Tag: EU

Which Will Come First: $5 Per Gallon Gas or an Iranian War?

On By kingsjesterIn Politics6 Comments

When Barack Hussein Obama was inaugurated the 44th President of the United States, back in January of 2009, a gallon of gas cost $1.84.

A little over a month before Obama ascended to his throne, his loyal minion, Tom Brokaw, of NBC, made the following suggestion:

Let’s talk for a moment about consumer responsibility when it comes to the auto industries. As soon as gas prices dropped, consumers moved back to the larger cars once again. The SUVs are the big gas consumers. Why not take this opportunity to put a tax on gasoline, bump it back up to $4 a gallon where people were prepared to pay for that, and use that revenue for alternative energy and as a signal to the consumers: “Those days are gone. We’re not going to have gasoline that you could just fill up your tank for 20 bucks anymore.”

Well, it look like ol’ Liberal Tom is going to get his wish:

CNBC.com has the story:

The world’s top oil exporter, Saudi Arabia, appears to have cut both its oil production and export in December, according to the latest update by the Joint Organizations Data Initiative (JODI), an official source of oil production, consumption and export data.

The OPEC heavyweight saw production decline by 237,000 barrels per day (bpd) from three-decade highs of 10.047 million bpd in November, the JODI data showed on Sunday.

The draw-down was sharper for the actual amount exported, declining by 440,000 bpd, or 5.6 percent, to come in at 7.364 million bpd, the data also showed. The level would still be similar to exports after a steep ramp-up last June.

In its monthly report on February 10, the IEA put Saudi Arabia’s production number for December slightly lower at 9.55 million bpd, a disparity of 260,000 bpd versus the JODI data.

Iran appeared not to have filed data in time for the latest release, providing no additional clues about how many export barrels were already lost in December, as some reports have suggested.

In a related story, courtesy of Reuters.com:

Iran has stopped selling crude to British and French companies, the oil ministry said on Sunday, in a retaliatory measure against fresh EU sanctions on the Islamic state’s lifeblood, oil.

“Exporting crude to British and French companies has been stopped … we will sell our oil to new customers,” spokesman Alireza Nikzad was quoted as saying by the Ministry of Petroleum website.

The European Union in January decided to stop importing crude from Iran from July 1 over its disputed nuclear program, which the West says is aimed at building bombs. Iran denies this.

Iran’s oil minister said on February 4 that the Islamic state would cut its oil exports to “some” European countries.

The European Commission said last week that the bloc would not be short of oil if Iran stopped crude exports, as they have enough in stock to meet their needs for around 120 days.

Industry sources told Reuters on February 16 that Iran’s top oil buyers in Europe were making substantial cuts in supply months in advance of European Union sanctions, reducing flows to the continent in March by more than a third – or over 300,000 barrels daily.

France’s Total has already stopped buying Iran’s crude, which is subject to fresh EU embargoes. Market sources said Royal Dutch Shell has scaled back sharply. Shell had no comment on the announcement.

Among European nations, debt-ridden Greece is most exposed to Iranian oil disruption.

Motor Oil Hellas of Greece was thought to have cut out Iranian crude altogether and compatriot Hellenic Petroleum along with Spain’s Cepsa and Repsol were curbing imports from Iran.

Iran was supplying more than 700,000 barrels per day (bpd) to the EU plus Turkey in 2011, industry sources said.

By the start of this year imports had sunk to about 650,000 bpd as some customers cut back in anticipation of an EU ban.

And, if ke you lose your breakfast, this probably will.

The Associated Press reports that:

The U.S. and Britain on Sunday urged Israel not to attack Iran’s nuclear program as the White House’s national security adviser arrived in the region, reflecting growing international jitters that the Israelis are poised to strike.

In their warnings, both the chairman of the U.S. joint chiefs of staff, Gen. Martin Dempsey, and British Foreign Secretary William Hague said an Israeli attack on Iran would have grave consequences for the entire region and urged Israel to give international sanctions against Tehran more time to work. Dempsey said an Israeli attack is “not prudent,” and Hague said it would not be “a wise thing.” It was not known whether their messages were coordinated.

Both Israel and the West believe Iran is trying to develop a nuclear bomb – a charge Tehran denies. But differences have emerged in how to respond to the perceived threat.

The U.S. and the European Union have both imposed harsh new sanctions targeting Iran’s oil sector, the lifeline of the Iranian economy. With the sanctions just beginning to bite, they have expressed optimism that Iran can be persuaded to curb its nuclear ambitions.

[As mentioned earlier] On Sunday, Iran’s Oil Ministry said it has halted oil shipments to Britain and France in an apparent pre-emptive blow against the European Union. The semiofficial Mehr news agency said the National Iranian Oil Company has sent letters to some European refineries with an ultimatum to either sign long-term contracts of two to five years or be cut off. The 27-nation EU accounts for about 18 percent of Iran’s oil exports.

Israel has welcomed the sanctions. But it has pointedly refused to rule out military action and in recent weeks sent signals that its patience is running thin.

Israel believes a nuclear-armed Iran would be a threat to its very existence, citing Iran’s support for Arab militant groups, its sophisticated arsenal of missiles capable of reaching Israel and its leaders’ calls for the destruction of the Jewish state.

