All errors should be reported to

Saturday, May 30, 2015

Capitalism vs.socialism on oil

Tim Mullaney at Market Watch is chortling. The House of Saud (and now, Iraq) are trying to flood the market with cheap oil, which is costing them -- in the case of Iraq -- "money they don't have." The Arab plan is to drive down the price, hoping to get U.S.oil companies to give up on hydraulic fracturing.

It may be having the opposite effect.

From Tim Mullaney: "OPEC’s endgame — push oil to $40, freeze U.S. supply, and wait for oil to hit $90 or $100 again — can’t work. There’s no place on that spectrum where OPEC covers its overhead — and it would have to cut capital spending, making OPEC less competitive and relevant, while making local politics even more volatile and unstable. Ask Iraq how smart that seems in Ramadi just now."

The problem is OPEC is pitting capitalism vs. socialism, and the advantage goes to oil companies. Stare-run operation are inefficient because politicians use them as patronage jobs.

From Tim Mullaney: "It costs only a few dollars a barrel to get the stuff out of the ground, but last year Goldman Sachs estimated Iran’s total break-even cost at $133 per barrel. Russia’s is $107, Iraq’s is $101. And so on."

He erroneously blamed social spending: "Since Arab states boosted social spending after the 2010 Arab Spring, the effective break-even on oil that props up regimes is extremely high."

That's baloney. There was no Arab Spring in Iran, Russia or Iraq. The high costs come from being government-run.

Meanwhile American companies can make money on $60 a barrel oil -- and this comes despite helping fund "Arab Spring" in the USA. America has the largest redistribution of wealth in the world. $2 trillion a year are transferred from private companies and individuals to Medicaid, Medicare, food stamps and a host of other social spending programs.

Mullaney's pretty much a garden variety, tree-hugging, carbon-dioxide-fearing journalist. But he seems to have stumbled on a truth about capitalism vs. socialism. Keep flooding the market OPEC and Russia. We dribk your milkshake, and still have ours to fiish.


  1. This post was not only helpful with the comment issue, but had also great links to other entertaining blogs. Some of them I will most likely keep visiting! Thanks. Accountively was founded in 2015 by entrepreneurs who believe in ubiquitous access to information. Our mission is to better connect businesses and individuals, looking for accounting services, with accountants across the United States. Please visit our website for more information Financial Accountant , accounting , accountant , CPA We are ready to help you and grow your business. Thanks

  2. Is MD Rana associated with John Smith in the following post? Coooooooooooooould beeeeeeeeeeeeeeeeeeeee.

  3. I was   about   to   say   something   on this   topic.   But   now   i   can see   that   everything   on   this   topic is   very amazing and mind   blowing,   so   i   have   nothing to   say   here.   I   am   just   going   through   all   the   topics   and being   appreciated.   Thanks   for sharing.