Jerusalem Capital of Israel Trump

Sir Humphrey Well I’m sure it’s a question of us maintaining our relationship the Arabs.  The power of Islam.  [lowering his tone]  Oil Supplies.

PM James Hacker:  Humphrey I’m talking about what’s right and wrong.

Sir Humphrey:  Well don’t let the foreign office hear you.

Yes Prime Minister A Victory for Democracy 1986

Don Corleone: And if by chance an honest man like yourself should make enemies, then they would become my enemies. And then they would fear you.

The Godfather 1972

One might think Donald Trump’s propensity to keep promises that he made to the voters who he considers his customers, enough of a reason for his decision to finally recognize the reality of Jerusalem as the capital of Israel when all of his predecessors failed to do so.  But even ignoring that character trait of Trumps to see things as they are there are two factors that make this the most opportune time for the US to make this move.

Fracking

Since the 1970’s the Arab nations have held their control over oil prices over our head as a club to restrain us from serious opposition.  Their ability to increase energy prices and hurt the US economy has been a factor for presidents from Nixon to Clinton to consider.  Only a massive attack like 9/11 was enough to override those considerations and act.

However the Fracking booms has changed the equation.

With the US now able to supply it’s oil need to the point that we are a net exporter combined the ability of US Frackers who have become more and more efficient, to add to production if prices start to increase suddenly trumps any attempt by Arab nations to push us around on the basis of oil, and that’s not even considering Trump’s actions to enable pipelines and drilling within the country.

Put simply the Arabs ability to mess with our energy supply is now a thing of the past and without the Obama administration trying to regulate Fracking away it’s unlike to return in our lifetimes.

Iran:  

Fracking takes away the ability of the Arabs to muscle us but the rise of Iran and the advancement of the Iranian nuclear program (ironically aided by the Obama administration)  has suddenly given states like Saudi Arabia , Jordan and others completely dependent on the US (and Israel) to keep Iran in check.

As none of them are willing or even able to hold off Iran on their own the US and Israel can name their price for that protection.

So while Palestinians will the Jerusalem decision as a justification to commit terrorism and murder Jews (as opposed to all the other reasons they have used for such terror for years) the reality those same Arab nations, while giving lip service to these Palestinian moves will quietly refrain from any concrete or meaningful action because they know that American and Israeli power is the only thing keeping them from becoming vassal states of Iran.

And with countries from both Africa and Europe already following suit the genie is out of the bottle for good.

And that doesn’t even count the possibility that Trump might be willing to cut the purse strings that keep the corrupt Palestinian authority in power.  Or his willingness to call Arab empty threats and bluffs.

Trump understand negotiating from strength and while he has that strength and leverage he’s going to use it.

That’s what a leader does.

LAYOFF UPDATE:  So far we have reached 20% of my goal since yesterday’s layoff.  (full story here) if you want to help us reach that goal please consider hitting DaTipJar here




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Update 2:  Now at over 110% of our goal!  Thanks so much also corrected a spellcheck error that Steve MacDonald of Granite Grok noticed “Fracking” not “Franking (which is the practice of members of congress sending mail via the gov to voters in their district).

Glenn linked to a post at the American interest about the price war in oil & the problem for non-Saudi members of the cartel:

The Saudis have the funds to make up for the budget shortfalls cheap oil is foisting upon them, but the rest of OPEC isn’t anywhere near as well prepared. Nigeria, Iran, and Venezuela have all agitated for the cartel to take action, though none have volunteered to be the one to actually make the necessary cuts. 

But there is a key line from that piece that not only explains why the supply & demand plan of the Saudi’s have failed but it also says all you want to know about why America is still destination one for the entire world (emphasis mine:

 Rather, they’ve been hard at work innovating their way to profitability even at $65 per barrel.

Innovating  do tell:

The cost cuts and productivity gains that shale oil producers expect come in three categories…First, there are savings from putting pressure on suppliers of drilling rigs, hydraulic fracturing and other services. Companies have generally been saying they expect reductions of 20 to 30 per cent this year.Second, companies benefit from focusing spending on their most productive assets. “You’re dropping all your worst-performing rigs and worst-performing rig crews and moving the rigs you have to your core areas,” says Randall Collum of Genscape, an energy research firm…Finally, there are productivity gains available from improved techniques.

In other words rather than acting as an Oligarchy that commands & expects to be obeyed would, they make themselves leaner, meaner and smarter to make their rigs profitable even at $65 a barrel.

That is America, that is western civilization it adapts, it innovates, instead of folding.

There is a difference between a culture that simply soaks money from hole in the ground for personal comfort and one made of free men that rewards competition.  That is why America is where the best and brightest go.

That is also why the Obama administration is so dangerous & must be stopped, they would convert us from a culture of doers to a culture of beggars.

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My latest piece for Watchdog.org: Is President Obama ‘pulling a Homer’ on energy, or is he smarter than that? is now up:

“To pull a Homer”: to succeed despite idiocy.

In “Homer Defined,” a 1991 episode of The Simpsons, the Springfield nuclear power is going into meltdown.  Homer Simpson (the inept lead character of the series) manages to save the day by choosing the right button to prevent the meltdown.

He is celebrated as a hero until it’s revealed that his choice of which button to press was just pure incompetent luck (eeny, meeny, miny, moe).  This coins the term “pulling a Homer,” whereby a person without wisdom or skill succeeds in spite of their own incompetence.

