The Thread for Democratic Socialists/AOC watch with 24/7 AOC updates

[Justwin]

https://open.spotify.com/episode/5xY86lDT8zhuf3s8gS2dM8?si=DPUeAVADSh6uyiPQGl7aUA

Listening now to see what Joe and Tracy have to say.

This was an excellent podcast. Very informative and thorough. The information contained in the podcast makes Bernie's tweet look like the tweet of a fool.

1.The oil supermajors Bernie is decrying, along with the small outfits, are the ones that are most ramping up production. It's the independents that are hesitant. The only kind of COLUSION (COLUSION is an autochange) that is possible is for the independents to be not increasing production in order to benefit the super majors. Why would they do that?

2. The shale independents made a huge mistake by continuing to ramp up production in the face of falling prices last go round. We all benefitted from their mistakes in the form of lower oil prices, but why should we expect them to make the same mistake again for our benefit? They may very well be overreacting this time around, but it's simply not COLUSION and profiteering. Maybe there is some greed in there, but I don't think they have an obligation to ensure low oil prices for us at the expense of going bankrupt.

I read in another article about how the independents in shale are scared of another battle with OPEC as they have gotten hammered the last two times battling OPEC.

3. Does Bernie not care about the environment? Higher fossil fuel energy prices are exactly what so many Democrats have said they want. Now they're mad because they're getting what they want? Utterly ridiculous. They need to grow up, institute a carbon tax, distribute the proceeds back to the people on a per capita basis and be done.

There is a lot of other information in the podcast if one is interested in oil markets and I highly recommend this episode.

[Kat Kid]

I think if you gave Bernie a lie detector test he would probably say he would be in favor of a carbon tax, but there is zero political support for it so criticizing Bernie for that is silly.

As for prices, I am not that opposed to higher gas prices as long as we accompany that with some strategic spending to ease the transition. We have beaten expectations despite relatively meager government support for alternative energies, it would be great to see what would happen if we actually put some money behind it.

I guess I feel like I am missing something here— if everyone seems to agree that most producers are not spending on cap x and are at best modestly bringing more production online as opposed to years past even as their margins have expanded due to better fiscal discipline and instead of reinvesting those additional dollars are spending more on dividends and buybacks then I guess I will just take that as everyone agreeing and move on.  There is excess capacity for supply in a very tight market and overwhelmingly producers are holding back.  Glad we all agree.

As for what to do, My preferred list of realistic things that could help in the medium term:

1) fully refundable tax credit for US EV
2) Iran deal and bring on some production there
3) Venezuela deal and bring on some production there

Getting rid of the gas tax is idiotic and underscores how little the president can functionally do, other than just completely unwind the one thing that long term would get us out of it.

[Justwin]

I think if you gave Bernie a lie detector test he would probably say he would be in favor of a carbon tax, but there is zero political support for it so criticizing Bernie for that is silly.

As for prices, I am not that opposed to higher gas prices as long as we accompany that with some strategic spending to ease the transition. We have beaten expectations despite relatively meager government support for alternative energies, it would be great to see what would happen if we actually put some money behind it.

I guess I feel like I am missing something here— if everyone seems to agree that most producers are not spending on cap x and are at best modestly bringing more production online as opposed to years past even as their margins have expanded due to better fiscal discipline and instead of reinvesting those additional dollars are spending more on dividends and buybacks then I guess I will just take that as everyone agreeing and move on.  There is excess capacity for supply in a very tight market and overwhelmingly producers are holding back.  Glad we all agree.

As for what to do, My preferred list of realistic things that could help in the medium term:

1) fully refundable tax credit for US EV
2) Iran deal and bring on some production there
3) Venezuela deal and bring on some production there

Getting rid of the gas tax is idiotic and underscores how little the president can functionally do, other than just completely unwind the one thing that long term would get us out of it.

The oil supermajors that Bernie criticized are investing in increasing capacity as are the players at the smaller end. The ones that are limiting the investments in increased capacity are the independents in shale. Do you think the independents investing enough to increase capacity by 5% is greed, COLUSION or profiteering? I don't think it is. I would call it prudence which is the opposite of Bernie's tweet. Was everyone sending out tweets of condolences to independents when they were getting killed as the price of oil fell 5 years ago or so?

