Pain is coming to the pump, which will negatively affect the economy, and there’s nothing President Trump can do about it. Here’s why…
Last Friday President Trump set his Twitter sights on OPEC:
Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!
— Donald J. Trump (@realDonaldTrump) April 20, 2018
Comparatively speaking, oil is not “very high”, but oil did recently put in 52-week highs:
Furthermore, the price of oil was $42 just 10 months ago.
And since President Trump is all abut his tax cuts and jobs, jobs, jobs, maybe the rise in oil prices is about to wreak havoc on U.S. corporations that made bad business decisions at exactly the wrong time.
Take Chevrolet announcing just last week that they are cutting production on the more gas friendly Cruze and laying off workers (from The Drive):
General Motors factory workers are facing yet another round of layoffs. This time, hundreds of jobs will be cut at the automaker’s Chevrolet Cruze plant in Lordstown, Ohio due to declining demand for the Chevy compact in the face of, you guessed it, America’s insatiable appetite for crossovers.
According to CNBC, workers were informed Friday afternoon that one of two shifts at the Ohio facility will be eliminated come mid-June. As it stands, the plant employs almost 3,000 people, 90 percent of whom are hourly workers. While GM says up to 1,500 employees will potentially be affected, the precise number of layoffs won’t be determined for a few weeks.
Apparently, on the current schedule, Lordstown workers had already been working fewer hours due to slow sales. In an email to The Drive, a GM spokesperson explained, “The move to one shift is being done to help us operate the plant with a more stable production schedule. On two shifts, we had to take several weeks of downtime to keep supply and demand in balance.”
Measuring 6.2 million square feet, the Ohio plant is primarily responsible for the Cruze sedan. The hatchback version, meanwhile, is assembled in Coahuila, Mexico, to President Trump’s dismay.
In case you haven’t noticed from the onslaught on SUVs hitting the streets, sedan sales have been slumping across the industry. In 2017, just 184,000 Chevy Cruzes were reportedly sold in America, marking a 32 percent drop from 2014 when GM moved more than 273,000 of the compact Chevys. This year, sales reportedly fell by another 28 percent.
Translation: Americans are buying less fuel efficient vehicles as they’ve been spoiled by cheap gas prices, and now good jobs are being layed-off because of it.
Or take last fall, when Ford decided to slash its development budget and to focus more on trucks and SUVs, late to the party, just as gas prices are now starting to pick up (from TheCarConnection):
Ford intends to cut about $14 billion in costs over the next five years by slicing the amount of time it takes to develop products and by reducing the number of unique parts per vehicle.
Hackett has hacked away at Ford’s long-term internal combustion development budget by about a third, shuttling that money instead into designing fully electric and electrified hybrid vehicles.
The automaker will reallocate $7 billion toward future development of crossovers and SUVs, which are driving Ford’s profits and the bulk of the automaker’s sales. Ford did not say exactly where that $7 billion will come from.
Here’s a question: When gas prices rise over $4, and then over $5, are Americans going to be buying SUVs and Trucks in droves, or will they be opting for fuel efficient vehicles, or will they even be able to afford new vehicles at all?
But returning to the topic on hand – rising oil prices.
Here’s a 20-year monthly chart of crude oil:
Since the words “very high” are subjective, I drew an arbitrary price line at $80 a barrel. It looks like the President will have to call oil prices “super-duper absolutely astronomically high” if they keep going up in line with the monthly chart.
So President Trump needs a scapegoat.
But taking a step back, OPEC nations are basket cases and increasingly in turmoil.
Member nations are:
Algeria, Angola, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia (the de facto leader), United Arab Emirates, and Venezuela, while Indonesia is a former member.
Here’s just some of the national and geo-political turmoil from The Organic Prepper:
For weeks, tensions have been rising between Iran and Israel, It began in February when, according to Israel, an armed Iranian drone originating from Syria penetrated the Israeli airspace. Israel downed the drone, then attacked the caravan which launched the drone from the T-4 airbase deep in Syrian territory. An Israeli F-16 jet was brought down by a Syrian missile while over Israeli territory. At this point, Israel launched an extensive retaliatory strike on Syrian air defenses and Iranian forces in Syria. This all occurred in one day. It was remarkable because no Israeli plane had been brought down since 1982.
Two months later. seven Iranian Revolutionary Guard Corps were killed in an airstrike on a Syrian air base, which Iran blamed as being done by Israel. Mutual threats of retaliation have since been issued by both Iran and Israel. Ultimately the conflict between the two countries depends on the fate of the nuclear deal. On May 12th Trump is anticipated to issue his decision on the deal.
Meanwhile, Iran is dealing with numerous internal issues. To name a few: a struggling economy, the worst drought in 25 years, increasing civil discontent, public demonstrations, and labor strikes. Last week Iranian President Hassan Rohani banned money exchangers from selling U.S. dollars and Euros. Travelers to nearby countries are limited to purchasing just 500 Euros ($615), while those traveling to more distant countries are limited to purchasing 1,000 Euros. Iranians may not hold more than 10,000 USD or 10,000 Euros.
In Israel, longstanding anti-Netanyahu demonstrations against government corruption have gained in size and sentiment. Saturday’s march in Tel Aviv numbered upwards of 4,000 people. Other more recently organized demonstrations, arranged by the Hadash party and composed of Arab Israelis, protested U.S. strikes on Syrian outside the U.S. Consulate in Haifa this weekend.
Meanwhile in Venezuela. Bloomberg outlines the catastrophic economic crisis:
“Venezuela, which holds the world’s largest oil reserves, has seen a steady decline in production amid lack of money for maintenance and exploration. Venezuela imports about 2 million barrels of heavy naphtha per month, and all of it comes from U.S. Gulf refiners, according to data compiled by Bloomberg. The U.S. is leaning toward imposing oil-sector sanctions on Venezuela before the country holds April 22 elections that opposition leaders have vowed to boycott, according to a senior State Department official. The official, who asked not to be identified discussing private talks, stressed that no decision has been made and the U.S. is still weighing the impact such sanctions would have on ordinary Venezuelans as well as on U.S. refiners that import heavy Venezuelan crude.” (source)
A fire on the Libyan oil pipeline has dramatically reduced their output. Libya suffered a major fire on its major export pipeline that was attributed to terrorist activities this past weekend reducing their oil production from 300,000 barrels per day by at least 80,000 barrels per day. It is unknown how long it will take to make the necessary repairs.
So what can we conclude is really going on?
Well, it’s a chain reaction and the end result is not good:
- Oil prices are rising.
- Inflation is rising.
- US Car Manufacturers are making the wrong decisions at exactly the wrong time.
- Gas prices are about to really start rising.
- This will hit American consumers where it hurts – their wallets.
- This will in turn hurt growth prospects for the US economy.
- Which could be a double-whammy as Federal corporate tax revenue falls short, and the tax cuts are all spent on rising gas prices.
- President Trump is worried about forces he can’t control but needs to blame somebody because he has taken ownership of all the great jobs and economic growth under his Presidency.
What can we take away from all of this?
Get ready for even higher gas prices, by adjusting driving habits, combining trips, reducing usage, etc.
That’s what is coming, regardless of what President Trump or OPEC say.
Makes one wonder if President Trump gave the order down to Stevie’s ESF to boost the dollar to help alleviate pain at the pump?
– Half Dollar
About the Author
U.S. Army Iraq War Combat Veteran Paul “Half Dollar” Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart.