October 6, 2022 - 3:30pm
OPEC+ announced on Wednesday that it would make production cuts of 2 million barrels per day, which is roughly equivalent to 2% of global supply. The decision is monumental. It shows that a new type of world is emerging in the wake of the war in Ukraine, and one that does not revolve around the West. As White House spokesperson Karin Jean-Pierre said this week: “It’s clear that Opec+ is aligning with Russia.”
The reality is that the decision to cut production is completely rational from the point-of-view of OPEC+. With interest rates rising quickly and growth slowing, Europe, which makes up around 19% of total oil consumption, is almost certainly facing down a serious recession next year. There is also a risk that the United States and Canada will fall into recession at the same time — these countries make up a further 27% of total consumption.
OPEC+ does not want to see history repeat itself. In the 2008 recession, European oil prices fell from just over $140 a barrel to just under $40 a barrel — a massive decline of over 71%. So, the likely reason that they are cutting production is to try to firm up the market in case there is economic turbulence ahead.
It is not OPEC+’s decision that is odd, then, so much as it is the American response. Jean-Pierre’s statement is somewhat understandable given that President Biden was aggressively lobbying the cartel to lower oil prices, presumably so he could have claimed to lower oil prices in the run-up to the midterms this November. Yet it still comes across as impotent, even pathetic.
Historically, American presidents have been able to lobby the Saudis to lower oil prices when it was so required. When Saudis flooded the market with oil in 2014, many were quick to point to the work of the White House behind the scenes. Certainly, the timing lined up in a way that suggested it. By the time the midterms rolled around that year on November 4th, the oil price had fallen around 28% from its peak in June.
What we are seeing emerge out of this week’s OPEC+ meeting is that the Saudis are no longer willing to play ball with the Americans. This is not surprising because Saudi Arabia is rumoured to be joining the BRICS alliance next year. The Saudis are rapidly moving away from the Western sphere of interest and are instead aligning with the emergent developing economies led by Russia and China.
This week’s OPEC+ meeting likely signals that future oil prices will be set in line with the needs of the BRICS+ countries, rather than with the needs of the West. Unless, that is, the West reconsiders its approach to diplomacy and how it conducts itself with these emerging economies. But the foot-stomping by the White House signals that they have not even begun to think through such matters. As winter nears, this could prove fatal.
Philip Pilkington is a macroeconomist and investment professional, and the author of The Reformation in Economics
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SubscribeReform and some of the Cons (the ones not in charge for most of my lifetime) are the only political movements that don’t actively mistrust and work to destroy rootedness, security and identity.
“the reason potholes are never fixed is a lack of funding and council incompetence”
It’s because road maintenance is a licensed activity. and it’s illegal for anyone unlicensed to do the work. The certification is convoluted including things like a quality management system and audits in addition to the things you’d expect like material specifications. You can’t, as a competent adult, just fill in a hole.
The need for certification obviously limits the number of potential suppliers, which then, naturally, both pushes the price up and limits supply, creating backlogs due to the lack of sufficient certified suppliers. And since certification is an upfront expense, it acts as a barrier to entry for new suppliers, particularly for small businesses that do not have administrative ‘slack’ to afford to do the paperwork. Certification will always benefit larger suppliers as a result.
Now filling in a hole will need to comply with some basic standards, so it’s not a job for cowboys. But I would have thought a much simpler and cheaper process would be possible. Material could be bought ‘off-the-shelf’ to standards. Initial specific training just for pothole repair and how to do a good job could be provided for free by the council to interested parties (would it need more than a day?). And a council overseer could be employed to view the works as they take place to ensure they are competently done and then council certified for liability issues. A simpler process would allow smaller, local firms to offer services (perhaps at a fixed price), increasing supply, reducing prices and speeding up the number of repairs.
