Pierre Andurand Sees Higher Oil Prices

Pierre Andurand sees higher oil prices prevailing in what some traders call a supercycle.

Crude Oil recently surged to 130 USD a barrel this week, March 07, on news of sanctions on Russian oil as a punitive measure for Putin’s Russian incursion on Ukraine. 

Russian crude known as Urals is being sold either at steep discounts to Brent crude, the international benchmark or left unsold. 

Moreover, the US and other countries are considering whether to impose embargoes on Russian energy imports. 

So the supply shock driven by policy outrage over Ukraine in Europe means that crude oil could hit 150 USD a barrel soon.

Russia is looking for new buyers in Asia and other regions where the geopolitical fallout over Ukraine is less pronounced. China is a potential buyer of Russian oil, but China is also known to drive a hard bargain and likes to buy at deep discounts. 

This new supply shock, sanctions on Russian oil, is why Pierre Andurand sees higher oil prices prevailing for some time

Who stands to gain or benefit from this policy-driven supply shock?

“We don’t have a strategic interest in reducing the global supply of energy,” principal deputy press secretary Karine Jean-Pierre told reporters aboard Air Force One.

Jean-Pierre said that sanctions like that “would raise prices at the gas pump for Americans,” something that the White House is “very aware of.”

But higher oil prices are likely to hit the hard middle and lower-class income households.

These people don’t drive 60,000 USD Teslas. They drive SUVs. So households will pay more for energy and food, which will likely collapse discretionary spending and trigger a recession.

Pierre Andurand sees higher oil prices continuing, which is likely to trigger a recession, which is what the Fed might want so that it can walk away from monetary tightening

Think about it. So, what the central banks wanted to avoid, to tame, which is to tighten, is achieved through higher oil prices. 

If the Fed had to tackle inflation of 7.5% with the aggressive hawkish monetary policy, they would have triggered a meltdown in the bond market. The US public deficit is over 30 trillion USD and interest on that debt is approaching 500 billion USD, which is the fourth largest budget item, according to the debt clock. 

The Fed’s most prized customer for its product, debt, is the federal government so they don’t want to tackle inflation by bankrupting the state. 

As explained above, implementing a sanction policy on Russian oil cuts the global energy supply, which then raises oil prices, is another way of reducing inflation as it slams the brakes on discretionary spending.

Pierre Andurand sees higher oil prices continuing, which puts the burden of challenging inflation on the middle and low middle-class households. In other words, the burden of inflation will fall on the serfs, who will be adversely impacted by energy and food costs.

The western oligarchs, the banking cartel secret shareholders of the Fed will not jeopardize their trillions of dollars of sovereign debt assets and their rule by fiat system to tackle inflation by raising the Fed fund rates. 

So with a new oil-driven cost recession on the cards, central banks will need to remain accommodating. 

We believe that there will be a new wave of quantitative easing, where monetary easing policy supports massive public spending programs

So it is the regular Joes who will pay to build a build-back system of state capitalism.

Since feudal times serfs have always paid with their blood, sweat, and tears to keep their feudal Lords on the throne, nothing has changed.

As I wrote this piece European stocks rallied on reports of joint European Union spending. Moreover, the current US administration’s infrastructure plan will invest roughly $3 trillion on roads, electricity, and broadband, as well as Medicare, education, and climate.

Perhaps seeds of western-style state capitalism are being planted as governments sit in the economic driving seat, supported by central bank liquidity to build a new economic model in a new cold war.

Maybe the US is confident it can win another cold war with Russia, bearing in mind the US and its occupied territories in the EU represent approximately 49.5% of the global economy.

The EU’s GDP is valued at $24.01 trillion in 2021, the US GDP is valued at $22.99 trillion in January 2022, and the Global GDP is valued at $94.93 trillion GDP. 

Meanwhile, China is sitting on the fence, playing peace-keeping mediator but leaning toward Russia, as it doesn’t call it an invasion, and has abstained from sanctioning Russia. China is still holding 2 trillion US dollars of treasuries, and it will be interesting to see whether it continues to remain such a large holding when those treasuries expire. 

The West’s strategy could be to isolate Russia, bankrupt the economy, and trigger a regime change.

So oil has become the new cold war weapon where Pierre Andurand sees higher oil prices, where Russia is increasingly isolated and left in the cold.