Biden ’s worries finally happened!
"OPEC+" ministerial meeting was held on on October 5th local time in in Vienna . All parties reaffirmed the decision to reduce overall crude oil production: Since November, "OPEC+" will reduce oil production by 2 million barrels per day.
Reasons and impacts of "OPEC+" production cuts and their impacts
Reduce production by 2 million barrels per day, which is equivalent to reducing the global supply by about 2%. In addition, the "North Stream" natural gas pipeline was bombed, and the United States and Europe will implement a "price limit order" on Russian oil. The global oil supply gap may be higher, which will cause a larger energy crisis .
Previously, member states of the International Energy Agency, including the United States, have all adopted the release of strategic oil reserves to hedge against the oil prices of , , but this move is not a long-term solution, and we must consider the problem of resuming in the future.
Why does "OPEC+" not only reduce production, but instead reduce production? There are mainly the following reasons:
1. "OPEC " is a for-profit organization. The first factor to consider is not whether countries around the world can afford oil, but the economic interests of oil producers. The basic principle is that the production cuts in lead to insufficient supply, and then take the opportunity to raise prices.
Under the general environment of inflation and tightening monetary policy, an economic recession is foreseeable, and the demand for oil in will inevitably decline. If the supply spills out again, it will really become a "baby price".
2. The last time "OPEC" large-scale production cut was in the early stage of the epidemic. In the face of serious shortage of demand, in order to compete with Russia for the market, it announced a production cut of 10 million barrels per day, causing a plunge in global oil prices. Later, "OPEC" and Russia joined forces to form "OPEC+", and began to gradually reduce production and cooperate to make money. As the Russian-Ukraine conflict is becoming increasingly fierce, increasing production will inevitably deteriorate relations with Russia.
3. Driven by . The Federal Reserve , major economies around the world have crazily raised interest rates. The market liquidity risk has increased. Small and medium-sized countries are generally facing debt crisis. , while "OPEC" can earn a large amount of foreign exchange income through high oil prices, alleviating economic pressure. Therefore, they hope that oil prices can remain high.
4. After the US shale oil revolution, self-sufficiency was achieved. 's oil demand for "OPEC" countries has dropped significantly, and its influence in the Middle East is not as good as in the past . Some Middle East countries have deteriorated with the United States, so "OPEC" will naturally not cooperate with the US's requirements for increasing production and reducing prices. Although
5 and Iran nuclear agreement is temporarily shelved, it will return to the negotiating table sooner or later. "OPEC" needs to make room for Iran's return to increase production.
In summary, it is external factors that have caused turmoil in the world crude oil market, orderly reducing production capacity will prevent oil prices from falling, avoid price fluctuations, and protect the interests of oil exporting countries. Of course, the impact of this cannot be ignored:
1. After the previous rounds of release of strategic oil reserves, global inventory is relatively low. In addition, the energy crisis continues to deepen, "OPEC+" production cuts will directly raise oil prices. The whole world will pay for this, especially the European energy crisis .
2. For Moscow, production cuts are of course good news. can not only put pressure on European countries, but also increase income by itself. Russian Vice Prime Minister Novak said that in order to cope with the price limit and embargo of EU , Russia will cut production to the necessary level and will not supply oil to "unfriendly countries."
3. Several times of persuading to increase production, but was ignored. Biden said bluntly that he was disappointed with the "short-sighted" decision of "OPEC+". The US government claims that the cut in this time may be regarded as a "hostile act" by the US side, and will promote the response of the "ban on oil production or export of cartels" bill.
Especially the midterm election is approaching, and the high oil prices have also increased Biden's election costs. For this reason, the United States has to further release its strategic oil reserves of 10 million barrels, while also not forgetting to pose political threats to Gulf countries.
However, the facts have proved that the Gulf countries do not take this trick of the United States, and have rejected and ignored the US's demand for increased production, and expressed strong dissatisfaction with EU countries with the price limit and embargo of Russia, believing that government actions have undermined the market nature of oil.
It is worth mentioning that "OPEC"'s discooperation with the United States and its care for Russia, reflects that Russia has won another goal in the Western economic sanctions .
In order to stabilize domestic oil prices, Biden also called on energy companies to lower retail prices. In addition, he also used his killer weapon - " burning grain" .
relies on "burning grain" to stabilize oil prices
In the past few decades, the United States has established absolute food hegemony in the world through mechanization, genetically modified, fertilizers and other means. , especially corn and other crops, can be used as raw materials for fuel ethanol and biodiesel, to replace petroleum.
In 2006, the subprime mortgage crisis occurred in the United States, and oil prices soared. Therefore, the government announced the expansion of corn planting area and refining a large amount of fuel ethanol to deal with excessive oil prices. resulted in consuming a large amount of grain reserves . The international grain prices were high, and hundreds of millions of people were facing the threat of famine.
