The World Could See A Record-Breaking Oil Supply Shock

Yves here. The headline should not come as any surprise. The West is determined to harm itself by harming Russia. As you know, the US has banned Russian oil. While Europe has not followed and the financial sanctions were designed to exempt commodities payments, there are de facto bans that go beyond the official ones, like “Russian” tankers not being allowed into ports (note that Russian-owned tankers are not flagged in Russia for insurance reasons over my pay grade, but they usually have Russian names so it’s not hard to pick them out, plus I assume port operators typically know who is who, ship-wise). Some Russian oil buys are still being made but they appear to be spotty.

More important, the press and pols in US and Europe have whipped the public into such a Russia-hating frenzy that it seems impossible for them to back down on sanctions even when the war is over. That means no (for the US) or less (for the EU) Russian oil. This is a problem because as we have explained, oil is not as fungible as you have been led to believe. Diesel and home heating oil require either medium heavy oil like Russia’s, or heavy sour like Iran’s and Venezuela’s. Shale oil and gas are very light and no substitute. Ditto the gas from Canada’s tar sands is also very light; reader are arguing over its bitumen, which in theory could help but that was never intended to be transported to the US.

I was surprised to see oil prices drop below $100 this week, because the high oil prices are pretty certain to remain baked in. The only factor that could provide a breather over the next couple of months is if China’s Covid lockdown continues and expands to include more provinces. Factory shutdowns and greatly reduced travel in China would cut fuel demand near term. But that would produce additional supply chain issues in the West and price increases in some sectors.

Note that IEA forecasts provide for high energy prices denting economic activity, but not enough to offset the loss of Russian supply.

The assumption in the West is that they can break Russia’s economy. The wee problem is that the US has an economic glass jaw. Typical workers have suffered falling real incomes due to Covid-induced inflation, both supply chain shocks and the oil production whipsaw (producers not ramping up production as quickly as energy demand rebounded). Even if China manages to give the US a mini-breather on oil prices, it’s not hard to imagine that they will be over $6 a gallon in low income states, and over $7 in California by the summer. And it is entirely conceivable they will be over $7 all over the US by fall.

Even in the runup this month, we were already hearing of distress, like low wage US workers not being able to justify turning up after factoring in the higher commuting costs, and fishing fleets in Europe idling because the fuel costs were too high.

To put it more tersely: I don’t think the US economy or the Democrats can stand the prospect of $7 a gallon gas, and that now looks like an entirely plausible future. And I don’t see how Biden swallow crows to relax some of the energy sanctions so as to save his party’s hide.

For a contrast, we are embedding Putin’s recent speech of March 16 at the end of this post. Its latter half discusses economic conditions and relief plans. Of course Putin depicts everything as going reasonably well given the difficult givens, most importantly the claim that the banking system is running fine and consumer production is being prioritized.

Putin has some uncharacteristically sharp remarks about the Russian version of Davos men. I wonder if some private discussions failed?

I want to be as direct as possible: hostile geopolitical designs lie behind the hypocritical talk and recent actions by the so-called collective West…

Yes, of course, they will back the so-called fifth column, national traitors – those who make money here in our country but live over there, and “live” not in the geographical sense of the word but in their minds, in their servile mentality.

I do not in the least condemn those who have villas in Miami or the French Riviera, who cannot make do without foie gras, oysters or gender freedom as they call it. That is not the problem, not at all. The problem, again, is that many of these people are, essentially, over there in their minds and not here with our people and with Russia. In their opinion – in their opinion! – it is a sign of belonging to the superior caste, the superior race. People like this would sell their own mothers just to be allowed to sit on the entry bench of the superior caste. They want to be just like them and imitate them in everything. But they forget or just completely fail to see that even if this so-called superior caste needs them, it needs them as expendable raw material to inflict maximum damage on our people.

The collective West is trying to divide our society using, to its own advantage, combat losses and the socioeconomic consequences of the sanctions, and to provoke civil unrest in Russia and use its fifth column in an attempt to achieve this goal. As I mentioned earlier, their goal is to destroy Russia.

But any nation, and even more so the Russian people, will always be able to distinguish true patriots from scum and traitors and will simply spit them out like an insect in their mouth, spit them onto the pavement. I am convinced that a natural and necessary self-detoxification of society like this would strengthen our country, our solidarity and cohesion and our readiness to respond to any challenge.

The so-called collective West and its fifth column are accustomed to measuring everything and everyone by their own standards. They believe that everything is for sale and everything can be bought, and therefore they think we will break down and back off. But they do not know our history and our people well enough.

This sounds an awful lot like guillotine blades being sharpened, particularly because Putin is normally very measured. But this is a mirror image of the West’s “You are with us or are against us” posture applied to his own super rich.

However, if you read the balance of the speech, Putin lays out a lot of economic programs, which if they can be implemented quickly enough, would indeed blunt a lot of pain, particularly to lower-income cohorts. We’ll see soon enough. But if Putin can deliver well enough on this program, its ameliorating impact plus Russians seeing Ukraine as an existential fight has the potential to give them more staying power than the West. We’ll see in due course.

Back to the main event of oil price outlook.

By Tsvetana Paraskova, a writer for with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. Originally published at OilPrice

  • IEA: market could lose around 3 million bpd of supply from Russia starting in April.
  • Sanctions come at a time that OECD crude inventories were already well below their 5-year average.
  • OPEC producers have not been willing to fill the supply gap.
  • U.S. shale not expected to bring immediate relief to oil markets.

The global oil market could lose 3 million barrels per day (bpd) of supply from Russia starting in April, as sanctions on banks and buyers’ reluctance to purchase Russian oil could result in the biggest oil supply crisis in decades, the International Energy Agency (IEA) said in its Oil Market Reportfor this month.

Since Russia invaded Ukraine at the end of February, the United States has banned imports of Russian energy while the UK is working to phase out its Russian supply by the end of the year. Even though Europe has not sanctioned Russian oil and gas, a growing number of European buyers are joining the wave of condemnation of Russia’s war and pledge not to buy its oil. As of last week, as much as 66 percent of Russian seaborne spot cargoes were struggling to find a buyer, according to estimates from J.P. Morgan Global Research.

The Russian invasion of Ukraine came at a time when the oil market was already tightening, with inventories in OECD economies already drawn down to well below the five-year average and sitting at their lowest levels in eight years.

Immediate Offsets To Lost Russian Oil Unwilling To Help

The immediate solution that could help offset the loss of Russian oil supply lies in the two most influential members of OPEC, which, together with Russia, have been managing supply to the market in the form of the OPEC+ agreement for several years now.

However, OPEC’s Saudi Arabia and the United Arab Emirates (UAE) – the only two producers believed to have enough spare capacity to ramp up production in the short term – have not stepped forward to fill in the widening gap that buyers’ “self-sanctioning” of Russian oil is leaving. The UAE confused the oil market last week with somewhat contradictory messages that it backs additional increases in OPEC+, but energy minister Suhail al Mazrouei later reaffirmed that the UAE would stick to the plan of gradual production increases.

“The OPEC+ alliance agreed on 2 March to stick with a modest, scheduled output rise of 400 kb/d for April, insisting no supply shortage exists. Saudi Arabia and the UAE – the only producers with substantial spare capacity – are, so far, showing no willingness to tap into their reserves,” the IEA said in its report.

On the other hand, if the Saudis and the UAE were to tap into their reserves, the global spare capacity—largely in their hands—would be so thin that a turn for the worse in the Russian oil supply, or another outage in Libya, would leave global oil producers with such a small cushion that a price spike would be certain to follow.

U.S. Shale Can’t Pump Much More Immediately

So why isn’t U.S. shale pumping more, especially with the “blessing” of the White House and Secretary of Energy Jennifer Granholm, who urgedAmerican producers “to responsibly increase short-term supply where we can right now to stabilize the market and to minimize harm to American families.

Producers have said why for months: there is a time lag between drilling and first oil, also because of years of underinvestment, capital discipline, discouraging federal policies toward the oil industry, and supply chain bottlenecks.

For example, even if ConocoPhillips decided to pump more oil today, the first drop of new oil would come within eight to 12 months, CEO Ryan Lance told CNBC last week.

“Even if shale production responds to the price signal, it cannot grow by more than 1.4 mbd this year given labor and infrastructure constraints,” J.P. Morgan said this week.

Then there is the prospect of additional barrels from Iran, but they “could be months off,” the IEA said, adding that the Islamic Republic could ramp up exports by around 1 million bpd over a six-month period when—and if—a deal is reached.

Demand Hit

The gap between global oil supply and demand could be narrower than expected just a month ago, because runaway inflation, surging energy prices, tightening monetary policies to tame said inflation, and the sanctions on Russia are likely to “appreciably depress global economic growth,” the IEA says.

The agency cut its global oil demand forecast by 1.3 million bpd through the end of this year, which would result in 950,000 bpd slower growth for 2022 than anticipated in mid-February. Total demand is now seen at 99.7 million bpd in 2022, an increase of 2.1 million bpd from 2021, the IEA added.

Even if the expected demand growth slowdown materializes, it will not offset the loss of Russian supply, leaving the market in deficit if the shunning of Russian oil accelerates and continues throughout the year.

OPEC also warned of slowing economic and oil demand growth in its own market report earlier this week. OPEC said that Russia’s war in Ukraine and the spiraling inflation could impact oil consumption growth, which “remains under assessment.” The cartel left its outlook of global oil demand growth at 4.2 million bpd for 2022, “for the time being”, but flagged “the extremely high uncertainty surrounding global macroeconomic performance.”

“Looking ahead, challenges to the global economy – especially regarding the slowdown of economic growth, rising inflation and the ongoing geopolitical turmoil will impact oil demand in various regions,” OPEC said.

“Given the complexity of the situation, the speed of developments, and fluidity of the market, with so far limited data to understand the far-reaching consequences of this conflict, projections are changing almost on a daily basis, making it challenging to pin down numbers, with reasonable degree of certainty,” the cartel said.

The next monthly meeting of the OPEC+ group led by Saudi Arabia and Russia is on March 31, and the volatile and high oil prices will likely put further pressure on the OPEC members of the alliance to boost supply more to try to offset the losses from Russia.

00 Ukraine Putin Address socioeconomic support for regions 3-16
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  1. Jack

    I am no fan of Putin, but after reading the above it sure sounds like he is a better President than the one we currently have in the US. Imagine! Taking care of your citizens. What a novel thought. And this,”The truth is that the problems faced by millions of the people in the West are the result of many years of action by the ruling elite of your respective countries, their mistakes, and short sighted policies and ambitions. This elite is not thinking about how to improve the lives of their citizens in Western countries. They are obsessed with their own self serving interests and super profits”.

    1. Thuto

      Something I’ve noticed in western commentary on this war, from both ordinary people and the professional pundit class, is that even the lone voices, who through their balanced and level headed perspective represent the signal in a sea of anti-Russia noise, sometimes feel compelled to preface said perspectives with a categorical denouncement of Putin. Stating upfront and without equivocation one’s disdain for Putin seems to be the sine qua non for a perspective that goes against the mainstream to be shared in anything resembling a public platform, which raises the (rhetorical)question of whether the fear of being attacked and called a Russian asset/Putin boot licker has become all pervasive.

      1. The Rev Kev

        This is happening all across the board. I see that the Russian tennis player Daniil Medvedev, who is now at No. 1, may be banned from Wimbledon unless he denounces Putin. It is not enough to speak against the war. And this applies to any other Russian and Belarusian tennis players as well-

        Now I know what it is like living in the Borg Collective. Trouble is this crap never stops but keeps on going. By the end of the year, if a baseball or football player wants to play in the US, they will first have to answer the question – ‘Are you now or have you ever been a supporter of Donald Trump?’

      2. WJ

        Ironically the fairest criticism of Putin historically–at least from a certain perspective–is probably that he is too much of a neoliberal–that he has not freed himself from several damaging neoliberal assumptions about the economy and the state. Agree that *some* recent policy descriptions and statements seem to be heralding a change in course here.

        1. Thuto

          No leader is above criticism of course, and the one you’re leveling here seems reasonable and fair, that’s why I believe Medvedev’s statement the other day that the days of Russia ingratiating herself to the west are over is in recognition of this.

      3. Skip Intro

        This is standard and traditional for anyone who dare questions the war of the day:

        “Chavez is a thug but…”,

        “Saddam /Assad is a monster who …, but…”,

        “Vaccines are the best defense against Covid, but…”

        1. Duke of Prunes

          Or it seem the most popular over the last few years: “I didn’t vote for Trump, but… “

      4. russell1200

        I take that to be an (often) honest dislike of Putin. Back when Bush W. was around, I felt like the two had a lot in common. Putin has had an ok run in Syria. Somehow that seems to have gotten people calling Putin a genius there for a bit. Maybe that was a mistake.

        I see three flavors of the “I hate Putin” epigraph:

        1) Left leaning people who view Western Culture, or some component of it (like neoliberals) as uniquely evil and want to bash on their hobby horse

        2) Political types (mostly on right) who want to pound on Biden-Democrats for gain. I assume other countries have their comparables – I am using the one I know.

        3) People who genuinely don’t like Putin, don’t like the invasion, but do think there are some unfortunate extenuating circumstances: either in Russia’s actions or in the Western response

        For myself, mostly in camp #3, I don’t find many of the arguments for extenuating circumstances to be compelling. But I do think that a good deal of the Wests reaction is impulsive and oddly thought out. Why exactly are we chasing around people who only a short time ago were supposedly personally fine to live amongst us? – aka Russian Oligarchs. Were they not ok, and only now we recognize that? I generally have negative associations with Russian Oligarchs, but I get a little nervous with the witch hunt smell.

    2. LawnDart

      Putin: They believe that everything is for sale and everything can be bought…

      I respect Putin. His statements seem forthright, often articulating naked truths about the culture and systems of power in the West, and not deceptions hidden behind a veneer of sweet bullshit.

      Here in USA, when a truth is spoken, it is often done so without sincerity, and forgotten the moment it is uttered in a rain of chatter. A statesman of his calibre could not exist within our system of governance– it would, could, never be allowed.

      I see no grounds for disagreement with the quote you attributed– sadly, none at all.

    3. Canadian Canuck

      “…Imagine! Taking care of your citizens…”
      Let not the tree blind you from seeing the forest.
      Putin is the ultimate KGB thug, he has murdered countless journalists, friends and other innocent russians who criticize him and now is mass murdering ukrainaians for all the world to see.
      Its all good and popular to have original ideas and criticize the west, but don’t lose sight of main evil.
      Take out Moscow and St Peter and the rest of russia is still living in abject poverty. Putin has done nothing for the average russian.
      All power and wealth in russia is in the hands of Putin and a few friends that he can dispose off as he pleases. Its a small junta or mafia gang, whatever you want to call it. And you wont survive in Putin’s Russia for more than a month. Take it from someone who has been there.

      1. juno mas

        And this is nonsense. The reason for Putin’s clear statement of what is at stake for Russia is that he is not the despot people are made to believe him to be. As for poverty, look at the US: 40 years of negative wage growth, normal medical care unobtainable, retirement security dependent on luck in the Wall Street (casino) with a 401k account. It is this impoverishment that makes Americans hate one another.

        As for mass murdering Ukies, did you miss the Iraq war, or Afghanistan (millions near starvation), Libya? How about Chile in the 70’s? The demonization of Putin without recognizing his deep conviction for Russian culture is stupid. Just as is thinking the West will change its methods of intimidation!

        Ukraine is what happens when you taunt a nation with a powerful military and share a long border.
        War is ugly. That is what diplomacy is for—something the US doesn’t understand.

        1. Canadian Canuck

          “…As for poverty, look at the US: 40 years of negative wage growth…”
          This might well be true and we should strive to do better. I agree.
          But what is considered poor in the US it is higher upper class in the rest of the world. What we consider poor here have cars and AC where in western Europe only 20% of households have AC. I dont think we are comparing apples with apples here.
          The main fight of the poor people is to get enough bread and daily calories to survive.
          Only in the US one can associate obesity with poverty

          1. LawnDart

            Crazy Canuck,

            But what is considered poor in the US it is higher upper class in the rest of the world. What we consider poor here have cars and AC where in western Europe only 20% of households have AC.

            Generalize much? Why don’t you throw some cell phones and big-screen tvs while you’re at it?

            “Only in the US one can associate obesity with poverty”

            Are you seriously that ignorant? You certainly haven’t experienced poverty first-hand. I can’t tell if you’re an adherent to “prosperity gospel” or neoliberalism.

            If the latter, you must have missed this take from the Huffington Post:


            How Malnutrition Causes Obesity

            Americans are overfed and undernourished. That’s right, the most obese children and adults in the country are also the most nutritionally deficient.

            The gist– crappy food doesn’t sate the body’s desire for nutrients, hence, cravings for more food, and the crappiness of the crappy food requires more nutrients to process the garbage calories and stuff out of your system, so it becomes a self-perpetuating cycle.

            Crazy Canuck, your verbal diarrhea is but one source of the shit that’s drowning us. At least show us an iota of respect by offering some evidence that might, at least in some tangential way, support the statements which you make.

            1. Canadian Canuck

              Well, maybe learn to cook if you don’t like processed food.
              There need be no proof for self evident things, like
              War is not Peace
              Slavery is not Freedom
              Black is not White, or
              Hunger is not Obesity.

              1. drumlin woodchuckles

                If the only “phuud” you have is obesogenic GMO petrochemical sh*tfood product, then hunger leads to obesity.

                But you do have a point, to a point. Only people trusted by the poors would be listened to for any nutri-food advice. Who would such trustworthy people be? Have the DSAs achieved that level of trust among the people they have helped with their tail-light repair clinics? If so, maybe they are the ones to begin surveying what kind of non-sh*t food might be available to the inhabitants of America’s food junkyards, and how to connect the poors and the non-junk food with eachother,

                Doing that, if the poors even wanted it done, would help the poors create their own oppositional defiant better foodculture where they are. And helping the poors achieve that would earn the DSA some very dangerous and very violence-capable upper class enemies.

      2. Thuto

        This reminds me of the Arnold Schwarzenegger clip doing the rounds online where he promises to reveal the “truth” about the war in Ukraine to ordinary Russians, only to parrot almost verbatim the mainstream soundbites like you’re doing here. I’ve seen various perspectives on this war here at NC, but i’ve yet to come across one that parrots the Anti-Putin opprobrium in Jen Psaki’s daily press briefings word for word, until now.

