Ukraine

[Telecaster]

So it's a great strategy that should be encouraged and aided, and unless I see solid reasons to the contrary I will say anyone trying to get Ukraine to stop is a badly incompetent moron on several levels.

Depends on how you look at it, I suppose.  Blocking aid to Ukraine is deeply important to the MAGA wing of the GOP.  Recall, last winter MAGA Republicans stated any aid to Ukraine would be contingent on border security funding, thinking this would make it a poison pill for the Democrats.  However, Democrats agreed to include border funding as part of a Ukraine aid package, but MAGA Republicans blocked it anyway.*

While the US is a net oil exporter, the price of oil is set on the global market.   A disruption anywhere causes prices to spike everywhere.    Russia is one of the largest exporters of refined petroleum in the world and Ukraine's attacks have already caused the price of crude oil to rise.      And our economy is tied to the price of oil.  If the oil goes up, the price of everything goes up.   

So why don't we as Americans take one for the team and accept higher prices?   Most Americans don't care too much about aid to Ukraine, but they deeply care about the price of gas and Americans tend to punish their politicians for high gas prices.   Biden is on shakey ground for reelection already as are a number of House Democrats.   High gas prices will cause election problems for them and if Trump wins and Republicans extend their lead in the House, there will be no more US aid to Ukraine, period.    Conversely, if the economy is going well next summer and fall, Democrats could gain control of the House and Republicans would no longer be able to block aid to Ukraine.   I understand why Ukraine is targeting refineries, but it would be smarter to wait seven months rather than increase the chances of a Trump win.   Because whatever benefits Ukraine is getting, the potential downsides are far, far greater.   

*I'll put this as a footnote because it is a bit off topic for thread...The Republicans reasoning for blocking border funding was that it didn't include as much as they wanted.  This explanation is very childish and so transparently false it is almost painful.   They got most of what they wanted, including addressing the two biggest border needs by far, the asylum process and lack of detention facilities.   Instead of getting most of what they wanted and simply trying to fill in the gaps the next cycle, they are getting nothing.  Which shows how important this issue actually is to them, which is to say not at all.   

[Radagast]

So it's a great strategy that should be encouraged and aided, and unless I see solid reasons to the contrary I will say anyone trying to get Ukraine to stop is a badly incompetent moron on several levels.

Depends on how you look at it, I suppose.  Blocking aid to Ukraine is deeply important to the MAGA wing of the GOP.  Recall, last winter MAGA Republicans stated any aid to Ukraine would be contingent on border security funding, thinking this would make it a poison pill for the Democrats.  However, Democrats agreed to include border funding as part of a Ukraine aid package, but MAGA Republicans blocked it anyway.*

While the US is a net oil exporter, the price of oil is set on the global market.   A disruption anywhere causes prices to spike everywhere.    Russia is one of the largest exporters of refined petroleum in the world and Ukraine's attacks have already caused the price of crude oil to rise.      And our economy is tied to the price of oil.  If the oil goes up, the price of everything goes up.   

So why don't we as Americans take one for the team and accept higher prices?   Most Americans don't care too much about aid to Ukraine, but they deeply care about the price of gas and Americans tend to punish their politicians for high gas prices.   Biden is on shakey ground for reelection already as are a number of House Democrats.   High gas prices will cause election problems for them and if Trump wins and Republicans extend their lead in the House, there will be no more US aid to Ukraine, period.    Conversely, if the economy is going well next summer and fall, Democrats could gain control of the House and Republicans would no longer be able to block aid to Ukraine.   I understand why Ukraine is targeting refineries, but it would be smarter to wait seven months rather than increase the chances of a Trump win.   Because whatever benefits Ukraine is getting, the potential downsides are far, far greater.   

Right but I am differentiating crude versus refined oil products. The US is recently a net oil exporter by a tiny margin, but it's a huge exporter of more expensive refined oil products. Saudi Arabia is the largest crude exporter, the US is the largest refined oil exporter. Similarly Europe imports nearly all crude oil, but it's pretty close to balanced as an importer versus exporter of refined oil. By attacking Russian refineries, the world will have to turn to the US and Europe (among others) for oil. Meanwhile, Ukraine has not been attacking crude, so Russia can still sell that cheap and the US and Europe can still buy it cheap. This strategy is basically a big attack on Russia and a handout for Ukraine's allies in Europe and the US.

I don't see why a Ukrainian strategy of refined oil attacks would result in more than a short blip in crude prices. The article you referenced also notes an Israeli strike against Iran the day before, and I can definitely see why that would spike crude prices.

[zolotiyeruki]

Right but I am differentiating crude versus refined oil products. The US is recently a net oil exporter by a tiny margin, but it's a huge exporter of more expensive refined oil products. Saudi Arabia is the largest crude exporter, the US is the largest refined oil exporter. Similarly Europe imports nearly all crude oil, but it's pretty close to balanced as an importer versus exporter of refined oil. By attacking Russian refineries, the world will have to turn to the US and Europe (among others) for oilrefined petroleum products. Meanwhile, Ukraine has not been attacking crude, so Russia can still sell that cheap and the US and Europe can still buy it cheap. This strategy is basically a big attack on Russia and a handout for Ukraine's allies in Europe and the US.

I don't see why a Ukrainian strategy of refined oil attacks would result in more than a short blip in crude prices. The article you referenced also notes an Israeli strike against Iran the day before, and I can definitely see why that would spike crude prices.

I think you made a slip there, and I fixed it.

While you're right that hitting Russian refineries has a more disparate impact on Russia than the rest of the world, compared to hitting crude production and export, it's also worth noting that refined products are also subject to global demand.  If Russia has to start importing gasoline and diesel, that'll push those prices up globally.  And while the resulting high prices would benefit exporters of refined products (like US oil companies), it would have a negative impact on consumers everywhere.

I suppose, then, that it's doubly logical then for the Biden administration to discourage it--they don't want consumers (voters) to see higher fuel prices, and especially don't want the oil companies to see higher fuel prices!

[pecunia]

Right but I am differentiating crude versus refined oil products. The US is recently a net oil exporter by a tiny margin, but it's a huge exporter of more expensive refined oil products. Saudi Arabia is the largest crude exporter, the US is the largest refined oil exporter. Similarly Europe imports nearly all crude oil, but it's pretty close to balanced as an importer versus exporter of refined oil. By attacking Russian refineries, the world will have to turn to the US and Europe (among others) for oilrefined petroleum products. Meanwhile, Ukraine has not been attacking crude, so Russia can still sell that cheap and the US and Europe can still buy it cheap. This strategy is basically a big attack on Russia and a handout for Ukraine's allies in Europe and the US.

I don't see why a Ukrainian strategy of refined oil attacks would result in more than a short blip in crude prices. The article you referenced also notes an Israeli strike against Iran the day before, and I can definitely see why that would spike crude prices.

I think you made a slip there, and I fixed it.

While you're right that hitting Russian refineries has a more disparate impact on Russia than the rest of the world, compared to hitting crude production and export, it's also worth noting that refined products are also subject to global demand.  If Russia has to start importing gasoline and diesel, that'll push those prices up globally.  And while the resulting high prices would benefit exporters of refined products (like US oil companies), it would have a negative impact on consumers everywhere.

I suppose, then, that it's doubly logical then for the Biden administration to discourage it--they don't want consumers (voters) to see higher fuel prices, and especially don't want the oil companies to see higher fuel prices!

So,....How much oil and gas of the world does Russia consume?  How big of an effect will that be?

These guys say 3.7 percent.

https://www.worldometers.info/oil/oil-consumption-by-country/

It might be more because of their stupid "Special Military Operation."  Even at 5 percent, I think the world can handle it.  Besides most folks are served by specific refineries.  The loss of refiners in Russia may not have that big effect on my local market.

How about the crude thing?  It seems like they are working harder and harder to cut Russian oil off from the world?  Will this have a long term effect?

It seems like they are discovering more oil all over all of the time.  It certainly takes some time to develop it, but wise investors may see a further loss of Russian crude and recognize an opportunity.  Here are some new discoveries.

https://www.rigzone.com/news/topic/discoveries/

Many of these are very recent.

