PETROANALYSIS || ARTICLE

A delicate balancing point now for the superpowers

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Petroanalysis Team

The elections in the United States are important for the year 2020 onwards in international terms, principally to NATO, Europe, Russia, China, the Middle East, Latin America, and South East Asia.

Of these, the Middle East is in the forefront, and in particular Iran, Syria, and Iraq. Only a short time ago expectations were for a direct confrontation between the U.S. and Iran and an explosion in oil prices, as Petroanalsis wrote in “The rules of engagement have now changed” on 15th January. Neither of these materialized however, and the oil price can now be seen to be around $50 per barrel, even with the curtailing of Libyan oil.

With regard to the Strategic Petroleum Reserve, President Trump recently suggested a various million barrels per day drawdown, a bad sign at a time when West Texas Intermediate was struggling to reach $50.

It should be noted that the outbreak of Corona virus is not to be considered extremely important in this context since this price reduction is a structural phenomenon. It reflects the sheer amount of oil circulating in the world, let alone the massive proven crude reserves even in the Arctic. Sanctions or interruptions due to force majeure add up to 5 million barrels per day; Saudi Arabia is only producing 9 million barrels per day; and OPEC stands at 29 million barrels per day, rather less than its usual 35 million barrels per day.

On the demand side, there is slow economic growth with 2020 demand expectations at less than 1 million barrels per day, and this is to be shared between around 30 oil-exporting countries. Peak demand is a fact, the only question to be asked is when it will occur, in 2030, 2040, or 2050?

Added into this is the fact that people as well as oil companies are now more deeply conscientious of climate change and the road to be pursued on this, in spite of the results of the Madrid Conference.

These considerations also touch on U.S. shale, in the context of both the present and in terms of how the energy market develops. One must briefly remark that for the United States, the shale industry has numerous benefits: apart from being an integral part of the concept of national security, it provides employment and general economic growth, has a knock-on effect for technical advances in the context of conventional oil, and involves the key financially important technological sector related to the oil industry.

In geopolitical, or geo-economic, terms the Republican Party experienced a victory with the result of President Trump’s failed impeachment trial in the Senate. The president was strengthened, and his aggressive policy to U.S. strategic competitors should continue, says his Party, emphasizing the contrast with Obama’s position on this that allowed competitors a stronger negotiating position with the U.S.

It is perhaps in the Middle East North Africa, MENA, region where the United States has been facing its most difficult challenges, Syria for example. It can be clearly seen that the U.S. has been in retreat whilst Russia and its regional allies, whether they are strategic or tactical as in the case of Turkey and Iran respectively, are complicating the picture.

This situation of declining U.S. prominence has been leading to an ever-growing Israeli anxiety, which for its part strengthens the ties between Tel-Aviv and Moscow: something that by no means satisfies the expectations of Israel’s friends in the American establishment.

Whatever the outcome of the 2020 general election, right now Europe is seriously worried by the situation in Libya and the clear Turkish military participation in that conflict. The approval of the British proposal in the United Nations Security Council for an immediate cease-fire in Libya is a clear indication that the European partners in NATO feel a more pressing urgency than their partner in Washington. When addressing the subject of immigration policy into Europe, one should remember that the United States is building a wall on its southern border, something that Europe cannot do!

What has just been outlined above leads one to the question of whether it is simply a matter of which party wins the general election, but whether whichever victory would guarantee Washington’s expectations of being the world’s leading superpower. Additionally, a more strategic question for the think tanks in the U.S. to address would be the following: to define where the global limits are for Russia’s achievements and expansion of its sphere of influence, both of which are clearly visible on the ground globally. Putin’s presidential end-of-term is in 2024… greater challenges are awaited for whoever is the new U.S. president until then.

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