Driving with Putin

Right now a lot of us are in reactive mode. Trump, Kim Jong Un, Harvey, and Assad keep throwing sand in our faces and we spend all our time trying to wipe it off and move forward. Even with all this political chaos we should pause, stop reacting for a minute, and make proposals. The persuasive power of “not that” diminishes with repetition.

U.S. intelligence services have established within a reasonable doubt that the Russians interfered in our last election. The details of the extent and Russia’s success are yet to be completely uncovered, but we know our political parties were hacked, our voting records were hacked, and our social media were clogged by a deliberate propaganda campaign. It is probable that the Trump family/campaign and the Republican Party were both involved in Russian money laundering.

This raises an important and tricky question: How do we retaliate against a nuclear armed nation that is also the world’s largest oil exporter? The answer is in the question. They are the world’s largest oil exporter. We are the world’s largest oil importer. The imbalance in this relationship seems to give them an advantage, but it is exactly the opposite. They can’t afford to export less oil. If we do it right, it is no problem for us to import less. The price of oil and the state of the Russian economy hang in the balance. A fine balance it is.

Right now the international oil cartel OPEC is trying to restrict the output of its member states in order to bring the price per barrel above $50. Last November, OPEC and its allies agreed to cut output by 1.2 million barrels per day (mbpd) as of January 2017. That compares to world production of 98 mbpd and OPEC production of 33 mbpd.

The U.S. consumes about 19.6 mbpd, and 43% of that, 8.5 mbpd, gets refined into gasoline for cars, SUVs, and light trucks.

An average car in the U.S. gets around 25 mpg. However, that mileage goes down as driving speed goes up. The U.S. Department of Energy, on its fuel efficiency page, notes, “Aggressive driving (speeding, rapid acceleration and braking) wastes gas. It can lower your gas mileage by roughly 15% to 30% at highway speeds and 10% to 40% in stop-and-go traffic.” Slowing down from 75 mph to 65 mph would raise mpg by about 10%.

And we do go 75 mph. A study by the Insurance Institute for highway safety showed that on rural interstates anywhere from 7% to 49% of drivers were going at least 75 mph.  In some places over 10% of drivers were going over 80 mph.

I’m going to make a wild ass estimate and say that if, as a nation, we just chilled out and slowed down, we could raise our overall gas mileage by 15%. Our fleet gas mileage would go from 25 mpg to 28.75 mpg. We’d use 13% less oil for gasoline production. That’s 1.1 mbpd. (See the hard won 1.2 mbpd reduction, above) That’s a nightmare for OPEC and a nightmare for Russia.

In February 2016, before the OPEC reduction agreement, the price per barrel touched $30. It could go there again without much more of a glut. That would cut Russian government revenues by 25%, their exports by 25%, and knock about 10% off their GDP. Ouchski.

Now, I’m not expecting Americans to suddenly become Prozac nation behind the wheel. I did this thought experiment to point out what a close run thing the world oil market is. Slight wobbles in supply or demand cause dramatic price swings. Even the prospect of such changes makes the commodity markets jump. It wouldn’t take a lot for us to use the power of our demand to rock the world. I mean, I’m not asking people to donate a kidney. Actually, I’ll bet some people would donate a kidney in exchange for the right to speed.

I have another idea, more pragmatic, although politically a stretch, that would do this and more. I’ll get to that one next time.

Putin’s Speech at Valdai

This is a point-at post. I don’t have all that much to say except that you should set aside about 15 minutes and read the speech Vladimir Putin just gave at the Valdai Conference in Sochi. Vlad drops his gloves and wades into the U.S. like an NHL enforcer. The importance of this speech is not about belligerence, though. It is straight talk about Russia’s attitude towards the pseudo-unipolar world we’ve had since around 1990. The one sentence summary is that a unipolar world doesn’t work, and even if it did, the U.S. has massively screwed up the opportunity, so the rest of the world is going to make other plans.

Of course, Putin glosses over the sins of Russia. This is predictable. Nevertheless, as a critique of U.S. hegemony and a discussion of the consequences, it is valuable.

I should note that it has received almost no attention in the U.S. mainstream news media, despite the huge foreign policy implications.

At Club Orlov, here.