From somewhere in the bowels of the internet:

"Russia is the third-largest producer of oil worldwide, accounting for over 12 percent of global crude oil production. Rich in natural resources, the country concentrates its energy production in the West Siberia and Volga-Ural oil and gas provinces.Dec 21, 2023"

I would guess the world has, at present, enough margin to cover the loss of Russian oil.  I think there would be a blip in prices for a few months, but the market would adjust and prices would come back down.

One must also realize that not all crude oil is the same.  Refineries are set up to handle specific types of crude.  So the supply demand thing is more complicated.

I'm sure some of you folks know even more details and / or can correct my suppositions.

[zolotiyeruki]

I used to work in the industry, and can fill in a few details :)

15-20 years ago, Russia (and OPEC as a whole) really shot themselves in the foot by artificially keeping prices a bit too high for a bit too long.  The high prices enabled/encouraged the development of technology (like fracking) that unlocked a whole lot of previously-unprofitable oil and gas.  Once that genie escaped the bottle, there was no putting it back in.  It takes years to develop (i.e. start production from) an oil field once you make the decision to build it out--drilling takes years, engineering all the facilities takes years, building takes a couple years, commissioning takes a year.  Since not every project happens at the same time, the impact of that technology took a long time to percolate.  But the impact is huge:  the US became a net exporter of petroleum products, then a net exporter of crude oil.  ExxonMobil's Golden Pass LNG terminal, originally slated to import LNG from the middle east (Qatar?), was redesigned to instead export LNG.  And now they're building a second export terminal (CP2).

Aaaaanyway, OPEC has a whole lot less power over the O&G industry than they used to.  They used to have a stranglehold (remember the embargo in the 70's?), but nowadays, everyone kinda shrugs and moves on when they cut production.  For Russia, this will continue to deteriorate.  They have little ability to develop their own oil reserves, and have historically partnered with the big multinational oil companies (ExxonMobil, Chevron, BP, etc), splitting the profits.  From now on, however, those companies will be a lot less willing to partner with Russia--the risk calculations are a whole lot worse than they used to be.

One more thing about gas prices:  the demand curve for gasoline in the US seems to be pretty flat--sure, people complain about high gas prices, but you don't see them doing much to curb their consumption.  (Hey, look, we're back on a MMM topic!)

[Radagast]

Right but I am differentiating crude versus refined oil products. The US is recently a net oil exporter by a tiny margin, but it's a huge exporter of more expensive refined oil products. Saudi Arabia is the largest crude exporter, the US is the largest refined oil exporter. Similarly Europe imports nearly all crude oil, but it's pretty close to balanced as an importer versus exporter of refined oil. By attacking Russian refineries, the world will have to turn to the US and Europe (among others) for oilrefined petroleum products. Meanwhile, Ukraine has not been attacking crude, so Russia can still sell that cheap and the US and Europe can still buy it cheap. This strategy is basically a big attack on Russia and a handout for Ukraine's allies in Europe and the US.

I don't see why a Ukrainian strategy of refined oil attacks would result in more than a short blip in crude prices. The article you referenced also notes an Israeli strike against Iran the day before, and I can definitely see why that would spike crude prices.

I think you made a slip there, and I fixed it.

While you're right that hitting Russian refineries has a more disparate impact on Russia than the rest of the world, compared to hitting crude production and export, it's also worth noting that refined products are also subject to global demand.  If Russia has to start importing gasoline and diesel, that'll push those prices up globally.  And while the resulting high prices would benefit exporters of refined products (like US oil companies), it would have a negative impact on consumers everywhere.

I suppose, then, that it's doubly logical then for the Biden administration to discourage it--they don't want consumers (voters) to see higher fuel prices, and especially don't want the oil companies to see higher fuel prices!

Agreed and good correction. If I was scoring it, I'd say Ukraine crushing Russian refining might be:
Russia: -6
Global oil refiners: +3
Global oil consumers: -2
US oil refiners: +2
US oil consumers: -1
US geopolitical position: +2

It's still a substantial benefit (4:1 by my score) for the US, however the benefits either accrue in the abstract world of geopolitics and manifest years later in apparently unrelated ways, or accrue specifically to oil refiners. Meanwhile there would be a small near term downside to US oil consumers. However China for example is a big importer of refined oil. Most of the people Russia exported refined oil to are not friendly to the US. IMO this is easily one of the most effective ways Ukraine has of crippling Russia's economy, harming its allies' foes, while minimizing negative economic effects to its allies.

