Reaction & Commentary
Crisis for prices quadrupled in a year shortages ensued and rationing became so common that people began to hold on to whatever they could get their hands on well today it appears that history is beginning to repeat itself now that the US is potentially facing the worst oil
Crisis in history with fears that we could soon be running out after all gas prices are already near their all-time highs production is about to be cut even further by 2 million barrels a day and some fuels are on such short supply that the U.S has just 25 more days left so
Given all of this talk about the worst energy crisis in decades draining reserves and record high prices for anyone invested in oil let’s talk about exactly what’s going on why oil production will continue to decrease and how this is about to have a Major Impact throughout our entire economy on this
Episode of Millennials should just buy a Tesla although before we get started while we’re on the topic of gas as most of you know I do my best to pump out three videos every single week and if you appreciate this being a one-step op shop where you could fill up on
Knowledge it would mean a lot to me if you topped off that like button or subscribed if you haven’t done that already plus if you could do that in the next five seconds I promise that you’ll be able to write out the next recession without running on empty all right so
Here’s where all of this starts on the most basic level the United States uses about 20 million barrels of oil every single day which makes us the number one consumer of oil in the world by far but there’s a bit of a catch since we only produce 18.6 million barrels of oil a
Day we’ve become reliant on other countries to fill that deficit and that is where things get interesting see on a global scale not every country uses the exact same amount of oil on a regular basis some months could be higher than usual and other months could be lower
Than usual and since oil production can’t quickly be turned off and on with a moment’s notice countries are often left with a surplus or a deficit depending on how much they actually use because of that when they have too much they’ll sell the excess to other countries who have too little and when
They have too little they’ll buy it back to maintain a consistent out day after day but what happens when everyone wants oil at the exact same time and there’s not enough to go around well in this case even though the United States produces almost as much oil as we use
It’s the wrong kind of oil so we exported and sold nearly half of a production to 176 countries and then we turned around about the rest that we need from Canada Mexico Russia Saudi Arabia and Colombia of which the United States is beginning to catch up that
Might have led to some problems when it comes to this you first have to understand OPEC which is the organization of petroleum exporting countries this is a group of 13 major oil exporting Nations who have teamed up to ensure that oil prices are stabilized throughout the international market
Without any major fluctuations and they currently control more than 80 percent of the world’s crude oil supply or I guess more simply put instead of working together and competing with one another they decided they would make more money working together and so OPEC was created why does this matter well together OPEC
Produces more than 40 percent of the world’s entire oil supply which is way more combined than we make as the United States and it would be a shame if they were to ever retaliate against us you know right just take 2016 as an example oil prices plummeted because the US
Began increasing its output with greater efficiency lowering production cost and costing more Supply to hit the market well that upset the countries who didn’t like to see lower oil prices and even though tensions were temporarily resolved there continued to be the ongoing threat that the U.S could
Dominate the oil market so in 2020 when demand slowed down U.S oil was building up from a lack of demand and prices were falling below our production cost Russia clapped back by refusing to cut production to stabilize prices and then they did the unthinkable they pumped even more oil in an attempt to
Destabilize the market and gain market share now even though an agreement was later reached and oil production was eventually cut to prevent prices from falling too far the tension never completely went away and today in the middle of a global oil shortage OPEC strikes back at a time of record high
Inflation by cutting oil production again why is it a big deal well imagine it’s like cutting off the water supply during a heat wave causing prices to increase even further during a time of record high inflation and starting in November oil production will be decreased by 2 million barrels a day on
The one hand the United States believes that this is done in support of Russia who relies on high gas and oil costs to sustain their economy but on the other hand Saudi Arabia believes that we’re going into a global recession demand is going to fall and they want to get ahead
Of it before it’s too late to end oil prices crash after all oil production is like playing a game of 4D chess produced too much and the price Falls produced too little and someone else will take your place and with the global economy expected to slow down it’s imperative to
Stay one step ahead of everyone else so if they’re predicting a recession and demand should in theory begin going down why is the United States suffering from record high gas prices and why is this being called the worst energy crisis in decades well in terms of the United
States a lot of this began in 2020 as the country went into a lockdown refineries began to scale back on production since after all people want traveling they weren’t driving they weren’t going on cruises and all of that demand completely evaporated overnight but as the economy began to recover
Production began to increase although at a much much slower Pace than before and when you combine that with the deep freeze over Texas a harsh winter in Europe and a war that no one saw coming it’s easy to see why the price of the pump that we pay has been increasing
However here’s where we take a slightly different turn in 1975 the United States created What’s called the Strategic petroleum Reserve after the Saudi Oil Embargo caused prices to nearly quadruple in a year led to rationing at gas stations and panic among consumers who began hoarding gasoline related