      3. britzklieg

        Department of redundancy department:

      4. LawnDart

        Hey ya Crazy Canuck– you be trippin?

        Take out Moscow and St Peter and the rest of russia is still living in abject poverty. Putin has done nothing for the average russian.

        Umm, the nineties were a few decades– a whole generation– ago, and a lot has changed since then:

        The above link would seem to contradict your statement. I can post others as well, but I would be interested in seeing evidence supporting yours, because frankly, it just seems to me that you’re talking out of your ass.

        And you wont survive in Putin’s Russia for more than a month.

        That seems like an awfully presumptuous statement with regards to people that you have never met.

      5. DJ Forestree

        Canadian Canuck writes: “Take out Moscow and St Peter and the rest of russia is still living in abject poverty”.

        Thanks god that there is no abject poverty in very civililized and very rich Canada. There are not thousands of destituted people populating the streets of Vancouver’s Downtown Eastside (DTES) everyday, in a shameful spectacle that looks like the worst of hell on earth. You can do an image search on “Vancouver Downtown Eastside” and “poverty”; take a look at how well-taken care of those citizens are. You can find similar images in some of the largest Canadian cities…

        And, there are no first nations people in Canada living in places were the water isn’t drinkable, and doing so while trying to spend very cold winters in shacks without proper heating:

        From the link above: “there are still 36 long term drinking water advisories reserves including some that have been in place for over 25 years. There is also a deficit in funding for the maintenance and operation of drinking water systems on reserves which the Parliamentary Budget Officer identified as being $138 million dollars annually.

        Instead, the Liberal government has been promoting public-private partnerships (P3s) as a solution. History has shown that P3s cost more, they lead to the privatization of water, and a loss of community control and jobs.”

        That deficit in providing safe, drinkable water for its own citizens hasn’t stopped the Canadian governement from sending more troops and weapons to NATO countries, like the Baltic Republics, and for lecturing many around the world about democracy and the principles of good governance. There is not money available to improve the lives of Canadian citizens with simple things as drinkable water, but Canada spent lots of money, resources, and lives trying to bring “democracy” to Afghanistan…Remind me again how that story ended? And why was Canada deploying troops in such faraway foreign land? Not to mention that Canada, as always following USA orders and the good leadership coming out of Washington, DC, was early in recognizing Guaido as Venezuelan president. I wonder how they feel in Ottawa now that the USA has gone with the hat in hand asking the real president (hint, the guy is in Caracas, his last name is Maduro) for some help: “Canada’s foreign affairs minister Chrystia Freeland posted on Ttwitter a statement saying that Canada recognizes Guaidó as the interim President of Venezuela.”

        Luckily, Putin is bad and he is, for now, away from Canada. That must be the reason why there is not a serious ongoing opiod crisis in Canada, killing thousands of people every year and getting worse. An update from British Columbia, this February: “It is with tremendous sadness that I report that our province is in a worse place than it has ever been in this drug toxicity crisis,” Chief Coroner Lisa Lapointe said at a news conference”.

        In any case, the West is safe under its great political leadership, and luckily for every citizen on the West side of the iron curtain, Putin is bad (and also crazy). Politicians on the Western geopolitical side are good, competent, and no crazy.

        1. Canadian Canuck

          Having spent a lot of time as a volunteer working with the homeless (I still do) I think the main question is one of mental illness not of poverty.
          People have different opinions about poverty and I know people who are millionaires who consider themselves poor.
          As I understand poverty, it is not existent in North America and most of western Europe.
          Our poverty is mainly not that we dont have, but rather because we want more. There is no remedy to it.
          Also, people who are victim to opioids arent necessary poor.
          Pursuit of individual interest will always lead to alienation from society of some people.
          The issue is that the pursuit of the “common interest” led the humanity to bigger disasters.
          So there is no solutions, only trade offs.

          1. Objective Ace

            You keep referring to “poorness” as an accounting measure. Americans have x amount of things which is higher then y amount of things available in other countries – great.

            But if Americans are working in much worse conditions, working longer, no vacation, no sick leave, unable to rely on social services like basic Healthcare, constantly need to be on the lookout for scammers taking advantage of them, unable to build community ties (indeed have politicians driving wedges between neighbors and family), etc etc all the while seeing the likes of Hunter Biden and Jared Kushner get rich off of crony capitalism and the Sacklers getting rich off of outright fraud – what good is y amount of goods?

            You blame mental illness for the homelessness.. I don’t think that’s fair. Why is mental illness so much higher than its been historically? Let’s get to the root cause

          2. John Zelnicker

            Canadian Canuck – You have a very distorted and even delusional idea of what poverty means in this country or any other.

            I’ve been reading this thread and thinking that other commentators have done a good job of refuting your ridiculous statements, which you have presented without evidence. (A violation of the site’s Policies, which you agreed to by commenting.)

            However, your statement that “As I understand poverty, it is not existent in North America and most of western Europe.” demonstrates your complete and total ignorance of what poverty is in this country and others.

            You say “Our poverty is mainly not that we don[‘]t have, but rather because we want more.”

            So it’s not poverty if the one in seven kids who go to bed hungry want more food?

            These are families that don’t have cars, wide-screen tv’s, air conditioning, or secure and decent housing. And, there are lots of them. I was a welfare caseworker many years ago and I have seen it first hand.

            You simply can’t compare the level of poverty between nations.

            As to your statement that only 20% of homes in Europe have a/c, have you considered that the reason may be that they don’t need it. Look at a globe. I was quite surprised as a kid to learn that New York is at the same latitude as Naples, Italy.

            Finally, those millionaires you know who consider themselves poor are just as delusional as you are.

          3. drumlin woodchuckles

            Its very easy to understand Americanadian poverty out of existence. All you have to do is to know what that poverty is, and then invent a different definition of poverty designed to declare Americanadian poverty to not exist. A very neat trick.

      6. lance ringquist

        we tortured some folks, i have the power to kill anyone anywhere, a list is provided for me everyday. a few serbs are collateral damage. it was worth killing over one half a million children. shock and awe killed how many in the middle east, and how many in fly over america are to poor to come up with $400.00, and you have the balls to say WHAT!

      7. Johnny Conspiranoid

        “Putin is the ultimate KGB thug, he has murdered countless journalists, friends and other innocent russians who criticize him”
        Says someone.