Part of the issue with getting support for a carbon tax is that Democrats are obsessed with spending the revenue to fund their preferred projects (see tax credits for EVs) rather than committing to returning the revenue to the people on a per capita basis. I would 100% oppose a carbon tax that is used to fund other programs. I would only support it if the revenue is returned to the people.

The issues facing the market currently are primarily supply issues. The supply issues are mostly based on a lack of confidence in the price of oil remaining high. I don't think that EV credits are going to do much to change the price of oil today nor have much effect in the future. However, if you do think they will notably affect the price of oil, you are probably going to make the supply situation worse by further undermining confidence in the future price of oil.

Figuring something out with Iran and/or Venezuela would do something to add supply to the market. Iran could probably increase production by around 1 MBD. I do not know how much Venezuela could increase production. The supply would not come online, though, until 3-6 months after sanctions are lifted.

[Kat Kid]

There is zero support for a carbon tax from pretty much any US politician, blaming the democrats for that is asinine. But whatever it isn’t happening.

As for the EV tax credit, I don’t think it is the best thing and I don’t think it would immediately bring down the price of oil but it might move peak oil forward by a year or two and that would be good for a number of reasons.

[Kat Kid]

And honestly justwin, reading back over my posts I have been way more of a dick than probably anyone else in this thread and I’ve appreciated all of your and sys’ posts and I looked at how MIR was coming in with an open mind and thanking people and it made me feel bad so thanks for engaging.

[Justwin]

I'm probably being too harsh on the Democrats in terms of a carbon tax not being implemented, but I do think there is some political will to implement it. I imagine there are a lot of Democratic senators that would be willing to vote for a carbon tax. It's just every time I hear any mention of a carbon tax from a politician, there is discussion about what programs it could fund. I think if a concerted effort was made to show how a carbon tax would not really make a lot of people worse off, it would be able to gain some traction. However, this would require the proceeds to be distributed back on a per capita basis. A carbon tax is the simplest, most efficient and most effective way to get the economy to transition away from fossil fuels. It's absurd, in my opinion, for any politician that is serious about the environment to not be advocating for one. It will take a lot of work to build the public support for it, but I think that work would be more fruitful than all of the time that was wasted on BBB.

I agree about the EV credits. No large impact now, but could move peak oil demand up a bit.

The main thing about Bernie's tweet that sys posted is I feel it really undermines his credibility when he legitimately criticizes something. I am not a person that's ever going to vote for him, but he and Elizabeth Warren have some things I could get behind. The foremost one is the finance industry and removing its privileged position in the economy. I still am upset about the way that the bailouts in 2008-2009 went down and am unconvinced that the industry is a net positive for the economy. There is a lot to legitimately criticize about that industry. However, it makes it harder to support Bernie and Elizabeth Warren when they are, in my opinion, completely off base complaining about an industry. It simply isn't the case that high profits automatically mean greed, COLUSION or profiteering.

This has been a fun topic to explore and I'm glad sys and you have posted about it. I really did enjoy the Odd Lots podcast on the price of oil.

[sys]

Thank you for engaging in this conversation, my knowledge of this issue is rudimentary so I appreciate the discourse.

My next question is if demand is the primary driver of the market, can you explain the current price of crude oil being 2x what it was in 2019 when the demand was slightly higher?

i haven't listened to the latest odd lots, so i'm at risk of being pre-contradicted, and a lot of the ground was covered btwn your post and my answer, but i'll try to address it and add a few other comments.

1.  oil prices are extremely volatile!  the basics of this are that oil demand is relatively price insensitive, hence when there is an imbalance btwn supply and demand, price moves a lot more than demand does (see price chart here, plus a lot of other good info).  so relatively small changes in demand or supply can and will cause large swings in price.

https://fingfx.thomsonreuters.com/gfx/ce/znvnejyjypl/OIL%20PRICE%20OUTLOOK%20FOR%202022-2023.pdf

2.  my view, and god knows i've been wrong trying to predict oil price moves far more than i've been right, is that if the 2020 pandemic hadn't come along, oil would have moved higher in 2020 because years of underinvestment following the sustained slump in oil prices starting in 2014 would have finally caught up.  instead, demand crashed, oil cratered and 2020 saw a massive retraction in oil supply in response.  imo, it is an open question whether the price action in late 2021/early 2022 is primarily a short-term reaction to the destruction of investment in 2020 or part of a longer-term cycle resulting from underinvestment from 2014 on.  i'm betting on the latter, but as i said, i've been wrong on this stuff a lot, and there are people that know far more about oil markets than me on both sides of that debate.



