For a while on Friday I worried I might have nothing to write about this week but then I saw the Biden administration had obliged once again by announcing an oil and gas lease sale on federal lands. As a general rule, I prefer to focus on the EU as its actions have much more immediate implications for my selfish well-being but I couldn’t miss the chance to dissect the news from the U.S.
That's very clarifying, thank you. I've followed this story since it first broke, but no one else mentioned most of the details or made any inferences as to where it is going. 4:45 AM here in Tacoma and I'm already ahead thanks to you. Cheers!
Irina, all great points. - Add this to the mix - The tough and almost impossible to follow regulations Colorado implemented several years ago in SB 181 has been the basis for the new regulations by the administration. It is even funnier as those regulations are moving to all forms of energy. Low cost power is something this administration has no desire to implement.
A bizarre approach to oil in US: releasing Strategic Oil Reserves, e.g. oil from the ground storage by people for people, while limiting oil exploration, e.g. removing oil from ground storage by evolution available to people…???
Not all rock is created similarly. I agree with your take that the Feds want this to fail and then to point to the companies and say “see, it’s. It our moratorium.. when we offer it you don’t buy it…”. Supply chain issues on casing and sand are really real. Interesting, I heard from a very credible source and friend that trucking rates have fallen dramatically (non oil field) due to less goods moving, more drivers and historically, it means we are about to be or are already in a recession.
I commend you for trying to make sense of the inherent mess that is government, their policies and their peripheral institutions. I strongly recommend picking up a textbook on organizational behavior (if you haven't done so already). I'm a "finance guy" but your post took my back to a mandatory graduate level course I had to take on the topic.
All organizations of any reasonable size suffer from a variety of 'institutional inertias' and various 'recognition lags' and 'action lags'. At the end of the day we will continue to see all sorts of schizophrenic behavior from the biggest organization of them all (the almighty US Federal Government)
For example:
Of course no one in the US Federal government thinks it is ok nor optimal for the "leader of the free world" to be in a position where they have to beg a country or regime like Venezuela or Saudi Arabia for ANYTHING (they are both despicable and nauseating in any sense of the word that matters)
Of course no one in the USA Federal government thinks that climate change is a "Chinese hoax" and we just just pollute away all day every day without a care in the world because corporate profits comes first and foremost. You can't be given a graduate degree by any business school in the West without pledging allegiance to the so called "Triple P bottom line" of People, Planet and Profit (and rightfully so!)
As I mentioned previously, there needs to be a lot more pain in the West before rational discourse and actions dominate the regulatory landscape but I'm optimistic that the current conflict will ignite a wave of diversification among western powers (diversification away from Russia and China primarily).
Western central planners are currently living thru a period of historically high uncorrelated risk across all metrics that they pay attention to.
In more or less laymen terms, this historically high uncorrelated risk translates into:
- Inflation at decades high
- COVID/global pandemic
- Kinetic conflict in the European continent
- Supply chain disruptions not thought possible under the just-in-time/optimization regime
adopted over the past 2 decades or so
- Releases from the SPR and other strategic reserves
The so called reaction function of central planners to historically high uncorrelated risk is simple and pre-ordained (DIVERSIFICATION)
Every government (yes, EVERY government) has its own authoritarian agenda whether you like it or not, whether the median voter knows it or not. If you can't grasp this political reality then try to donate money to peaceful protesters in a country like Canada and see what happens or try to have a number of friends over to your private residence where such number exceeds that which has been deemed appropriate by Australian central planners. (I'm reminded of a great quote - "The price of freedom is eternal vigilance" by Thomas Jefferson by I digress...)
Anyhow, the central planners of the broader West (US, Canada, EU, Australia, Japan, Scandinavia you know the usual suspects) have been slapped in the face with the fact they cannot implement their authoritarian agenda as they see fit without a say from Russia and China and so the natural response will be to diversify away this risk such that they can implement their own authoritarian agenda with greater degrees of freedom (again, this is not unique to the West, this is how ALL governments operate)
So going forward expect to see greater degrees of diversification WITHIN the broader West. Expect to see greater energy and supply chain interconnectivity among and within the West (for example more LNG export terminals out of North America and more LNG import terminals in Germany and Europe, greater interconnectivity between Japan, Australia, Taiwan, South Korea and Singapore)...it is no coincidence that Taiwan has just shipped its "crown jewels" to the USA.
