It's been a wild week. Over the weekend, Iran unleashed a barrage of missiles on Israel; the world awaits the response. President Trump is in the dock, in a criminal trial he looks set to lose. Speaker Johnson finally appears ready to introduce various funding bills for Ukraine, Israel and Taiwan, even as the Clown Show tries to take him down. And meanwhile, the US Secretary of Defense, Lloyd Austin, admonished Ukraine to observe proprieties and not make waves as the country fights for its life. The US appreciates that the situation may be desperate, but for goodness sake, please do it quietly! Those attacks on Russia refineries could increase fuel prices and inconvenience all of us.
Ukraine has been facing the twin challenges of an excessively timid Biden administration and a wildly dysfunctional Republican conference in the House. Barring a vote to fund Ukraine this weekend -- and even with it at some point -- Ukraine may be compelled to try to restrict Russian oil exports through the Black Sea. A combination of Russian, western and other tankers export almost $10 billion of Russian crude from the Black Sea every month. That equals the entirety of Russia's defense budget. The oil continues to flow only because the US and western Europe so desire. In essence, the US is protecting Russian oil exports and allowing Russia to fund the war thereby.
Ending this trade would materially degrade Russia's ability to conduct the war. It would also raise oil prices comfortably to $150, and perhaps as high as $200, per barrel. This would push Europe into a steep recession and would similarly punish US consumers. Indeed, US drivers would lose $60 bn / month in added gasoline and diesel costs, with the price of regular gasoline reaching perhaps $6 / gallon ($8 in California). US government support of $60 bn for Ukraine for the entire year would look like peanuts by comparison.
Trump Says Europe Is Freeloading on Ukraine, But the Actual Numbers Are Bigly Different
Should that happen, Kyiv would be in a position to shift the blame firmly onto the MAGA Republicans in Congress. Does Marjorie Taylor Greene prefer $6 gasoline to supporting Ukraine? Kyiv can put her to the test.
A strike on a Russian tanker would also panic the White House, prompting a swift and desperately needed restructuring of the Price Cap. Ukraine will not win the war without it.
Attacking Russian tankers is, of course, a politically risky option. A very risky option. On the other hand, certain defeat at the hands of the Russians is a much higher price to pay. If push comes to shove, the Ukrainians need to shove. Marjorie Taylor Greene and the MAGA Republicans need to decide if they want to own $6 unleaded as the Ukraine vote reaches the House floor.
Oil Prices
Brent crested $90 last week, but is trading down a bit, $87 at writing. Nevertheless, copper prices continue to surge. Thus, either copper has to retrace, or Brent might be expected to rise to $96 / barrel.
Urals has closed up, much as expected, to $78 / barrel, $18 / barrel above the Price Cap.
The Urals discount, the difference between Russia's western crude oil export price and Brent, has compressed to around $11 / barrel, again, much as expected.
Urals is now at the highest level for this date in at least nine years.
Despite US fretting, European gasoline and diesel prices do not appear materially affected by Ukraine's attacks on Russian refineries.
Overall, oil prices are developing much as expected and against Ukraine's interest. The easiest, though high risk, way to motivate a desperately needed and vastly overdue restructuring of the Price Cap would be an attack on an oil tanker carrying Russian crude in the Black Sea. If the House fails to fund Ukraine and the White House declines to revisit the Price Cap, it might come down to that.
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Comments (10)
You don't seem to know a lot about Trump, he's not president, which you seem to be forgetting. It is BIDEN that wants to prevent Ukraine from attacking Russia. Trump provided lethal aide to Ukraine, which Obama refused to do. Get your facts straight.
Thinking it over perhaps Ukraine is doing what is best, destroying the refineries where possible. They are harder to repair and more costly than the other options mentioned. By destroying refineries they can not store the stuff for later sale.
Sink a hundred ships each month or destroy a couple of loading terminals... hmmm?
Thousands of producing wells are capped in Montana and the Dakotas. Not enough crews to run them. Covid retired a lot of older workers. They don't want to come back. Its a hard life even though it pays well.
Rather than sink the ones leaving, full of fuel, thereby risking environmental damage and the likelihood that the oil has been paid for at time of departure, why not sink the empty ones arriving to load up? No chance of fuel being paid for, and no environmental damage.
Bold advice from this investment banker. His portfolio may increase in value, but who will pay for the environmental damage?
It would be better to start with Russia’s shadow fleet that sails through the Baltic Sea. These ageing, uninsured and unseaworthy ships could cause major environmental havoc in the Baltic Sea, according to the Swedish foreign minister.
For safety reasons, any uninsured Russian ship that sails through the Baltic Sea should be put on a chain. If a ship’s condition is deemed inferior, the oil should be pumped out.
Do that and we will see what happens.Europe and USA turns against Ukraine and Russia escalate more and believe me she has the capacity to do so...
I think Ukraine needs to take this bull by the horns and show the rubber spined, corrupted, China paid-off Democrats, Putin loving Republicans how a real country with real patriots operates. We all know that it's about money and control. Ukraine is valuable to Russia, China, USA, EU, NATO, WEF, but they all want to own Ukraine for a cheap price. They are ALL thieves.
Maybe Ukraine needs to stop listening to shady global "advisors" and handle this Ukrainian style. You guys know the enemy you are dealing with. You know what the Kremlin has done to 12 time zones over many decades.
Take out Russia in your own way. Sink those tankers, down those bombers, squeeze as much money as you can from all those fake allies.
One tanker loss won't effect worldwide oil prices much, but it will make a point.
@Terry, it will make a bigger impression than you think. It's about setting new precedents. Holy Crap, they just SANK a Russian tanker! Uh Oh! Ukraine is going for the luquid gold!!
THAT will get these thieves posing as allies off their asses. Quickly.
I believe you are wrong about high gas price in USA. USA has enough gas for itself so it will not be without gas. Biden could institute gas price freeze on gas in USA. If Republicans object to price freeze, Biden blames gas hike on Republicans.
Putin threatens nuclear, Ukraine threatens shut down of Black Sea oil shipments.
Ukraine destroys Russian oil processing and shipping.
There is always a bright side, we don't need that air pollution anyway.
@guest from USA, quite dumb you are.
@GUEST FOR USA IS DUMB, Yes, he is quite dumb...we don't claim him...would you take him please? And maybe 5 million more like him? Maybe we can make a deal.
@guest from USA, oh, I see you have bumped into some of the critics/objectors who’s only means of expressing a contrasting opinion goes like this: “You are dumb! You’re so dumb!” Obviously these are feeble-minded souls who deserve our pity. Just ignore them. If they had valid points to make, and the mental capacity to make them, they would explain their opposing views and we could all be enlightened by their arguments. But clearly, they are themselves too dumb to have, or be able to express, valid thoughts.