Products so as a way to prevent that situation from happening again the Strategic petroleum Reserve was created to hold more than 700 million barrels of oil as a backup in case of an emergency the goal is that this would act like a cushion during energy disruptions it
Would allow the U.S to raise revenue as needed and it could be loaned out to other companies for a profit typically throughout the last few decades we’ve held between six and seven hundred million barrels of oil we’ve stocked up when times are good and release them strategically in times of hardship but
Today a reserve has fallen to its lowest level since 1984. in fact we’ve used 27 percent of our entire Reserve in one year with another two months left to go on top of that it’s also said the United States has just 25 days left of diesel supplies AS Global pensions cause delays
In production but with winter coming and demand for oil still strong analysts believe that this could set the stage for a global energy shortage so we need to talk about exactly what’s being done what this means for you and how this is going to impact almost everybody watching to start bringing these prices
Down is not going to be an easy fix that’s why they proposed a three-part plan that begins with What’s called the no pack Bill get it like OPEC but no anyway this bill if signed into law would allow the United States the option to sue OPEC and its members for fixing
And manipulating the price of oil similar to how they would work to disassemble monopolies who gained too much control within a specific sector however the downside is that it could be near impossible able to enforce any decisions against a foreign Nation it’s heavily opposed by the us-based oil
Companies and if they actually pursue this further there could be serious consequences from other oil companies who could make the situation a lot worse it’s also worth noting that OPEC might not have as large of an effect as we think with an Oxford study finding that OPEC members cheat on their commitments
96 of the time and generally they do what they were going to do anyway or more simply put the group exists because of its political benefit between members and the price would be the same with or without the group second they’re planning to release more oil from reserves with another 15 million barrels
Scheduled to be released in December as they say the upcoming oil Reserve release is aimed at ensuring there’s enough oil on the market to ensure gasoline prices don’t Spike up but critics argue that this could be a political move to try to lower oil prices prior to elections well 15
Million Barrels in a month barely makes a difference when we consume 20 million barrels a day of course other studies show that tapping the reserve so far was able to lower prices between 17 and 42 cents a gallon so I’ll leave that one up to you to decide and third the US wants
To encourage more production to bring down costs according to the US Energy Secretary the U.S was working to identify at least 3 million barrels per day of new Global oil supply with assurances from high-level oil and gas Executives that their companies were set to dramatically increase Investments and
Bring online new rigs now some could say that U.S oil suppliers have very little incentive to bring down prices given that their profits have been skyrocketing through the roof although in terms of how this is going to impact you I recommend sitting down in terms of higher energy costs this is likely to
Lead to what’s known as cost push inflation this occurs when Energy prices are on the rise and because manufacturing costs also increase that extra cost gets passed on to you as the consumer in the form of higher prices that in turn is likely to lead to higher
Inflation which in turn will lead to higher interest rates which of course will increase the cost of borrowing it’s also reasonable to expect that as energy costs take up a higher portion of disposable income consumer spending will fall and that’s bad for stocks now even though oil prices like this are usually
Temporary from the oil embargo to the great financial crisis to now in the short term demand is fairly consistent so most likely consumers just pay it and then they cut back elsewhere but long term higher oil prices May encourage consumers to diversify away from gasoline-powered products diversify into
Solar and drive electric vehicles which could much further down the line have an effect on demand after all auto manufacturers are paying very close attention to fuel efficiency Ford aims to be fully electric by 2035 and California plans to ban the sale of gas-powered cars around the exact same
Time although in terms of what I think about this and how you can make the most of the situation here are my thoughts in the big picture it’s probably not looking great for the United States we become extremely Reliant in foreign oil and as much as we’re investing back into
Renewables it’s estimated that natural gas will still be the most consumed source of energy through 2050. personally I think renewable energies are the future and I would love to see a reality where electric cars and solar panels are the norm but it’s going to take time and financially speaking
There’s going to be a price to pay while we go through that transition foreign relations are extremely complicated Imports are often less expensive than manufacturing here domestically and realistically we’re not producing enough to be able to withstand any disruptions in price however on the bright side the
Majority of Americans are in favor of being carbon neutral and as technology advances it’s going to become cheaper and cheaper to manufacture so financially speaking in the short term I wouldn’t be surprised if prices remain high and most likely that would result in higher prices for everything else
That’s dependent on oil so pretty much everything but long term I believe this will help push the advancement of renewable energy and in the next few decades we could be at a point where foreign oil is of less of an importance until then and I know I say this all the
Time but it’s especially true today do your best to cut back on what you don’t need save as much money as possible and keep an emergency fund on the side just in case as history has shown us time and time again eventually prices do come
Back down so as long as you could get through these next few months you should be okay so with that said you guys thank you so much for watching as always feel free to add me on Instagram thank you so much and until next time