Last week, Israel accused Iran of being behind a string of attempted attacks on Israeli diplomats in India, Georgia and Thailand.

There is precedent for Israeli action. In 1981, the Israeli air force destroyed an unfinished Iraqi nuclear reactor. And in 2007, Israeli warplanes are believed to have destroyed a target that foreign experts think was an unfinished nuclear reactor in Syria.

So, America, here we are, with our Ship of State on a precipice, looking down into the abyss.

And at the helm, we have our own Dear Leader, who is busily counting all the money he will be able to give to his Green Energy Cabal, after the $5 per gallon gas prices hit.  And, at the same time figuring out how to appease the hungry lion (the Muslim Brotherhood), so that they will eat us last.

That is…if the world doesn’t blow up first.

A Greece Fire

On By kingsjesterIn Politics1 Comment

If you have paid any attention to International News at all, you are aware that Greece is in the throes of an Economic Crisis, one which Economic Experts and Political Pundits say, may be headed to the United States of America.

Well, things have escalated in that ancient land.  Reuters.com has the details:

The Greek parliament approved a deeply unpopular austerity bill to secure a second EU/IMF bailout and avoid national bankruptcy, as buildings burned across central Athens and violence spread around the country.

Cinemas, cafes, shops and banks were set ablaze in central Athens as black-masked protesters fought riot police outside parliament.

State television reported the violence spread to the tourist islands of Corfu and Crete, the northern city of Thessaloniki and towns in central Greece. Shops were looted in the capital where police said 34 buildings were ablaze.

Prime Minister Lucas Papademos denounced the worst breakdown of order since 2008 when violence gripped Greece for weeks after police shot a 15-year-old schoolboy.

“Vandalism, violence and destruction have no place in a democratic country and won’t be tolerated,” he told parliament as it prepared to vote on the new 130 billion euro bailout to save Greece from a chaotic bankruptcy.

Papademos told lawmakers shortly before they voted that they would be gravely mistaken if they rejected the package that demands deep pay, pension and job cuts, as this would threaten Greece’s place in the European mainstream.

“It would be a huge historical injustice if the country from which European culture sprang … reached bankruptcy and was led, due to one more mistake, to national isolation and national despair,” he said.

The chaos outside parliament showed how tough it will be to implement the measures. A Reuters photographer saw buildings in Athens engulfed in flames and huge plumes of smoke rose in the night sky.

“We are facing destruction. Our country, our home, has become ripe for burning, the centre of Athens is in flames. We cannot allow populism to burn our country down,” conservative lawmaker Costis Hatzidakis told parliament.

The air in Syntagma Square outside parliament was thick with tear gas as riot police fought running battles with youths who smashed marble balustrades and hurled stones and petrol bombs.

Terrified Greeks and tourists fled the rock-strewn streets and the clouds of stinging gas, cramming into hotel lobbies for shelter.

How did one of the cradles of ancient civilization come to resemble the Watts riots?

Dave Backus, of New York University’s Stern Business School, shared his thoughts, e-mailed “on the fly”, with The Economist’s View:

* Debt and deficits. Greece in serious budget trouble, with government debt at 125% of GDP and rising. Confidence in Greece has fallen with repeated upward revisions in deficit estimates, which raise suspicions that the situation is worse than reported.

* Contagion? Greece itself is small, but there’s fear that if Greece defaults or leaves the Euro Zone (or perhaps some other dire event), there could be spillovers to other Euro Zone countries (Italy, Portugal, and Spain lead the list). One version of this is that it would undercut the credibility of the Euro Zone. Member countries have (generally) reduced their borrowing costs by eliminating currency risk, but if investors see membership as reversible, that could change quickly.

* Conditions for help. The policy challenge is to keep the problems in Greece from spreading without creating adverse incentives for other countries. A bailout, for example, might make other countries less likely to resolve their own budget problems (mumble “moral hazard” around now). The traditional solution is some kind of “conditionality,” in which bridge loans are tied to concrete progress on the budget. IMF programs typically have this form, and the NYC bailout in the 1970s did, too. Such conditions solve the budget problem and make bailouts less attractive to other countries. When imposed by an outside agency (the IMF, for example), they may also provide political cover (“they made us do it”).

* Who? The challenge in the EU is that the rules explicitly forbid bailouts, so there’s no natural agency to execute a plan. That leaves us with ad hoc mechanisms (the finance ministers, for example). Or maybe the IMF.

* Euro Zone. It’s an inherently weak structure, since there’s no strong political entity at the top to enforce decisions on member countries.

* Who’s next? There are several other EU countries with budget problems. And in the US, many (most?) states have serious budget problems, California being the biggest one.

Per Money.MSN.com, our country could take a hit from the falling dominoes caused by a Greek default.

Exactly how far the damage would go depends on to which degree that bond markets would punish the bonds of Portugal, Ireland, Italy and Spain, which, along with Greece, make up the so-called PIIGS group. The exposure of U.S. banks to Greek debt alone is relatively small. But U.S. banks have $670 billion in total exposure to the PIIGS group.

Given the disastrous Domestic Economic Failure that is the Obama Administration, the fallout from a potential European Economic Disaster would be the icing on a very bitter cake.