Entries Tagged as 'Venezuela'

Make Crude Oil Exports a Part of US Trade Policy

Make Crude Oil Exports a Part of U.S. Trade Policy

Sen. William S. Cohen

Recently, former Sen. William S. Cohen made headlines by presenting a thorough and persuasive argument that President Obama should seek to make crude oil exports a part of US trade policy. The argument was presented via Time and pointed specifically to four main benefits the U.S. could enjoy by focusing more on energy exports:

1 – Exports would strengthen NATO by providing an adequate Western response to Russia’s practice of withholding energy resources as a power play. Energy exports from the U.S. would provide European allies with an alternative to dependence on Russia.

2 – Exports to the Far East would promote economic growth in allies like Japan and South Korea while opening the possibility of collaborative trade efforts with influential countries like China and India.

3 – Energy exports could promote a great deal of collaboration with Central and South American countries. According to reports by FXCM, Venezuela remains the country with the single highest volume of oil reserves. With approximately 297.6 billion barrels on reserve (ahead of Saudi Arabia’s 267.9), the country is naturally viewed as the leading source for this part of the world. However, Cohen’s argument points out that domestic challenges are causing Venezuela to scale back its exports. This results in a new need for energy resources, which the U.S. could provide, for much of the hemisphere.

4 – Easing restrictions on U.S. crude oil exports could drastically improve the economy and job situation at home. Cohen notes that crude oil exports would essentially serve to further the energy boom that has already had positive effects on the U.S. economy, specifically pointing to the “shale revolution” as an example.

As mentioned previously, it’s a very convincing argument for an increased focus on energy exports for the U.S. Not only have new technologies essentially increased the United States’ energy reserves by opening new avenues for obtaining resources, but shifts in geopolitics around the world have simultaneously created new needs in various regions. These two factors would seem, as Cohen suggests, to foster natural trade partnerships that could be extraordinarily beneficial for the U.S. economy and also save President Obama’s legacy on trade.

So why haven’t we gone about it already? Well, as is often the case with political matters, it’s a problem that sounds simple but has proven to be exceedingly complicated. Basically, as is explained in an article at Bakken, a U.S. ban on crude oil exports has been in place since the 1973 Arab oil embargo. Also, various periods of inaction in Congress since then have resulted in the ban’s ongoing existence.

This means that before the U.S. can turn its attention toward organizing and implementing crude oil and energy export programs, Congress and President Obama will have to work together to lift an existing ban. As has been proven over the years, such a collaborative effort is difficult to come by. The hope, in this case, is that the clear benefits of increased energy exports by the U.S. both abroad and at home will yield a rare sense of partnership between the president and Congress.

It’s a lot to hope for, but the benefits are clear. In the aforementioned Bakken article, former CIA director Leon Panetta and NSA advisor Stephen Hadley were quoted with the most simple explanation of the idea of energy exports: “The U.S. can provide friends and allies with a stable alternative to threats of supply disruption…. This is a strategic imperative as well as a matter of economic self-interest.”

It’s hard to imagine why we wouldn’t give it a shot.

Jenna Batten is a freelance writer based outside of Baltimore. She typically covers topics in finance, politics, and travel, and has contributed to numerous publications online. When Jenna isn’t writing, her hobbies include sailing and web design.

Note from Mover Mike – there has been some concern about exporting natural gas. Some have argued it would be good for our balance of trade, but the increased demand would raise prices for a very cheap fossil fuel here at home.

Oil Collapse Threatens Universe

George Ure at Urban Survival blows my mind with this information today about the Oil Collapse:

Oil Price Collapse

Oil Price Collapse

But for the past many months I have been telling you what? ‘

That right: Oil could collapse into the $30s per barrel.

That’s because the world is in the grips of a gigantic deflation the likes of which have never been seen before and that in itself is remarkable and worthy of discussion.

First, however, we need to be clear that a barrel is not a barrel. If you are talking about the ubiquitous 55-gallon drums, popular in American chemical, refining, and coatings, that’s not what a barrel of oil is: Write this down: Oil is 42 gallons per barrel.

Just how cheap is oil, right now? Well, if you drop by the local convenience store this morning, oil is cheaper than your coffee by a damn-sight. Grab a bottle of that water (a large Desani or Aqu-What’s-It) and you will pay more for the water than for oil. (Admittedly, there’s a price off convenience and maybe if water folks made a 42-gallon size. Even so, compare oil to those 5-6 gallon water jugs at the store.

While all of this may sound like really, really good news, oil breaking into the $51 range this morning increases the odds of panic in financial markets this spring. Think you could wake up to a Dow 2,500-4,000 points lower than where we are right now before summer? Don’t bet against it.

Part of the reason oil was so high (for so long) is the Fed’s quantitative easing. Usually when there’s a big recession (remember 2007-2010?) prices come right down, everyone sees a bargain, and recovery begins.

Unfortunately, what the Fed’s money give-aways have done is set a semi-permanent deflation expectation in place. While the QE money kept deflation from becoming obvious (and wage collapsing, and even more massive unemployment) it is now off the table and the price of oil is dropping quickly.

Let’s run a number or two to show economic impacts: Let’s say you bought a car getting 18 MPH highway, $4.25 Gas and drove 100,000 miles. Total fuel bill? $23.611.

Fast forward to my son’s car (Versa) mostly highway and around 37 MPG and gasoline we’ll use Triple A’s national average of $2.199. Driving it the same 100,000 miles, his fuel bill will only come to $5,943 and change.

This is whatcha call an economic shock. Car costs (on a real cost per mile basis) are down to about 1/4 of where they were in the past 7-years. This is deflation and huge deflation at that.

Oil could drop down to the $50 range. But if it can take out $50, why not $48? And then what holds it at $45? You see how this goes.

Emerging Markets

Emerging markets

Emerging markets

Wikipedia defines emerging markets as “The four largest emerging and developing economies by either nominal or PPP-adjusted GDP are the BRIC countries (Brazil, Russia, India and China). The next five largest markets are South Korea, Mexico,Indonesia, Turkey, and Saudi Arabia...”

Martin Armstrong warns, “The emerging markets have issued debt in dollars which is a currency they cannot print and do not control. This hard-currency debt has tripled in the last decade and is split between $3.1 trillion in bank loans and $2.6 trillion in bonds. This will ripple through the banks causing massive new losses just as the Cyprus banks held Greek debt. This time, it will be the debt of all emerging markets. We are looking at a drastic scale of the biggest cross-border lending sprees of the past two centuries.

“A large portion of this emerging market debt was taken out at real interest rates of 1% on the implicit assumption that the Fed would continue to flood the world with liquidity for years to come. This has made the emerging markets vast borrowers dollars so in a trading position they are “short dollars”. This is the greatest short-position on a currency on the boards and when the dollar RISES, they will face the margin call from Hell itself. This will set off another banking crisis for bankers always buy the high and sell the low. They have NEVER learned even once from any economic crisis.”

Read more at Coming Emerging Market Debt Meltdown


Venezuela Cracks Down

Venezuelan President Nicolas Maduro has used the military, legislative and judicial power consolidated during 15 years of socialist rule in a sudden series of blows against opponents who have spent more than a month protesting in the streets, knocking down their barricades and throwing dissident leaders in jail.

Where are Obama and Kerry?

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