/OIL ECONOMICS IS SHIFTING – THE WORLD BEWARE

OIL ECONOMICS IS SHIFTING – THE WORLD BEWARE

Would it surprise you to know that Mexico, UK and Venezuela are importing oil, gasoline and hydrocarbons?

And at the same time, the Trump administration is opening new fields for exploration and the number of active oil rigs in the U.S. is booming. Interestingly, Brent Crude hit $70 a barrel this week. There is a tectonic shift in oil, and the shift will continue its current trajectory. Under Trump, the U.S. is planning on being a net exporter of energy!

The situation in Venezuela is very dire.  Oil production is forecast to half this year, and the country is running a huge negative foreign reserve deficit. They can’t import basic commodities (foods) and at the same time oil! Yes, Venezuela is a NET importer now. One of the countries with the largest reserves of oil and gas is effectively embargoed. People apparently have no food – they are eating rabbits, killing cows in the streets … it’s very sad!

At the same time, the exact same thing is very quietly being done to Mexico. Trump is NOT only planning on building a wall and starting mass deportations of Hispanic immigrants, and walking out of NAFTA but the U.S. is now exporting oil to Mexica (at record prices). This week, Fiat-Chrysler announced a plan to bring car production back to the U.S. from Mexico. They know how to read the tea leaves! The Peso has stabilized recently, but has been dropping since Trump took power. Why exactly Mexico is being screwed, I do not know, but for sure its happening. Trump has declared war on Mexico!

In 2017, The UK’s reliance on imported oil products reached its highest level in 33 years as rising demand for fuels continues to outstrip what domestic refineries produce. According to official government data the figure is the highest since 1984 when industrial action cut coal production and forced the UK to burn oil. Interestingly, the UK now is approaching the status of other major European economies in its reliance on energy imports.

The back drop to all this is that Oil prices are steadily rising! This surely, is NOT a formula for an economic boost for Mexico, UK or Venezuela. In fact, it spells imminent disaster as oil prices continue to rise.

There is also ONE other signal that would suggest that in fact prices will continue to rise. The Saudi’s are buying paintings, real estate etc. – assets that are great hedges against inflation. They clearly expect a bout of inflation! Trump administration too is planning for a major bout of inflation (to essentially devalue U.S. treasury debt); as he adds another trillion in federal debt in 2018 and 2019 (all part of the recent tax cuts passed by Congress).

The U.S. federal government (and the U.S. generally) is the largest, most significant buyer of oil and gas. It can unilaterally dictate energy market outcomes – globally! This is an important weapon Trump carries as he wages war on whoever he deems are America’s enemies and allies.

It is important to note that the Saudi’s have recently completed new pipelines from the Persian Gulf to the Red Sea and Arabian Sea. The Persian Gulf could literally be shut down, and they will be able to continue exports. But NOT – Iran. This would have a massive affect on oil prices. Is this the plan? Will the U.S. use war with Iran to not only hit Iran, but also, Mexico, Venezuela and the Europeans? There is something much bigger going on here – in smoke filled, back rooms in Trump Tower.

Will the Brits allow themselves to be impoverished without a source of cheap oil? Is invading Iran the plan?

The trends are clear. At this rate, my prediction right now, is that in about 14 months (in 2019), we will see some major conflict in the Persian Gulf. This will be after Brexit (March 2019), after before the start of America’s next presidential election cycle, when new American oil rigs are pumping at full blast, after mid-term elections in the U.S.! Yes, 2019.

Oil prices will really spike, and Trump’s enemies will be brought to their knees. Mexico, Venezuela, and Iran. I am thinking there will odd events involving the Russians, Europe, the Brits, and British oil and gas company fields in Iraq, Azerbaijan and Qatar too. Maybe China too will be undermined. Be warned!