  2. Lex

    Putin’s speech, if he means it and can enact those policies, is a significant game changer. Economics is my weak suit but to me it sounds like Russia is turning towards the Chinese model. I agree that this looks like the final break between Putin and the oligarchs. I’m sure the US hopes the oligarchs will rise up against him, but the timing isn’t going to work. Besides for the fact that the US vastly overestimates the “pro-western” political forces in Russia as well underestimates how deeply the oligarchs are despised by the majority.

    Am I wrong to surmise that the US plan to destroy Russia’s economy is, like so much of US political-economic thought, primarily premised on whether the stock market can handle the sanctions blow back rather than the effect that blow back will have on the average American? My biggest take away from the Putin statement was how much time was devoted to addressing the economics of middle and lower class people compared to anything I’ve ever heard from a US politician. Putin’s great failing as Russia’s leader was lack of domestic economic development. There have been improvements on that front since 2014, but if he sees the plan described to completion he will be long respected (even by those who don’t like him or like his particular politics) by the Russian people.

    1. lance ringquist


      the financialization of america became super charged from 1993 on wards. i think that the swift actions of the dim wit nafta billy clintons nafta democrats, even surprised the traditional oligarch party, the GOP.

      the GOP never believed their own complete economic rubbish, but who is more dangerous? a party that knows its rubbish, or dim wits that actually believe the rubbish. and there it is, nafta billy actually believed the economic rubbish. so did carter, empty suit hollowman obama, and the current nafta dim wit biden.

      russia will end up making a lot of things the world wants, and if they do it like FDR’s new deal, they will have immense internal demand, and the sanctions will mean little as their economy makes them the envy of the world.

    2. Yves Smith Post author

      Whether Putin delivers IMHO will depend mainly on the operational capacity of his government. Look at the trouble we had getting the unemployment funds supplement under Covid out. We have readers like Tom Stone in CA who said it took forever, Ditto one of our aides here in Al who was owed nearly $20,000. Or that $2,000. Most got the $ pronto but for those who didn’t, it took months.

      So he and his team can design a lovely menu of relief and “get the goods moving” schemes. But can they deliver? The Russian government was basically destroyed in the 1990s. Did Putin adequately rebuild it?

  3. cocomaan

    I want to say that OPEC will blink. Or won’t blink. I want to say I know what they’ll do. But people like MBS in Saudi are fairly unpredictable to me, except that they want to safeguard their own power. Seems like OPEC is trying to play the superpowers off of each other and then side with the winner.

    More important, the press and pols in US and Europe have whipped the public into such a Russia-hating frenzy that it seems impossible for them to back down on sanctions even when the war is over.

    This is what I see too. If Russia pulled back tomorrow, would any of the sanctions disappear? Doubtful.

  4. Nels Nelson

    I subscribe to the Heisenberg Report as part of my attempt get views across an ideological spectrum. The host there who refers to himself as The Real Heisenberg has been gleeful at thought of “King Dollar” destroying the Russian economy. In a recent post concerning the destruction US sanctions are reeking on Russia, I posted the following:

    Then there is the following which I have been expecting:

    YEREVAN, March 14 – Sputnik. The member states of the Eurasian Economic Union (EAEU) and China will develop a project for an independent international monetary and financial system. This was agreed upon by the participants in the economic dialogue “A New Stage of Monetary, Financial and Economic Cooperation between the EAEU and the PRC. Global Transformations: Challenges and Solutions”, which was held on March 11 via videoconference. It is envisaged that the system will be based on a new international currency, which will be calculated as an index of the national currencies of the participating countries and commodity prices. The first draft will be submitted for discussion by the end of March. As Sergei Glazyev, Minister for Integration and Macroeconomics of the EEC, emphasized, China was the first in the world to move to the stage of national economic recovery.

    This sounds very much like the proposal John Maynard Keynes made at the Bretton Woods Conference instead of the fixed exchange rate gold standard the US wanted. He wanted an international currency which he called the Bancor based on a basket of currencies of the members. The US nixed it.

    Could the above announcement be the beginning of the end of what economist Michael Hudson’s called “Super Imperialism – The Economic Strategy of American Empire”?

    I received the following wrist slap from The Real Heisenberg:

    I realize not every reader is apprised of my policy on Sputnik, RT and/or any associated outlets, so I’m not going to remove this comment. But I do want to reiterate that policy: No quotes or links to Sputnik, RT or any of their affiliates, arm’s length or otherwise, are permitted in our comments section.

    Sputnik and RT are FARA-registered entities. In other words, they are registered agents of the Russian government and operate as international propaganda mouthpieces for the Kremlin.

    Again, I’m going to let this comment stand because I know not everyone is apprised of my policy, but this is a reminder.

    I cannot help but believe that American hubris is going to get a visit from Nemesis.

  5. fresno dan

    I do not in the least condemn those who have villas in Miami or the French Riviera, who cannot make do without foie gras, oysters or gender freedom as they call it. That is not the problem, not at all. The problem, again, is that many of these people are, essentially, over there in their minds and not here with our people and with Russia. In their opinion – in their opinion! – it is a sign of belonging to the superior caste, the superior race. People like this would sell their own mothers just to be allowed to sit on the entry bench of the superior caste. They want to be just like them and imitate them in everything. But they forget or just completely fail to see that even if this so-called superior caste needs them, it needs them as expendable raw material to inflict maximum damage on our people.
    If you substitute America for Russia, and the Hamptons and Hawaii, you could be talking about a certain American…

  6. Carolinian

    Whatever one thinks of Putin–good or evil–pretending that he is foolish seems likely to be a big mistake. Naturally therefore our DC chowderheads seem determined to do so. Lambert has been making Uncle Remus allusions lately and indeed who has been lured into the briar patch here? If gas goes to $7 then we will have a revolution in this country, not Russia.

    Was out on the road yesterday and diesel is at $5–a dollar more than gasoline which is softening a bit. One wonders how those testy truckers are feeling about that.

    1. Late Introvert

      Does anyone know how one would signify support for the truckers without encouraging the wing nuts, bumper sticker like? Because I actually do appreciate them very much, I sure would not want that job. I make a point of PAYING FOR SHIPPING these days, for one thing. Those people earn it.