As long as oil prices rise, the United States will start to "burn grain", to be precise, "burn corn". The United States is the world's largest corn producer and exporter, with a production of 377.5 million tons, and exported nearly 70 million tons in 2021, accounting for about 40%. At a time when the global food crisis is intensifying, the United States has instead reduced its corn exports.
In fact, the United States has been "burning corn" wildly since last year. Nearly 20% of corn is used to produce biofuels, mixing low-cost fuel ethanol into gasoline for sale.
This gasoline containing 15% ethanol fuel is called E15, which is lower cost and cleaner, which can effectively reduce oil prices and improve the environment; but it is not without its shortcomings. E15 is more corrosive than ordinary gasoline. fuel-saving is fuel-saving, but it is also a waste of cars, so many consumers and traditional energy manufacturers oppose the popularization of E15.
In fact, E15 gas stations in the United States now only account for 1.5%, and they cannot replace traditional energy in the short term. But Biden still attaches great importance to the field of biofuels, investing $2 billion in related research at the Biotechnology/Manufacturing Summit held in mid-September.
is indeed useful to regulate the energy market by increasing biofuel production capacity, but it is not big, and it is even useless, which will directly stimulate the grain market to rise all the way. is completely replacing another crisis with one crisis. Of course, is a crisis for poor countries, but it is a huge business opportunity for the United States, which is the overlord of grain traders.
alleviate the crisis? Harvest the world!
In 1973, Egypt and Syria jointly attacked Israel. In order to retaliate against the United States' support for Israel, the Arab countries in "OPEC" decided to significantly reduce production, and even threatened with an embargo.
Result Nixon government ignored the warning and provided Israel with US$1.5 billion worth of arms. Arab oil-producing countries immediately announced an oil embargo on the United States and suspended exports, which even caused a chain reaction in some European countries, leading to a world oil crisis.
The oil price at that time rose from US$3 per barrel to US$13 per barrel. The economy of Western countries continued to decline, the European economy fell by 2.5%, the United States fell by 4.7%, and Japan fell by 7%.
Under the impact of the oil embargo, it forced all parties to find ways to increase oil supply, including ADM company , one of the four major grain merchants . proposed to use grain to make biofuels, which raised grain prices all the way.
For ADM, replacing energy is something the United States cannot afford, and it has since brought it to a "iron rice bowl"; for the US government, they gradually realized that food can be used as a "weapon" to control the whole world, and even the Soviet Union, the rival at that time, suffered from severe food dependence.
Therefore, corn can affect both grain prices and oil prices, becoming a well-deserved "artifact" . This is also the reason why the US government has supported grain merchant giants and attached importance to biomanufacturing technology in previous dynasties.
With strong productivity, technology and policy support, the United States has become the largest fuel ether producer, and all the money has been earned by the United States. However, the so-called biofuels have not solved the world energy crisis, but instead hyped up a false alternative concept.
is like paying "IQ tax" when buying diamonds. Can the production of ether fuel really alleviate the oil crisis? Regardless, in short, if you can make money, you will be the right one. For those countries suffering from "food dependence" on the United States, they can only buy food at high prices, while poor countries in Africa are simply unable to bear the heavy pressure.
While "burning grain", the United States vigorously encourages the EU and Ukraine to carry out the war against Russia to the end, in order to maximize the restraint of the two major grain exporters of Russia and Ukraine, destroy the international grain trade system, and also deliberately delay global logistics speed through grain merchants and further raise grain prices.
combined with the ongoing energy crisis and the price limit order imposed on Russian oil, the value of sugar cane, including corn, palm oil, , soybean oil, rapeseed oil, etc. as biofuel raw materials is infinitely amplified.
data shows that in 2021, the United States, the European Union, and Brazil consumed 300 million tons of grain for biofuel, and this year the energy and food shortage is even larger; has frozen bones, and the stinky wine and meat stinky , and there are nearly 1.7 billion poor and hungry people around the world; at the same time, the four major grain merchants affected by the United States, such as ADM, Bangji , Cargill , Louis Dreyfu , and Louis Dreyfu , and the four major grain merchants affected by the United States have revenues of more than US$330 billion, and their profits have doubled.
That is why the United States provoked a conflict between Russia and Ukraine and made a fortune in war. In fact, the United States itself does not have food and energy security issues. Biden is now eager to calm oil prices mainly due to political considerations. The rise in oil prices itself is profitable for Wall Street elites and politicians.
So it is not that the world has truly encountered a food crisis and an energy crisis, but that the United States has been manipulating the market, artificially destroying trade order, disrupting resource allocation, and frantically harvesting the wealth of various countries.
The only thing Biden miscalculated is that the Fed failed to deal with this hyperinflation in advance, so that the United States faces the risk of an economic recession.
So all efforts now must serve to boost the economy, elections, and appease allies, rather than make money. Otherwise, how could the United States, as a net exporter of energy, be angry at the "OPEC" production cuts?
