that are medium heavy sours similar to Russian Urals, but that’s about it..