      1. truly

        I have been meaning to make a bumper sticker for my car- “Got Anything? Thank a trucker”. I agree with you, truckers need some real support these days.

  7. Roquentin

    There is this sense in the US that you can have war, economic or otherwise, without consequences. This is probably because, especially for younger people, the have never had any consequences to speak of for political decisions made in the US. They just expect everything to go on like it always has. I will also never understand how people thought we could just lock down most of the world for two years without major economic effects. We’ve basically used monetary policy, rather effectively, to manage economic pain but we’re brushing up against the limits of what it can do. It’s either runaway inflation or recession now, and it’s starting too look like the powers that be find a recession preferable to double digit inflation.

    Things are probably going to get even weirder and wilder in the US politically. The last recession certainly did.

    1. eg

      If policymakers had an actual understanding of the power and flexibility of fiscal policy they wouldn’t be stuck with their delusional reliance upon a monetary policy which dooms them to choosing between runaway inflation or recession.

      1. Objective Ace

        You seem to assume they care more about the actual economy then enriching themselves, buddies and lobbyists. Remove that assumption and their actions make perfect sense. The carrilion effect dictates where that monetary policy is directed is who will benefit the most, and sure enough it always seems to be the already rich. That’s why we bailout Wallstreet (or any company “TBTF” ) but allow millions of people to go without health insurance

  8. WJ

    If one were to compare, objectively and from a purely analytic perspective, the speeches and other public communications issuing from the Russian state with those issuing from the American, one would immediately note a couple of important differences:

    1. Russian communications involve concrete references to recent and obviously pertinent historical developments from 1991 onward. US communications are devoid of any reference to this history. The US communications speak only of the present as an immediate and inexplicable crisis. If the US does reference history, that history stops at 1945.

    2. Russian communications involve much more sophisticated syntax and grammar (in English translation) than US communications delivered in English. Russian communications often approach the status of explicit argumentation. US communications often amount to bald assertions without argument or evidence–sloganeering more or less.

    I’ll let others draw the conclusions they will from these points.

  9. Louis Fyne

    —-ike low wage US workers not being able to justify turning up after factoring in the higher commuting costs, —

    we are past the point where many dual income families with young kids decide that having one parent stay home full/part-time makes more sense.

    Or retirees who work to get out of the house decide that it’s better to just stay at home

  10. Tom Pfotzer

    One of my favorite indexes of human competency is the ability to collect and utilize feedback.

    Natural selection suggests that this competency pays dividends.

    Another point to note, and having animals around* helps one to see this…there seems to be a “stubborn gene” that manifests as “determination” and “willfulness”.

    You can readily see the utility of both of these behaviors, and they’re often in tension or even direct opposition.

    Which coping tool to select, and when?

    * I have farm animals. After a few years of interaction, it becomes obvious that these animals exhibit a lot of the same behaviors humans do. And it’s really obvious, because the animals have no pretense about it.

    Behaviors like: pecking orders, social hierarchy, greed, sex-obsession, cultivation of behaviors that lead to extra feed/snax, cozying up to the people with the “gold”, territorial “defense” and “expansion” …it’s a long, rich list of behaviors that look just like ours.

    So, from that data, I surmise that we come by this (situation) honestly. Think how long ago chix branched off the part of the genetic tree we’re on. Those behaviors echo down the long hallway of evolution.

    So, here we are not using feedback, willfully pursuing someone else’s “territory”, inventing all manner of justifications for our behavior, meting out sanctions (within and without) for not going with the “rules based order”.

    If we didn’t have to worry about nukes, well, we could just blunder along a few more millennia. But, we kinda do have to worry about nukes.

    Think about the massive, entrenched inertia of all that native instinct. Eight billion people, going at it 24/7/365. And then relatively suddenly, a situation arises where those instincts are lethal to the host.


    On the subject of “coping”, I’m buying as much stuff (materials, tools, etc.) as I can think of to address the potential – actually full-on right now – shortages (supply constraints) and loss of buying power (print to stimulate to overcome disruptions, coupled with reduced foreign demand for dollars).

    And it’s not like I don’t have other stuff to do. Prepping for WW3 is annoying. I don’t need the emotional stimulation, and the show is fairly tedious on most dimensions.

    Did you buy your iodine tablets yet?

    Sounds perfectly ridiculous, doesn’t it? “Can we really, truly, for-real be this stupid?”

    Feedback. Some of the best feedback you’ll ever get comes in packages that ain’t no fun to open.

    1. Anthony G Stegman

      Why bother prepping for WWIII? You will be better off living in the moment, spending down your assets, and going out in a blaze of glory when the bubble finally goes up.

      1. Alex Cox

        If there is a nuclear war, most of us won’t go out in a blaze of glory since we don’t live in the targeted cities. Instead we will starve to death as the delivery chains break down.

        Not much glory there, so maybe we should work to avoid this.

        1. Hickory

          Look up nuclear winter. When the sun doesn’t shine for a decade+, no one makes it for long.

    2. kareninca

      I wasn’t able to buy iodide tablets, since they are sold out all over, but it turns out that topical iodine can do the same thing if you get the right version and use it properly, so I bought that. But that really only helps with a trivial aspect of a nuclear blast. I can’t build a shelter in my condo that blocks gamma rays. Well, maybe I could, using cans of tinned corn beef and Chunky Sirloin Burger Soup???

  11. Matthew G. Saroff

    I believe that your statement, “Typical workers have suffered falling real incomes due to Covid-induced inflation,” does not present an accurate picture.

    As I understand it, average wages have fallen behind inflation, but that over-measures the wage earners at the the top, while median wages have generally paced inflation, and wages in the lower quartile have exceeded inflation. (Link)

    So inflation has eaten up most of the wage increases for most of the people, but real wage loss is mostly confined to the top two quartiles.

    1. Yves Smith Post author

      Brookings looked at low-level worker pay increases at large companies, which tend to pay better than average businesses. They did conclude that there were real pay increases since Covid but deemed them to be meager:

      Caregiver pay has not gone up in Alabama even though I paid way over agency levels and raised rates for our aides during Covid. Still $10 an hour or even less:

    1. Tom Collins' Moscow Mule

      “the knowledge that the world isn’t the reality it supposes to be.”

      ‘Postmodernism’ has little to do with the fact the author of the essay apparently fails in his attempt in trying to knit together a confused stream of consciouseness intellectual word play.

