The reporting out of Vienna, where OPEC met, points to the cartel’s playing a long-term game in which it tries to obliterate some of its American competition by letting prices fall in the hope that some American producers go bankrupt.
.. Anybody who has fretted that years of money-printing by global central banks will create out-of-control inflation has some egg on his or her face right now. Plummeting prices for energy and other commodities are dragging down inflation to levels that are, if anything, too low.
The falling commodity prices are actually making these authorities’ jobs harder. The overwhelming urgency across the advanced world — in the eurozone, the United States and Japan — has been to try to get inflation higher, to reach the 2 percent annual target central banks in all three places have set.
Cheaper Oil: Winners and Losers
Saudi Arabia can survive low prices because, when oil was $100 a barrel, it saved more of the windfall than it spent. The biggest losers are countries that didn’t. Notable among these are three vitriolic critics of America: Venezuela, Iran and Russia.
Some analysts think growth in 2015 will be just 0.5-2%, compared with about 4% a year in 2010-12. Inflation is 8%. Russia, it seems, is headed towards stagflation.
A Pump War?
The Russians have noticed. How could they not? They’ve seen this play before. The Russian newspaper Pravda published an article on April 3 with the headline, “Obama Wants Saudi Arabia to Destroy Russian Economy.” It said: “There is a precedent [for] such joint action that caused the collapse of the U.S.S.R. In 1985, the Kingdom dramatically increased oil production from 2 million to 10 million barrels per day, dropping the price from $32 to $10 per barrel. [The] U.S.S.R. began selling some batches at an even lower price, about $6 per barrel. Saudi Arabia [did not lose] anything, because when prices fell by 3.5 times [Saudi] production increased fivefold. The planned economy of the Soviet Union was not able to cope with falling export revenues, and this was one of the reasons for the collapse of the U.S.S.R.”
Indeed, the late Yegor Gaidar, who between 1991 and 1994 was Russia’s acting prime minister, observed in a Nov. 13, 2006, speech that: “The timeline of the collapse of the Soviet Union can be traced to Sept. 13, 1985. On this date, Sheikh Ahmed Zaki Yamani, the minister of oil of Saudi Arabia, declared that the monarchy had decided to alter its oil policy radically. The Saudis stopped protecting oil prices. … During the next six months, oil production in Saudi Arabia increased fourfold, while oil prices collapsed. … The Soviet Union lost approximately $20 billion per year, money without which the country simply could not survive.”
.. But have no doubt, this price falloff serves U.S. and Saudi strategic interests and it harms Russia and Iran. Oil export revenues account for about 60 percent of Iran’s government revenues and more than half of Russia’s.
The Hypercar Lives: Meet VW’s XL1
The XL1 came in at a staggering 313 miles per Imperial gallon of diesel. That’s the efficiency equivalent of more than 230 miles per U.S. gallon of gasoline.
In 1993, after two years’ validation with the industry, RMI put the Hypercar concept into the public domain so nobody could patent it and to encourage competition leveraging its ideas, while RMI’s for-profit spinoffs sought to commercialize technologies outside automakers’ comfort zone and raise the competitive pressure.
.. Two decades ago he claimed regenerative braking could yield 70 percent efficiency when automakers balked at the idea of exceeding 30. Today’s electric vehicles, including the Chevy Volt and Tesla Model S, respectively get 70+ and 80 percent.
.. Despite XL1’s eye-popping mpg rating, VW might have left some efficiency on the table. Lovins notes that Toyota’s 2007 1/X concept car, also a plug-in hybrid, had four seats and the interior volume of a Prius, but weighed only 926 pounds, so even a production-ready version would probably weigh less than the two-seat XL1. “We’re seeing a lot of partially executed solutions,” says Jerry Weiland, the GM veteran who leads RMI’s transportation practice. “Different automakers have done bits and pieces [of the Hypercar concept], but no one has put the whole thing together.”