EconAir

Saudi Arabia Oil Minister U.S. Oil Production E nergy prices could go up at the same time that energy production could continue to decrease, although not as much as simple supply/demand forecasts would expect (see prior post).   Crude oil prices would have to rise from current $35/barrel level to at least $50/barrel to stabilize production and over $60/barrel to start increasing production.   Similar percent increases would be needed for natural gas. For most shale oil and natural gas producers, virtually all operating revenue is now going to debt payments.   After hedges come off, the number of bankruptcies and “distressed debt” will accelerate in second quarter of 2016.   The companies can continue production but bondholders, lenders and stockholders will suffer even larger losses.   This trend has already started in the junk bond market and the fall of public oil companies’ stock prices. Why Saudi Arabia Misjudged U.S. Oil Production ...

Russian T-72 Tank Seen in Ukraine   HISTORICAL BACKGROUND Most of what is now Ukraine came under Russian control in the 1700s, due to the expansionist policies of Catherine the Great.   Part of western Ukraine (Galicia) was a province of the Austro-Hungarian Empire.   With the collapse of the Romanov regime in 1917 and Austria-Hungary in 1918, Ukrainians attempted to establish an independent republic.   During the Russian Civil War, Ukrainian nationalist groups fought on the side of the Communist Red Army because they knew that if the monarchy were reestablished, Ukraine would be forced back into the Russian Empire.   Their hopes for independence were crushed as the triumphant Communist regime absorbed Ukraine into the Soviet Union. Ukrainians suffered under the Stalinist regime.   Because the Ukraine was the “bread basket” of the Soviet Union, grain and other crops were systematically confiscated by the Communist government to feed in...

Ukraine President Russia’s illegal invasion and annexation of the Crimea will set off a chain of events that could strengthen U.S. power and influence, especially in Eastern Europe.   Putin is gambling that President Obama and conservative Republican leaders lack the will to energetically react to Russian expansion.   First U.S. reactions have been weak.   Unless there is a change, Putin might be encouraged to annex other Russian-dominated areas outside current Russian borders. Ukraine has tried to balance Western and Russian pressure.   The popular revolt against the pro-Russian Ukrainian Prime Minister upset the balance and precipitated the crisis. Putin may have decided to upset the unstable status quo in Eastern Europe, starting with Ukraine and Moldova.  Russia's next step could be to annex the eastern third of Ukraine.   This area includes the Donetz Basin, which contains a Russian majority and industrial resources.   If successfu...