      1. That is because, the various human social realities are truly ‘constructed’ in the same fundamental sense that the human experience of an external reality is constructed. The most basic and trivial scientific understanding of our present age agrees that, “Nature is a dull affair, soundless, scentless, colourless; merely the hurrying of material, endlessly, meaninglessly. . . . apart from eyes, ears, or noses, there would no colours sounds, or smells.” Or as Albert Hofmann reminds everyone in his discrption of a ‘transmiter-receiver concept of reality’:

      “That gave me the concept of reality as the product of the transmitter and the receiver. The transmitter is the exterior world, the whole universe including the whole material world, including, even, our whole body. The receiver is our conscious-making spiritual center, that inner spiritual room, and the antennae are our 5 sense organs. Let us speak about the optical picture of reality. What is outside, regarding the optical picture, we have electromagnetic waves, the wavelengths of ultrashort roentgen waves up to middle-long radio waves. It is all the same, all the electromagnetic base, just at different wavelengths, and from this enormous spectrum our receiver can only realize a very small spectrum of 0.4 – 0.7 millimicrons. Within this small spectrum we are sensitive to, we are able to experience it as light. And within this small spectrum, we can receive wavelengths of 0.4 as blue and 0.7 as red. We say,”That is red.” But that happens inside. It’s a transformation. We must realize that we have the screen inside. Everybody creates our own reality. Everybody has cosmogonic potency inside. Everybody is really the creator of a world of his own, that is to say the acoustical world. What exists outside? Outside exists compressions and dilations of the air. You cannot play music in a vacuum. It’s just wave-like compressions and dilations of the air. There exists a large spectrum of such kinds of waves, but we have only from 20,000 to 25,000 vibrations per second which we can perceive as sound. The rest doesn’t exist. Therefore, what we see, our beautiful, our colorful world, does not exist outside. What exists outside is matter and energy and nothing else… matter in all kinds of forms. Living forms or inorganic forms.”

      “Albert Hofmann – Everybody Has Cosmogonic Potency (1984)”

      2. The persistence of that illusion, as a highly complex mathematical (holographic) dream, or ‘maya’ exists because, (See as an example for further inquiry):

      “We think about time of truth in different domains, in mathematics, in ethics, in religion, in philosophy. And it’s often this perception that human life, which is full of change and death and so forth, can be transcended to a timeless realm. These ideas are very deep in our culture, and the physicists have just a particularly sophisticated form of it.”

      “Resetting the Theory of Time” —-

      3. “That it’s really about who will get to define reality, and how.”

      It is probably trivially safe to assume, based upon observable scientifically (social, psychological, ect.) ‘known knowns’, that power, force, control, and dominance (hierarchies) are central aspects of human social organization.

  12. Jeremy Grimm

    “The Russian invasion of Ukraine came at a time when the oil market was already tightening, with inventories in OECD economies already drawn down to well below the five-year average and sitting at their lowest levels in eight years.”
    Curious how that had been so. As the screws were tightened on Russia was the invasion of Ukraine and u.s. driven sanctions on Russian petroleum a big surprise? I am not sure what ‘tightening’ means in this context.

    “… the sanctions on Russia are likely to “appreciably depress global economic growth,”
    Depress ‘Global economic growth’? — I expect so, but I believe that broad characterization of the impacts hides the much more direct impacts on the transportation networks of our “optimized” supply chains and the long distance commuters compelled to their travels by u.s. warped and inflated real estate markets. Global economic growth may be depressed but that blithely ignores who will be most damaged by that process.

    As for Putin’s speech — I have not read the full speech yet. The last line of the excerpt Yves included jumped out at me: “But they do not know our history and our people well enough.”

  13. Anthony G Stegman

    It is not in China’s interests for the West to suffer from its own self-sanctioning. China does far more business with the West than it does with Russia. It will not risk this by taking any meaningful actions to assist Russia. This includes keeping oil supplies under stress. I will expect the Chinese to make efforts to increase global oil supplies and relieve pressure on Western economies. Having said this China faces a big challenge walking a tightrope between the East and West. It may ultimately be forced to take sides in the Russia-Ukraine conflict.

    1. Polar Socialist

      Considering the statements China has made for over a year now, I think they’ve done with the tightrope. They want a multipolar world instead of “The West” dictating to them or anyone else. If not now, when would be a better opportunity?

      Considering the actions they have taken recently, like negotiating oil-for-yuans with Saudi-Arabia or commencing the development of new currency for trade between members of Eurasian Economic Union and China it also seems that they are much more willing to call West’s bluff than ever before.

    2. Otis B Driftwood

      COVID taught us that until the West reestablishes its production capacity, we are at the mercy of China. Not the other way around.

    3. Yves Smith Post author

      It is not just the West v. Russia. The rest of the world ex the US, Europe and its Five Eyes friends in the antipodes are not condemning Russia, which in these times is tantamount to support. They are willing to trade with Russia.

      Russia’s position in fertilizer alone gives it significant leverage. Keeping people fed in China is of paramount importance.

      And China is absolutely furious after Biden’s call. They are not about to be told how to conduct their geopolitical and economic affairs. This in their mind has gone way beyond mere economics to national sovereignity. They’ll do business with Russia and are capable of doing a much bigger “Fuck the EU” than Nuland could ever contemplate.

      If they have to take a GDP hit to decisively knock off the US as superpower competitor, that is a trade they would make all day. Even more so because the Chinese leadership and public accept that the Ukraine war is the result of US overreach. Any fallout can be pinned on the US.

    4. Richard

      Anthony G

      China “does far more business with the West” so it will not take “any meaningful actions to assist Russia.”

      Not the point. Not everything is money. In this case, if Russia goes down, China is all alone against the US. In time the US will try to take China down too. China knows this, and will act accordingly.

  14. KD

    It looks like US/EU going into severe recession, developing world will have food shortages and civil unrest, and we may see some financial contagion blowing up banks and pension funds. A tough time to be an incumbent or a central banker.

    While it is clear you can gin up public opinion with dead children coverage, it is hard to imagine there will be any lasting bump except in Eastern Europe where you actually have a security threat. Further, who knows in that part of the world if the blame will fall on the Russians or the US, as it would appear that a diplomatic solution should have been possible.

