News Items covers four subjects: (1) World in Disarray, (2) Financialization of Everything, (3) Advances in Science and Technology, and (4) Electoral politics, foreign and domestic. Six days a week, not Sundays. Weekdays by ~6:45am ET. Saturdays: sometime in the morning, usually.
Department of Corrections: Yesterday’s Political Note (about the Georgia Senate race) asserted that Glenn Younkin (R) defeated Terry McAuliffe (D) in the 2021 Virginia gubernatorial election by a margin of 11 points. He did not. He defeated him by 2 points (50.6%-48.8%). The search for someone to blame is being vigorously pursued.
1. Eurointelligence:
The global economy has just been dealt another highly unpleasant surprise. The Opec+ cartel’s decision to substantially cut its output quotas will severely test Europe and the US as they head into an economic downturn. This is especially the case as western countries have increasingly limited options to respond. It acts as another reminder of the collective west’s limits to enforce its will in a world where it is heavily dependent on others for key natural resources.
What Opec+, which includes the core Opec group of countries like Saudi Arabia, the UAE, Iraq and Venezuela as well as some other large exporters, such as Russia, did was significant for a couple of reasons.
First, the size of the cut was substantial. The headline figure will be 2mn barrels per day, the equivalent of about a fifth of Russia’s overall crude oil production, distributed among its members.
Second, Opec+ is going ahead with the cut even though, in historical terms, oil prices are not that low. Brent crude is nowhere near the highs north of $120 per barrel that it hit following Russia’s invasion of Ukraine, and over the summer. But it still hasn’t dipped below $80 a barrel year-to-date.
Instead of a move to stop prices from falling to dangerously low levels for some producers, this looks like a concerted attempt from both Saudi Arabia and Russia to put the squeeze on the west, delivering an October surprise of their own shortly before the US midterm elections next month. Opec+ is a recent invention, having only come about in 2018, because of the precarious situation both Opec itself and Russia found themselves in thanks to the US shale oil boom in the early 2010s. Shale oil’s emergence helped drive prices to dangerously low levels, at least from both Saudi Arabia and Russia’s point of view, making cooperation essential.
The output cut cements that cooperation, and indicates that Mohammad bin Salman, the Saudi crown prince, is arguably Vladimir Putin’s most reliable friend. (Source: eurointelligence.com, 6 October 2022, lightly edited for space reasons)
2. The Biden administration is preparing to scale down sanctions on Venezuela’s authoritarian regime to allow Chevron to resume pumping oil there, paving the way for a potential reopening of U.S. and European markets to oil exports from Venezuela, according to people familiar with the proposal. In exchange for the significant sanctions relief, the government of Venezuelan President Nicolás Maduro would resume long-suspended talks with the country’s opposition to discuss conditions needed to hold free and fair presidential elections in 2024, the people said. The U.S., Venezuela’s government and some Venezuelan opposition figures have also worked out a deal that would free up hundreds of millions of dollars in Venezuelan state funds frozen in American banks to pay for imports of food, medicine and equipment for the country’s battered electricity grid and municipal water systems. (Source: wsj.com)
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