The EU for example has no issues being dependent on North American natural gas because we're all on the same authoritarian team. The US doesn't mind depending on supply chains that are anchored in eastern Europe where there is still a pool of relatively cheap labor compared to German labor for the same reason. At the end of the day for the western authoritarian agenda to be able to exert itself in the way that it wants to and in the way that ALL authoritarian agendas seek to exert themselves there must be less reliance on actors like Russia and China who can and often seek to restrict the degrees of freedom of such agenda.
The cold hard fact is that the broader west has enough natural resources, technology and manpower to fuel its authoritarian agenda while respecting the Triple P doctrine and without relaying one bit on actors like Russia or China. The question is just how far is the west prepared to go to secure its authoritarian agenda for generations to come given that doing so may be painful in the short run and riddled with all the schizophrenic recognition and action lags that I hinted at previously.
Of course just because I concede that the western authoritarian agenda is superior in any way that matters to the Russian or Chinese authoritarian agenda it does not mean that I can't acknowledge it for what it is. So please don't go calling me a communist or Putin supporter or climate change skeptic or whatever other delusional and confirmation bias ridden label your monkey brain happens to put together (yes, I too have a money brain; trust me I know)
We live in interesting times! But then again, I'm sure every generation before ours has uttered those words and every generation after ours will echo them so maybe we're not all that special and interesting after all. Let the games begin!
If Haaaland thinks the "extractive industries" have been hard on the environment, just wait until we dig up over 4000% more lithium (by 2040) and numerous other materials from said environment for "green" energy.
Thank you for the clarification. I heard about this but did not look into it. It didn't make sense at first that they (US government) were taking an action that made sense.
That's very clarifying, thank you. I've followed this story since it first broke, but no one else mentioned most of the details or made any inferences as to where it is going. 4:45 AM here in Tacoma and I'm already ahead thanks to you. Cheers!
Happy to help!
Irina, all great points. - Add this to the mix - The tough and almost impossible to follow regulations Colorado implemented several years ago in SB 181 has been the basis for the new regulations by the administration. It is even funnier as those regulations are moving to all forms of energy. Low cost power is something this administration has no desire to implement.
I am hearing a lot about stifling regulations, Stu, some of them not making much sense. Thanks for adding to the list.
A bizarre approach to oil in US: releasing Strategic Oil Reserves, e.g. oil from the ground storage by people for people, while limiting oil exploration, e.g. removing oil from ground storage by evolution available to people…???
Yes, bizarre is one -- polite -- way of calling it, definitely.
Not all rock is created similarly. I agree with your take that the Feds want this to fail and then to point to the companies and say “see, it’s. It our moratorium.. when we offer it you don’t buy it…”. Supply chain issues on casing and sand are really real. Interesting, I heard from a very credible source and friend that trucking rates have fallen dramatically (non oil field) due to less goods moving, more drivers and historically, it means we are about to be or are already in a recession.
I commend you for trying to make sense of the inherent mess that is government, their policies and their peripheral institutions. I strongly recommend picking up a textbook on organizational behavior (if you haven't done so already). I'm a "finance guy" but your post took my back to a mandatory graduate level course I had to take on the topic.
All organizations of any reasonable size suffer from a variety of 'institutional inertias' and various 'recognition lags' and 'action lags'. At the end of the day we will continue to see all sorts of schizophrenic behavior from the biggest organization of them all (the almighty US Federal Government)
For example:
Of course no one in the US Federal government thinks it is ok nor optimal for the "leader of the free world" to be in a position where they have to beg a country or regime like Venezuela or Saudi Arabia for ANYTHING (they are both despicable and nauseating in any sense of the word that matters)
Of course no one in the USA Federal government thinks that climate change is a "Chinese hoax" and we just just pollute away all day every day without a care in the world because corporate profits comes first and foremost. You can't be given a graduate degree by any business school in the West without pledging allegiance to the so called "Triple P bottom line" of People, Planet and Profit (and rightfully so!)