  15. ghiggler

    Yves writes:

    Ditto the gas from Canada’s tar sands is also very light; reader are arguing over its bitumen, which in theory could help but that was never intended to be transported to the US

    I’m one of the arguing readers, but I’m going to close with this as my last post on the subject. The Oil Sands Magazine page on product streams talks about the chemistry and trade flows as of 2019/2020. On these subjects you can trust it. On matters of policy and opinion your milage may vary.

    The graph titled Alberta Crude Oil Receipts shows that in 2019

    93% of the 1800 kbbl/day of heavy diluted bitumen was exported to the United States
    50% of the 1100 kbbl/day of synthetic crude oil (SCO) was exported to the United States

    Dilbit heavy, sour oil was intended to be transported to the US, and the vast majority actually is transported to the US.

    1. Yves Smith Post author

      That means it won’t solve our Russian oil problem since we already use the tar sands bitumen and still need a lot of Russian oil. Thanks.

  16. Dave in Austin

    Another report from the all important cognitive dissonance (CG) front of the Ukraine war.

    All US, EU and British companies have been ordered to cease all trade with Russia because of the Ukraine War. Meanwhile Ukrainian companies owned by local oligarchs continue to trade with and profit from the gas trade with Russia, making $5-10 million dollars/day. There have apparently been no formal trade bans or financial transaction limits with Russia announced by the Ukrainian government.

    All US air space is closed to Russian flights and American and EU companies have been ordered to cease all flights through Russian air space. Meanwhile from Flight Tracker today:

    Air India’s over-the-pole flight 107 from Hydrabad to Chicago (the Infosys H-1B visa express) is passing east of Moscow and will be out of Russian air space in a few hours. It is running a bit late because of weather in Chicago.

    The Emirates Dubai-to-Moscow is on time as is the Qatar Air Doha-to-St Petersburg flight 278.

    The China Southern flight 461 from Shanghai to Frankfurt might be a bit late because it has had to be rerouted a bit north in Russian airspace to avoid the fighting around Kiev.

    No word yet on the US and EU plans to apply sanctions and deny landing rights to these airlines.

    Meanwhile 30,000 people have escaped from the besieged city of Melitopol through a safe corridor created by the breakaway region of Donetsk.

    Since roughly 50% of the city’s population is Russian speakers (the actual number has unfortunately been recently removed from the Wikipedia Melitipol page but information about the language breakdown remains at, they are probably being fed and housed by friends and relatives in the nearby breakaway regions and might provide some information about the claim that the local population was being used as a human shield by radical right-wing Ukrainian militias.

    Unfortunately, no western press seems to be reporting from the area. So no film of or interviews with the escapees are available on any of the western networks. To bad, since the networks have done such great job of informing us about the plight of other recent waves of Ukrainian refugees. No word yet on if they will be granted refugee status in the United States.

    1. Greg

      Re: lack of interviews with refugees, this is my favourite embedded reporter with the donetsk peoples republic (separatists)
      It’s youtube, so it’s not everything because censorship, but you can at least get auto translated (garbage) captions that way. On telegram translation is a pig.

      A couple of vids so far along humanitarian corridors in various cities where the DPR is operating.

    2. KD

      It does create an interesting possibility if Putin gets the current government to ink a deal or puppets Ukraine, then you can run sob stories of the starving Ukrainian children because of the cruel Western sanctions on Ukraine, or alternatively, Ukraine can just act as Russia’s proxy to evade impact of sanctions if Ukraine isn’t subject to sanctions.

  17. Petter

    This from today’s, Norwegian business newspaper, referencing an IEA press release (Google translate). Good luck is about all I can say.
    IEA: Oil demand can be rapidly reduced by 2.7 million barrels daily
    Emergency measures can reduce daily oil demand by 2.7 million barrels within four months, according to a press release from the International Energy Agency (IEA).

    In the face of the emerging global energy crisis triggered by Russia’s invasion of Ukraine, practical actions by governments and citizens of advanced economies could lead to significant reductions in oil demand in a matter of months, reducing the risk of a major supply crisis, according to a new analysis by The International Energy Agency today.

    The agency points out that the measures will have an even greater effect if they are also implemented in emerging economies.

    The term “advanced economies” is commonly used for countries that are traditionally referred to as industrialized countries.

    These measures will reduce “painful prices” for consumers worldwide, reduce economic damage, shrink Russia’s hydrocarbon revenues and help move oil demand in a more sustainable direction, according to the IEA.

    The IEA has previously stated that the invasion came against the backdrop of an already pressured global oil market, increased prices and commercial inventories that are at the lowest level since 2014.

    Here are the ten proposals the IEA put forward on Friday:
    1. Reduce speed limits on motorways by at least 10 km / h.
    2. Work from home up to three days a week where possible.
    3.Car-free Sundays in big cities.
    4. Make public transport cheaper; stimulate micromobility, walk and cycle.
    5. Limit private car use in large cities by days.
    6. Increase companion driving and implement measures to ensure that cars use less fuel
    reduce fuel consumption
    7. Promote efficient use of trucks and goods delivery.
    8. Choose high-speed trains and night trains over planes where possible.
    9. Avoid business travel when alternatives exist.
    10. Accelerate the use of electric and more fuel efficient vehicles.

  18. Troglodyte

    Truthfully, I suspect a carefully thought out geopolitical plot to dethrone King Dollar and American unipolarity.

    The timing of the Ukranian crisis is very convenient for Russia – a time of cyclically increasing commodity prices, now leveraged by Russia itself. That the American pocketbook is experiencing seismic price shifts and will continue to see even larger shocks in the coming months in time for the 2022 midterms is suspiciously convenient.

    Given the US Navy’s expectations about the Taiwan question coming to a head, it wouldn’t surprise me in the least if China made its move right prior to the 2024 US presidential elections.

    Isolationists in Congress. Isolationists in the White House. End of American unipolarity.

    1. drumlin woodchuckles

      If it went further and led to America’s defection from the Free Trade Order, and the restoration of Protectionism for the next few decades behind which to slowly rebuild some small part of our industrial ecosystem which the Free Trade Conspiracy and its American business partners worked to export or destroy, then that would be a good outcome for ordinary Americans.

      And those who worship Free Trade and Free Markets could all move to China.

Comments are closed.