August 1, 2016

America's biggest weapon and why Trump needs to win.

America's biggest weapon is oil.  America is on the cusp of having the ability to become energy independent, which would dramatically help the national trade imbalance.  But the potential of America becoming a net exporter of oil has incredible geo-political implications and it's one of the biggest reasons that America needs Donald Trump to win the presidency later this year.

Let's start with the situation.  Oil prices have remained low despite Saudi Arabia's attempt to create a supply glut and drive new and developing production out of the marketplace, thus restoring their oil hegemony and dominance.  Once that occurred they could then re-establish a price of their choosing.

The funny thing is, those bankruptcies and closures didn't exactly happen:
Opec's worst fears are coming true. Twenty months after Saudi Arabia took the fateful decision to flood world markets with oil, it has still failed to break the back of the US shale industry.

The Saudi-led Gulf states have certainly succeeded in killing off a string of global mega-projects in deep waters. Investment in upstream exploration from 2014 to 2020 will be $1.8 trillion less than previously assumed, according to consultants IHS. But this is a bitter victory at best.

North America's hydraulic frackers are cutting costs so fast that most can now produce at prices far below levels needed to fund the Saudi welfare state and its military machine, or to cover Opec budget deficits.
It's not about the number of rigs in production, it's about the incredible increase in productivity of the rigs that do exist.


What this means worldwide is an incredible opportunity for America that goes well beyond trade.   It means economic muscle that stretches beyond OPEC regimes all the way to Russia and China and their belligerent agendas.

Firstly, unfriendly Middle Eastern nations will struggle despite the fact that oil prices will rise again in a few years;
...This sets the stage for an oil shortage and a price spike later this decade. Whether Opec can survive that long is an open question. Most of the cartel need prices of $100 to fund their regimes.

Venezuela is already in the grip of hyperinflation and food riots. Nigeria's currency peg was smashed last month, and the naira has fallen 60pc. Angola has turned to the International Monetary Fund, Azerbaijan to the World Bank.
But where this really matters is in Russia and China. Russia's aggressiveness will necessarily be curtailed while oil prices remain low as that is their primary economic driver. Less money means less ability to invade the Ukraine. The threat of cutting off Europe can be offset by cheap production from America, a supply glut, and Middle Eastern countries desperate to peddle their product as American oil production better satisfies domestic demand and they have to find new buyers.

Similarly an expansionist China will face a renewed America not so economically anemic. The failing oil markets might create alternate markets for production besides cheap Chinese labor. Weakening China's economic clout which they are clearly abusing.

This is where a Trump victory in November becomes so important. Hillary Clinton speaks green because her base wants here to do so. Winning Sanders' voters' hearts and minds means having to kowtow to every anti-business group she can, including environmentalists, anti-frackers and the solar crowd. She'll put coal miners out of work, she's said. Coal is not oil, but the premise is the same - power your world with rainbows. Meanwhile that enables OPEC. It enables Russia and China. It keeps America weak and dependent on foreign oil. But with magically free health care and tuition. There is no upside, only suicide on a national level. Should she win, four more years of an anemic economy, an anemic America are a certainty. The only thing not certain is the future time of death for America. Donald Trump on the other hand gets this, if nothing else - a strong economy means a strong America, a wealthy America means a safer world. That alone is enough to require a Trump victory
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