As I mentioned previously, there needs to be a lot more pain in the West before rational discourse and actions dominate the regulatory landscape but I'm optimistic that the current conflict will ignite a wave of diversification among western powers (diversification away from Russia and China primarily).
Western central planners are currently living thru a period of historically high uncorrelated risk across all metrics that they pay attention to.
In more or less laymen terms, this historically high uncorrelated risk translates into:
- Inflation at decades high
- COVID/global pandemic
- Kinetic conflict in the European continent
- Supply chain disruptions not thought possible under the just-in-time/optimization regime
adopted over the past 2 decades or so
- Releases from the SPR and other strategic reserves
The so called reaction function of central planners to historically high uncorrelated risk is simple and pre-ordained (DIVERSIFICATION)
Every government (yes, EVERY government) has its own authoritarian agenda whether you like it or not, whether the median voter knows it or not. If you can't grasp this political reality then try to donate money to peaceful protesters in a country like Canada and see what happens or try to have a number of friends over to your private residence where such number exceeds that which has been deemed appropriate by Australian central planners. (I'm reminded of a great quote - "The price of freedom is eternal vigilance" by Thomas Jefferson by I digress...)
Anyhow, the central planners of the broader West (US, Canada, EU, Australia, Japan, Scandinavia you know the usual suspects) have been slapped in the face with the fact they cannot implement their authoritarian agenda as they see fit without a say from Russia and China and so the natural response will be to diversify away this risk such that they can implement their own authoritarian agenda with greater degrees of freedom (again, this is not unique to the West, this is how ALL governments operate)
So going forward expect to see greater degrees of diversification WITHIN the broader West. Expect to see greater energy and supply chain interconnectivity among and within the West (for example more LNG export terminals out of North America and more LNG import terminals in Germany and Europe, greater interconnectivity between Japan, Australia, Taiwan, South Korea and Singapore)...it is no coincidence that Taiwan has just shipped its "crown jewels" to the USA.
The EU for example has no issues being dependent on North American natural gas because we're all on the same authoritarian team. The US doesn't mind depending on supply chains that are anchored in eastern Europe where there is still a pool of relatively cheap labor compared to German labor for the same reason. At the end of the day for the western authoritarian agenda to be able to exert itself in the way that it wants to and in the way that ALL authoritarian agendas seek to exert themselves there must be less reliance on actors like Russia and China who can and often seek to restrict the degrees of freedom of such agenda.
The cold hard fact is that the broader west has enough natural resources, technology and manpower to fuel its authoritarian agenda while respecting the Triple P doctrine and without relaying one bit on actors like Russia or China. The question is just how far is the west prepared to go to secure its authoritarian agenda for generations to come given that doing so may be painful in the short run and riddled with all the schizophrenic recognition and action lags that I hinted at previously.
Of course just because I concede that the western authoritarian agenda is superior in any way that matters to the Russian or Chinese authoritarian agenda it does not mean that I can't acknowledge it for what it is. So please don't go calling me a communist or Putin supporter or climate change skeptic or whatever other delusional and confirmation bias ridden label your monkey brain happens to put together (yes, I too have a money brain; trust me I know)
We live in interesting times! But then again, I'm sure every generation before ours has uttered those words and every generation after ours will echo them so maybe we're not all that special and interesting after all. Let the games begin!
If Haaaland thinks the "extractive industries" have been hard on the environment, just wait until we dig up over 4000% more lithium (by 2040) and numerous other materials from said environment for "green" energy.
Thank you for the clarification. I heard about this but did not look into it. It didn't make sense at first that they (US government) were taking an action that made sense.
“It didn't make sense at first that they were taking an action that made sense.” Nice!