“UNINTENDED CONSEQUENCES”

POTUS mistakenly believes that he is helping the US economy and his political future by duping the Saudis to increase oil production and lower oil prices. Until now the Saudis have complied diligently to avoid potential international wrath caused by the Khashoggi assassination ordered by MBS and oil prices have dropped more than 25%. He thinks that condoning such morally reprehensive misbehavior by an ally seems like a small price to pay to achieve lower oil prices and billions in weapons sales. 

But there are always those pesky unintended consequences. It seems to me that lower oil prices will disproportionally hurt US oil producers because they are now the global marginal high cost producers. A strong domestic oil industry is the best guarantee for ample competitive future domestic energy supply. If you add potential recessionary effects of the trade war with China, drop of Energy related securities, persistent increases in US interest rates by the FED as well as higher budget deficits and debt levels, the resultant economic slow down could easily turn into a wicked recession or worse.

Trump may unintentionally be planting the seeds for the demise of the Republicans in many future elections leading to socialist administrations headed led by the likes of Sanders and Ocassio. Somebody needs to supervise his twitter account before he does any further damage.

 

 

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On 11/20/2018 at 4:39 PM, Manfred Kruger said:

But there are always those pesky unintended consequences. It seems to me that lower oil prices will disproportionally hurt US oil producers because they are now the global marginal high cost producers.  

Granted, lower oil prices will place pressure on the industry, the US is better off with a strong domestic oil industry, and US producers are the highest cost when only production costs are considered.  This raises questions though: 

1) Should we include OPEC's cost to run their welfare states?  If so, then they are the highest cost producers, and there could be a middle price at which US producers survive and OPEC countries devolve into chaos.  That would be good for the us. 

2) If prices dropped, but not enough to kill US production, wouldn't that be good for the US in the short run and relatively neutral in the long run?  

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On 11/21/2018 at 5:39 AM, Manfred Kruger said:

POTUS mistakenly believes that he is helping the US economy and his political future by duping the Saudis to increase oil production and lower oil prices. Until now the Saudis have complied diligently

What exactly have the Saudis done to lower prices?  Seriously.  They have pumped sufficient oil to meet orders/demand.  And that is exactly what they have said they have done, nothing more.  They cannot simply open the valves and let the oil run into the desert.

to avoid potential international wrath caused by the Khashoggi assassination ordered by MBS and oil prices have dropped more than 25%.

Oil prices dropped mainly due to Trump granting waivers to the top 8 Iranian oil customers.  This immediately meant that approximately 1.5 million barrels of extra oil were openly on the market.

He thinks that condoning such morally reprehensive misbehavior by an ally

Trump has repeatedly said that he would not condone such grotesque actions AND he has said that he has no proof sufficient enough to act upon.  Do you have proof?  Or do we have statements made by other high political figures?  Turkey?  Erdogan?  And yes, the CIA is political, or at least that is what a number of ex-CIA people have come forward to enlighten us about (Google Kevin Ship, for example, but there are a number of others: Kevin Shipp, CIA Officer Exposes the Shadow Government).

seems like a small price to pay to achieve lower oil prices and billions in weapons sales. 

Until sufficient proof, proof, is brought out into the open, why should weapons sales to an ally be cancelled.  Even then, security in the Middle East is, IMHO, a separate matter entirely.  Again, my opinion on this one.

But there are always those pesky unintended consequences. It seems to me that lower oil prices will disproportionally hurt US oil producers because they are now the global marginal high cost producers. A strong domestic oil industry is the best guarantee for ample competitive future domestic energy supply. If you add potential recessionary effects of the trade war with China, drop of Energy related securities, persistent increases in US interest rates by the FED as well as higher budget deficits and debt levels, the resultant economic slow down could easily turn into a wicked recession or worse.

@mthebold has touched on these points, but there are a lot of economists who point to an impending recession whether Trump was president or not, or whether there was a trade war with China or not, or whether oil prices dropped or not.  All of these things certainly could make for a deeper financial crisis, I would agree.

Trump may unintentionally be planting the seeds for the demise of the Republicans in many future elections leading to socialist administrations headed led by the likes of Sanders and Ocassio.

Please don't forget that the Republican party did not have much if any chance of winning the last election without Trump.  Don't forget that.  Hillary was virtually a shoe-in.  Can we expect a Democrat to win the next election?  No, not if Trump is running for re-election.  Can we expect a Democrat to win in 2024?  Quite possible, indeed.

Somebody needs to supervise his twitter account before he does any further damage.

Do you ever need to guess what Trump actually says?  Not what he's going to say; but what he actually says?  Less so than almost any president before him, IMHO, because he tweets and gets his message to the public via his internal spokespeople, not the press.  I like it this way.  In fact, if Trump let the media become the spokesperson, can you imagine what we would be asked to swallow?  It's hard enough as it is.  LOL!

 

 

 

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