The ‘industry’, however would lobby against any such rationality – not only the existing contractors who have spent money on admin and training, but also the body of auditors, and all the specification and standards writers, the trainers, and the consultants and advisors who handhold the business through the certification processes. It’s in the interest of these groups to extend the requirements, possibly including hiring practices or sustainability. Certification becomes expensive, time-consuming and full of fees for ‘professionals’ and a long way away from the basic need to just fill in a hole.
Insightful comment.
We should definitely do as you say.
There is also, though, a question priorities. Until all the potholes are fixed, all MultiKulti outreach efforts and other non-essential council expenditure ought to be terminated.
Have you considered the issue of potholes identifying as Bumps?
I live in a village. We want our parish lengthsman back.
Oddly, all this bureaucracy over filling in holes brings forth exactly the very cowboys to do the job that no householder would ever employ. The road near me has had its potholes filled three times in eight years, and now awaits another load of tarmac sloshed roughly in the same holes
There was a scandal recently over the insulation of homes by registered suppliers, much of whose work was not only shoddy, but significantly below standard. And most of the work had been authorized and passed by council inspectors. Many of these homes are now unsellable. So even government registered suppliers are untrustworthy – as were the building inspectors at Grenfell.
How do we go forward when we cannot even trust our own government?
Aye, but who pays for it? 14 billion just to clear the backlog.
Rather enjoyed reading this.
But really, Poppy : “sandstone Cotswold villages” ! A subtle April Fool’s wind-up ?
Correct. Oolitic limestone in fact.
Really good piece.
Thank you, Poppy, for an acute piece of observation and analysis.
Lovely Poppy thank you. It does seem that English villages offer the only escape from grim national decline. However our Hampshire village is showing signs of creeping and unsettling change… the two over-sized care workers who cram into a little car and drive to administer ‘care’ to the unlucky elderly – in and out in minutes… the reckless drivers from Amazon and Evri…village feuds about the imposition of affordable housing… a new monstrous modern house to spoil the view…houses sitting empty as ordinary families appear unable now to afford four bedroomed homes with large gardens…. But the daffodils are heavenly.
As a native and resident of the north of England, i’ve recently had the opportunity to spend some time in a Hampshire village (not far from Winchester) and the difference in the quality of life was a real eye-opener, gorgeous and welcoming village pub included.
I hope your village survives the travails of what some call “progress”.
Poppy Sowerby is also proving to be an eye-opener. Having mainly written about the latest fads and trends amongst the younger generations (some of which, at least, was interesting) she’s beginning to expand her horizons; ironically enough, by reference to her roots. This article hits quite a few nails on heads.
It really seems like the price of housing is the cause, directly or indirectly, of half of our problems in the West.
Also, what’s with all the empty houses and apartments? NYC, where I live, is full of them.
“the reason potholes are never fixed is a lack of funding and council incompetence, neither of which would be helped by a Reform victory”
More likely, as in America, the reason infrastructure is always starved for attention and funding is that tax money is siphoned off into social engineering instead of civil engineering. In that sense, a Reform victory might well begin to turn the tide.
Fewer than 17% of the UK population live in what can accurately be described as ” rural areas” or villages. Which ever way the inhabitants vote or whatever their opinions are, they will never have as much sway with our politicians as urbanites.
In my rural idyll elections have been cancelled by the Labour national government at the request of the local Conservatives.
The thought of Mosques being built anywhere in England gives me the creeps, but the thought of them being built in the countryside makes me feel angry and very sad.
Yes indeed. Not far from my home is a very pretty, quintessentially English village, or rather it was quintessentially English. A few years ago some farm buildings on the edge of the village became a mosque, so it’s perhaps not surprising that the last census revealed the population of the village to be 25% Asian. Meanwhile, not far away, an old pub deep in the woods has become a Hindu “studies centre”.
But I do live in Slough – 25% white British at the last census – and not far from the London Borough of Hillingdon – 48% white – so perhaps this encroachment, dismaying though it is, is unsurprising.
Read the article: not in the countryside but in a town, like where churches are repaired, sometimes.