[Travis]

Even with Mike Johnson's moronically cynical stonewalling of aid to Ukraine, I feel like there's still a whole lot the Biden administration could be doing to help.  We pay tons of money to safely dispose of nearing-expiration munitions, cluster bombs, etc.  Can we not just ship them over? And with the money saved on disposal, we could afford to send more stuff at the same time?  Sell a couple thousand Bradleys to NATO countries that could then donate them to Ukraine?

We can't just ship munitions to a country that we don't have any kind of military trade/alliance with on the President's say-so. That was the whole point of the Presidential Drawdown Authority that Johnson is blocking. It takes Congress allowing the transfers if there isn't already a treaty in place.  I'm not familiar with every clause in those laws, but I imagine there's something in there preventing us from just using a proxy like France to donate weapons and vehicles.

[Travis]

So there's been a lot of movement on Congress' funding for Ukraine the last couple days. For some reason, Johnson decided to move the whole package forward and it, the Israel, and the Taiwan support bills will go up for a vote Saturday. The procedural votes have sailed through, the nutjobs in the HFC tried swamping the docket with amendments that are literally cut and paste from two year old Russian propaganda messages, and despite clear indications that they're going to try to vacate him, Johnson's rhetoric has been "I'm a Reagan Republican...We must be strong...I'm doing this out of principle." Now I don't really believe any of that given that he's sat on this for about six months with thousands of soldiers and civilians dying while we waited, but it seems like it's going to happen. Stay tuned.

https://www.politico.com/news/2024/04/18/biden-johnson-ukraine-aid-00153237

Also, a Russian Tu-22M strategic bomber went down in flames last night on its return trip from firing cruise missiles at Ukraine. Russians are saying "malfunction" while Ukrainians are saying "300km max-range shot with an S200." Most if not all of the crew managed to bail out. This is the first time one of these planes has gone down in this war from mechanical failure or hostile action.

https://vxtwitter.com/Faytuks/status/1781175921740783644

[pecunia]

So there's been a lot of movement on Congress' funding for Ukraine the last couple days. For some reason, Johnson decided to move the whole package forward and it, the Israel, and the Taiwan support bills will go up for a vote Saturday. The procedural votes have sailed through, the nutjobs in the HFC tried swamping the docket with amendments that are literally cut and paste from two year old Russian propaganda messages, and despite clear indications that they're going to try to vacate him, Johnson's rhetoric has been "I'm a Reagan Republican...We must be strong...I'm doing this out of principle." Now I don't really believe any of that given that he's sat on this for about six months with thousands of soldiers and civilians dying while we waited, but it seems like it's going to happen. Stay tuned.

https://www.politico.com/news/2024/04/18/biden-johnson-ukraine-aid-00153237

Also, a Russian Tu-22M strategic bomber went down in flames last night on its return trip from firing cruise missiles at Ukraine. Russians are saying "malfunction" while Ukrainians are saying "300km max-range shot with an S200." Most if not all of the crew managed to bail out. This is the first time one of these planes has gone down in this war from mechanical failure or hostile action.

https://vxtwitter.com/Faytuks/status/1781175921740783644

Looks like Ukraine aid "finally" passed the House.  Now it's time to see if MAGA and/or others have some tricks up their sleeves in the Senate to cause further delays.

[zolotiyeruki]

I could be wrong, but I believe Ukraine aid has been passed by the Senate multiple times, with Republican support

[dividendman]

I could be wrong, but I believe Ukraine aid has been passed by the Senate multiple times, with Republican support

Yeah, the Senate passed a similar bill 70-29 in Feb. Only a minority (22) of Republicans supported it in the Senate, so there will be some drama and grandstanding.

[Travis]

79-18. Aid package passed the Senate. Goes into effect tomorrow after Biden signs it, and it sounds like massive amounts of weapons and equipment are already staged or on their way.