This is an excellent illustration of what has happened with the economy, both over the last six years and in the past two months of the Obama administration.

Has Barack Obama succeeded, and if so why does he compare unfavorably to Homer Simpson?  Well you’ll have to go to Watchdog.org to find out

 

Right now Oil prices are dropping faster than we’ve seen them drop in years.

Oil prices sank again on Monday, giving consumers more of a break and causing a split among OPEC leaders about what action should be taken, if any, to halt the slide.

The price drop has led to a near free fall in gasoline prices in the United States. On Monday, the national average price for regular gasoline was $3.20, 9 cents lower than it was a week ago and 14 cents below the price a year ago, according to the AAA motor club.

This would seem counter intuitive.  Winter is coming for Europe & North America.  ISIS is running amok in the middle east, Iran is still developing their bomb (large explosions not withstanding) and Eastern Europe is still wondering what Putin’s next move is going to be given that situation one would expect the prices of oil to go through the roof.

Except there is a wild card and that card is Saudi Arabia.

Saudi Arabia cut its flagship Arab light selling price by $1 a barrel, versus October’s discount of $1.05 a barrel to the Oman/Dubai average price. Traders expected a cut of about 70 cents, according to Reuters. The Saudis also cut prices to the U.S. and Europe by 40 cents a barrel.

McGillian said Saudi now lowered its selling price below the Oman and Qatar prices.

Why on earth would the Saudis be cutting prices rather than production?  Why aren’t they fighting to get oil prices back up again?

Because they have no choice.

The reality of Saudi Arabia is pretty simple, all their power all their influence comes not only from their oil wealth but from the power to affect oil supplies internationally as soon as that lever disappears their ability to protect what is basically a family kleptocracy disappears.

But the shale oil and oil sands business have thrown things for a loop.

Thanks to increased oil prices oil sources that were once cost prohibitive, suddenly weren’t.  Now it was cost-effective to build the infrastructure necessary to harvest the oil sands of Canada and oil via fracking and as the infrastructure.  Meanwhile the experience as these projects got rolling,  combined with the same western ingenuity that allowed the Saudi’s to develop the fortune underneath their feet caused technological improvements further bringing down the cost of producing that barrel of oil hitherto left untouched.

As Al Akhbar.com put it:

Though the Saudi move may seem puzzling in market terms, it becomes less complicated when analyzed within the world of geopolitics which is plagued by competition over strategic markets and where oil is used as political leverage.

Saudi Arabia is threatened physically from Iran to the east, moreover they are threatened economically from a US exports to their customers.

For Saudi Arabia, this may be the right time to increase its market share by lowering oil prices, which would also put pressure on both Iran and the United States.

If prices drop Iran is put on the defensive as they have to satisfy an unhappy population while still supporting their client state in Syria and holding off ISIS gains which could create a rival in the world of Islamic fundamentalism.

Meanwhile on the other end if the price of oil drops far enough the US production from non-traditional sources suddenly is no longer cost-effective:

Even the more expensive drilling operations are still profitable when oil sells for $85 a barrel, and oil closed just below $86 on Monday. In general, oil companies would have to expect oil prices to stay below $80 a barrel for many months to scale back their drilling plans.

What’s even more critical for the Saudi’s is to keep new sources offline.   In areas where fracking etc is already established the primary cost creating the infrastructure to produce and supply the oil is in place so they can handle a price drop better but in spots where development hasn’t begun their only hope to keep them in check is a price that stops those folk in their tracks!

It’s a catch 22.  High oil prices enable all those who are a physical threat to them and create new financial threats while low oil prices while dropping their bottom line preserves their ability to be the boss on the world’s energy stage, a state to be feared, respected and protected.

Thus the Saudi’s are forced to take steps that Hurt Iran, put Putin in check, wreak havoc with Venezuela and cause China to rethink their investment and development of oil allies around the world, while at the same time providing relief to American consumers and drivers.

Check and mate, we’ll see.

 

CanadaBy John Ruberry

For over five years President Obama has been dithering in regards to building the Keystone XL pipeline, which if constructed, will bring petroleum from the oil sands in western Canada to America’s heartland.

Over in Iraq, Obama is utilizing token measures in an attempt to slow the terror group ISIS and to give some relief to the religious minorities being attacked by the Islamo-fascists.

For the time being, ISIS seems content in selling oil, earning $3 million per day. But the jiadists appear to crazed enough to destroy oil fields, which would–duh!–drive up the price of oil.

Which is why America needs to lessen its dependence on oil from the Middle East.

There is much at home Obama can do. Rather than bow to his environmentalist donors, the president can expedite the approval of drilling and fracking on federally-owned land and open up more of our continental shelf to oil exploration. Obama can also alter the tone of his administration, which is decidedly anti-fossil fuel.

We don’t know if the president took an economics course at Occidental or Columbia because he hasn’t released his college transcripts, but the macroeconomic equation is simple. More petroleum in the marketplace means cheaper oil.

John "Lee" Ruberry
John “Lee” Ruberry

More drilling and fracking in American means more jobs. Building the Keystone XL pipeline also means more good-paying jobs.

The Obama recovery is dominated by low-paying, low-skilled, and part-time positions.

Obama has to ask himself if  he will be burdened by leftist ideology for the remaining two-and-a-half years of his presidency–or will he be a leader?

John Ruberry regularly blogs at Marathon Pundit.