so, anyways, leaving 2019 aside and turning to some of the subsequent comments, especially regarding who is and who isn't bringing new supply to market and why, my feelings are that most of the commentary for investors about having restraint and not flooding the market is complete bullshit.  yes, investors are leery about companies pursuing growth, because they've been losing money for the last seven years and they're rough ridin' tired of it, and companies are somewhat responsive to that.  but oil companies aren't going to leave $100 oil on the table because they think their little 30k barrels/day west texas play is going to crash the market.  never have, never will.  imo, and not necessarily in order, the reasons (especially us/canada shale) companies are a little slower to invest in bringing new production online than they might be are:

1.  uncertainty about future oil price.
2.  they don't have high quality land to drill (see the part about majors being quicker to add new production than independents - majors, in general have better opportunities)
3.  they're still up to their ass in debt and covenants prevent them from spending on capex until they pay more back
4.  they're lying to investors and are getting ready to drill, baby drill as we speak
5.  sorta the same point as #1, but the saudis put the fear of god into them and it'll take a bit of shaking that off
6.  peak oil demand/rapid ev adoption has made investing in longer-lived projects questionable


at any rate (and mostly for kk), my advice as an investor would be to sell too early rather than too late because there's no way in hell they don't produce themselves back into cheap oil again before too long.

[sys]

oh, i should add that oil currently isn't that expensive, really (again, see the charts linked in my previous post).  not entirely sure why the current freak out about it, other than i guess voters are more responsive to the change than the absolute level and dems are flailing around desperately for anything other than themselves to blame for the voters hating them.

[BIG APPLE CAT]

serious question but is there any reason to believe that the majors (and possibly even the minors to some extent) won't find a way to position themselves to corner the market on the raw materials needed for the EV market (lithium, molly, etc.)? At the end of the day these companies are essentially mining companies that are good at finding places where there are resources and then extracting them from the earth. Could they not just as easily pivot those operations to different materials? Like if Chevron decides they want to open up (or buy out an existing) lithium mining operation who is going to stand in their way?

[sys]

serious question but is there any reason to believe that the majors (and possibly even the minors to some extent) won't find a way to position themselves to corner the market on the raw materials needed for the EV market (lithium, molly, etc.)? At the end of the day these companies are essentially mining companies that are good at finding places where there are resources and then extracting them from the earth. Could they not just as easily pivot those operations to different materials? Like if Chevron decides they want to open up (or buy out an existing) lithium mining operation who is going to stand in their way?

i think they are pretty different skillsets.  afaik, there aren't any sizable oil companies that are moving into rare earth metals mining.  seems more like an arena that large mining companies could enter (and i think some have).

when vertically integrated majors have moved towards renewables, they seem to have mostly entered on the energy production side.

[BIG APPLE CAT]

serious question but is there any reason to believe that the majors (and possibly even the minors to some extent) won't find a way to position themselves to corner the market on the raw materials needed for the EV market (lithium, molly, etc.)? At the end of the day these companies are essentially mining companies that are good at finding places where there are resources and then extracting them from the earth. Could they not just as easily pivot those operations to different materials? Like if Chevron decides they want to open up (or buy out an existing) lithium mining operation who is going to stand in their way?

i think they are pretty different skillsets.  afaik, there aren't any sizable oil companies that are moving into rare earth metals mining.  seems more like an arena that large mining companies could enter (and i think some have).

when vertically integrated majors have moved towards renewables, they seem to have mostly entered on the energy production side.

fair enough. I mean i realize that when they get crude, only a small percentage of it is used to make gasoline and the majority of it is used for like everything else imaginable...paving roads, car tires, diapers, etc. So there's no reason to think that even if demand for gasoline just completely falls off the table that they would stop using crude. I just...i dunno, these companies don't seem like the types who are just going to give up market share without a fight. As of now, they are responsible for producing what makes cars go. If something else starts making cars go I have a hard time believing they're just going to shrug their shoulders and say oh well.

[sys]

i think the majors are mostly putting a toe or two into the electricity generation business.

