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US has few options as oil prices continue to strengthen

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US has few options as oil prices continue to strengthen

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Headlines are now crossing over the Iran nuclear deal, saying they are at the point where political decisions are needed. This is another sign of progress and shows that an agreement is possible.

But that will depend on the White House and what they are willing to give up. Oil is at $88 and that gives Iran a lot of leverage. For me though, this is the easiest route for Biden.

Last month’s SPR release did very little. There is more capacity there, but that would put the United States in a tough spot if there was a real oil supply shortage or a super spike. For me, that bullet has already been fired.

Next comes Russia-Ukraine. The US and UK appear willing to sanction Russian energy exports if Putin’s forces cross into Ukraine. It’s a tough decision and I think Germany will block it. I think there’s about $10 of geopolitical risk in oil right now and giving in to some of Putin’s demand and de-escalating the situation could drive oil prices down. However, this could be more difficult than backing down from Iran.

In the medium to long term, the options are just as difficult. Biden promised to end new drilling leases in his campaign and has done so so far. One exception was an auction that was already scheduled for 80 million acres in the Gulf of Mexico. However, that sale was blocked today by a US judge who said environmental assessments did not take climate change sufficiently into account. Analysts think they will appeal, but how far do they want to push? And what about big projects like Keystone XL? It would be a dramatic descent.

At the end of the day, there are stocks to be drilled in the United States, but shale producers have been disciplined so far and I think they will be criticized by

inflation

Inflation

Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates demand pressure on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country according to the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.

Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates demand pressure on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country according to the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.
Read this term and worker shortages if they try to scale up. I don’t think there’s a shareholder appetite for that kind of spending, but prices close to $100 might change that.

So my base case is that there is a deal with Iran, but who knows what will happen with Russia.

That said, maybe that’s overthinking it. Look at this table:

US has few options as oil prices continue to strengthen

 | Breaking News Updates

US has few options as oil prices continue to strengthen

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