Sunday, June 05, 2005
One Foot Over The Edge, Or...What If Gifford Miller Ran Exxon?
Well so much for our “Southern New England Summer Job Index.”
Despite the fact that Tommy Goodwin no longer has to bag groceries at the Stop & Shop in Westerly, Rhode Island—he got a job waiting on tables at a good restaurant, and who knows what might happen when they seat me at one of his tables (Tommy was my youngest daughter’s first boyfriend)—Friday's jobs number was the worst in two years.
I guess oil prices do matter, after all.
(We’ve been told by economists and talking heads and front cover stories in Forbes that rising oil prices don’t matter like they used to, because the economy is so much more energy-efficient than it used to be. Which must be why people drive Hummers that get, literally, 9 miles per gallon—because there’s so much energy left over from all the efficiency going around these days.)
Speaking of oil and energy, there was important, and bad, news Friday from the other side of the world, where half of our newly found oil has been coming from.
Russian Czar—er, President—Vladimir Putin stole—er, purchased—another asset for the State of Vladimir, having “ordered” the owners of Izvestia (the Russian equivalent to the Washington Post), to sell a controlling piece of that newspaper to Gazprom.
Gazprom happens to be the Russia state gas monopoly, which happens to also own NTV, a television channel that was known for going after Putin’s administration...until Gazprom happened to buy NTV and install nicer reporters.
So don’t expect much groundbreaking journalism from Izvestia any more.
And don’t expect much new oil from Russia, either. Because the really bad news from Friday was this: Russian oil production is stagnating thanks to the Kremlin’s heavy-handed takeover of Yukos (you recall the sometimes-deleted scene in The Godfather where the Godfather’s button-man slaps around the casino owner and chases him out of the building?—that’s about the way the Kremlin took over Yukos).
Yukos is Russia’s largest oil producer.
Now, try to imagine what a large oil company run by, say, the New York City Council might look like.
More specifically, try to imagine Gifford Miller—the slick-haired, perpetual New York Mayoral Candidate and, in his spare time, Speaker of the New York City Council-who-has-never-held-a-real-job-but-he-sings-on-the-campaign-trail—running America’s largest oil company, which would be Exxon.
For starters, every Exxon station in America would immediately have fifteen relatives of Al Sharpton, Fernando Ferrer and young Gif himself on the payroll, if not actually pumping gas.
And good luck getting your heating oil delivered on time.
Visualize, for a minute, budget meetings with Gif, Ferny and Al deciding what to do with Exxon's $40 billion of cash flow…(think Homer Simpson dreaming of beer and drooling here)…
Then, move them to a smoke-filled room on the other side of the world; change their accents; give them all sharkskin suits, guns and heavy Russian mafia connections…and you now have an idea of who is running the largest oil producer in the Union of Decidedly Un-Socialist Vladimir and His Friends and Family.
Any wonder why Russian oil production is stagnating?
One Russian who sees the writing—and the higher oil prices—on the wall, is Andrei Illarionov, who told reporters (according to the Wall Street Journal) "it's not possible yet to assess the scale of the damage" caused by the Yukos takeover: "We are on the edge and we've already put one foot over.”
Illarionov is not a Russian dissident who just got out of a Siberian prison camp: he is the Kremlin’s own “Economic Advisor.” (If Vegas is making odds on Illarionov’s life expectancy, I will take the under.)
Now, let’s look at some actual numbers, to see what the problem might be.
Thanks to the unleashing of the Soviet oil industry from the days when People Like Gifford Miller controlled the means of production, Russian oil output rose 50% from 6 million barrels-a-day in 1999 to 9 million barrels-a-day in 2004—a 3 million barrel-a-day increase.
Almost 7 of those 9 million barrels-a-day are exported. (Only Saudi Arabia exports more oil—between 8 and 9 million barrels-a-day—than Vladimir & Friends.)
World oil demand is running at 84 million barrels-a-day, up about 6 million barrels-a-day since 1999.
Therefore, Russia alone has satisfied half the total increase in world oil demand since 1999.
If that extra source of oil goes away—and Russian oil output has been flat for eight months in a row, for the first time since 1999—the world is looking at a very large mismatch in supply versus demand some time in the future.
The Oil Crisis of 200X awaits us, in my view, its precise date yet to be determined—weak jobs number on Friday or not.
So enjoy your Hummers while they’re not yet outlawed.
And keep an eye on the future political career of Gifford Miller, whose campaign slogan could be, “At Least He’s Not Running Exxon.”
I Am Not Making This Up
Posted by Jeff Matthews at 10:12 AM