[tdaver]

serious question but is there any reason to believe that the majors (and possibly even the minors to some extent) won't find a way to position themselves to corner the market on the raw materials needed for the EV market (lithium, molly, etc.)? At the end of the day these companies are essentially mining companies that are good at finding places where there are resources and then extracting them from the earth. Could they not just as easily pivot those operations to different materials? Like if Chevron decides they want to open up (or buy out an existing) lithium mining operation who is going to stand in their way?

i think they are pretty different skillsets.  afaik, there aren't any sizable oil companies that are moving into rare earth metals mining.  seems more like an arena that large mining companies could enter (and i think some have).

when vertically integrated majors have moved towards renewables, they seem to have mostly entered on the energy production side.

fair enough. I mean i realize that when they get crude, only a small percentage of it is used to make gasoline and the majority of it is used for like everything else imaginable...paving roads, car tires, diapers, etc. So there's no reason to think that even if demand for gasoline just completely falls off the table that they would stop using crude. I just...i dunno, these companies don't seem like the types who are just going to give up market share without a fight. As of now, they are responsible for producing what makes cars go. If something else starts making cars go I have a hard time believing they're just going to shrug their shoulders and say oh well.

Gasoline yield is close to 50% and diesel/jet is another 40%.  All those other products are secondary for most refiners.  There’s been major investment in renewable diesel recently because they can repurpose existing assets, the technology isn’t really that different, and the product is fungible with their current product.  Can’t say that about other renewables.  But I agree that the ExxonMobiles of the world won’t just sit back and watch.  They’ll have to jump into something new at some point.

[Katpappy]

Anybody who keeps up with the future of energy knows geothermal energy is started in Alaska.  It involves drilling to core levels that produce energy from heat that makes zero emissions and can be utilized in the existing fuel stations to power fuel-driven motors.  Only if they come up with battery technology that exceeds anything in the present auto industry, this product will be dead in it's tracts.  Guess who is involved in this new energy; if you guessed big oil, you're right.  Yes, another thing this will do is get rid of all the small producers, as they will not have the investment it takes to retrieve the new energy.  Just like the independent gas station from the late 70's/80's.  BIG OIL, BABY.

[sys]

foreign policy brings out the best in horseshoe theory.

https://twitter.com/Blake_Allen13/status/1497795515202916352

[Kat Kid]

Did you read the statement?

[chum1]

I'm not seeing the tight relationships between imperialism, NATO, and the working class that those people apparently do.

[sys]

Did you read the statement?

the tweet i linked accurately represents what is said.  what are you driving at?

[Kat Kid]

Did you read the statement?

the tweet i linked accurately represents what is said.  what are you driving at?

I don’t think the tweet accurately represents the statement. It is very clear from the statement that they said Putin is responsible for this. The DSA is an American organization tho, so it makes sense to to focus on offering up ideas for what they think America should do. It is very possible to believe NATO is a contributing cause to the tensions with Russia and that Russia is to blame for this war.

[sys]

of course it's possible to believe that.  the dsa just made clear that they, as an organization, believes that.


i posted it here because it's an incredibly stupid thing to believe and i'd like people to know how stupid dsa is.

[steve dave]

https://twitter.com/aoc/status/1498038441564585986

[sys]

I have to say, I doubt Jessica Cisneros would have the FBI turning up at her house.

But I'm glad Cuellar got re-elected so we could protect that dem seat from going red.

https://www.texastribune.org/2022/01/19/henry-cuellar-fbi/

Always blows my mind to see her name out in the wild. Well, sort of her name. Her actual name is Justicia.

today is the special election.  looks like a good chance it will go to a runoff, but still a chance one candidate or the other will clear 50%.

[sys]

compared to the 2020 primary, the northern (san antonio area) part of the district swung quite a bit towards cisneros and the southern part quite a bit towards cuellar.  the changes are close to offsetting, but there's also a third candidate taking up 4-5% of the vote.  hard to guess who those voters would prefer if forced to choose among the top two.

[Spracne]

compared to the 2020 primary, the northern (san antonio area) part of the district swung quite a bit towards cisneros and the southern part quite a bit towards cuellar.  the changes are close to offsetting, but there's also a third candidate taking up 4-5% of the vote.  hard to guess who those voters would prefer if forced to choose among the top two.

Keep me posted. You're literally my primary source of info.

[sys]

it's pretty jarring how few voters participate in non-presidential year primaries.  for reference, there are about 700k people in a congressional district.

https://twitter.com/DecisionDeskHQ/status/1498885460046884868