Where finance and media intersect with reality

In the Blind Spot on Thursday (Commodities, Commodities, Commodities)

TBS Blog

Commodity power

  • US goods risk being late as China’s lockdowns worsen shipping port jams.

    [But remember it’s just “transitory” ]

  • Someone in the Blind Spot Discord asked: Do sanctions cause a shortage of crude and gas or a displacement?

    [A verified par moi OSINT reply: “China is by far the largest importer of Iranian crude these days and effectively the sole consumer of it. China can easily continue to buy all discounted Iranian crude AND all discounted FSU crude up to the bottleneck point of shipping. In turn when you run out of ships, it will be the more expensive crude grades that will struggle, ie Nigerian. The inland European refineries that run off the Druzhba pipeline will have a dramatic operational headache if that flow stops. The last time that occurred was in spring 2019, when the solution was to destock SPR bbls until the pipeline restarted. Obviously that’s not sustainable and logistics can’t get built overnight. Even trucking requires a large network of infrastructure (and is very expensive)]

  • EU seeks answers to energy supply crunch, U.S. LNG deal.

    [This is quite a fascinating development. You can find the actual commission statement here. “A dedicated working group on green transition and LNG is being created to develop a concrete action plan on these matters, and our officials will meet this week to further discuss enhancing energy-related cooperation.” Clubbing together in this way (in a not dissimilar way the bloc did with vaccine purchases) strengthens the argument that the EU is less concerned with competition and more concerned with bargaining power on the international stage. Which is fair enough.

    But it is also a bit like the opposite of OPEC — an organisation of natural gas importing countries (or cartel) committed to boycotting those who don’t satisfy their terms of engagement. The move also overlooks that for a discriminatory buyer’s strike to work, the club has to be confident about the compliance of its members. Nor am I confident that this sort of c̶o̶l̶l̶u̶s̶i̶o̶n̶ cooperation really does have clout in the current market situation.By removing Russia from the picture, Europe faces at least two years of chronic natural gas under supply. This is due to chronic under investment in global natural gas supply the last two years because of ESG-induced net zero policy.

    That’s at least two winters worth of undersupply that could seriously compromise the health (if not the lives) of the most vulnerable in Europe.

    The green lobby seems to think that the war is an excellent reason to switchover to renewables more quickly. Except there’s a small problem with that theory. You can’t create renewable infrastructure cost effectively without cheap fossil-fuel input. We are not at a point where renewable energy can create the energy surpluses it needs to power day-to-day life and self-replicate in an expansive way. And if you really care about the environment, you’d realise that LNG is far less green than pipelined gas too.

    The lack of LNG investment, meanwhile, is only going to lead to a situation where the EU’s cartel gains are other Western allies’ losses. A bit like with vaccines. It’s a form of mercantilism which says f*** you to other gas dependent countries like Japan and India. That’s not a good recipe for cultivating alliances against Russia. To the contrary it’s another factor that might push India closer to Russia.

    Worth noting, Reuters says the US has been shipping record volumes of LNG these past three months — a support function that will be increasingly vital but also increasingly likely to have to come at de facto cost to America. However you look at it, it’s a form of politically motivated industry collusion.]

WW3 Watch

  • Lloyd Blankfein is gunning for action. Not everyone is so hot on his recommendations.
  • The read out from a rare meeting between US officials and a Russian military representative since the Ukraine invasion suggests morale problems on the Russian side due to conflicting feelings.

    [Key insight: The US team had the sense, according to the readout, that Ilyin stopped just short of accusing US and Ukraine of atrocities against his family. It’s not clear what specifically caused them to reach that conclusion, but one of the attachés said, “The fire in his eyes and flustered demeanor left a chill down the spine.” The readout said one of the attaché’s jaw dropped, and both Americans reported they had never “witnessed such an outburst by Russian counterparts at an official meeting.”]

  • Russia’s airpower may be its Achilles heel.
  • Russia is not likely to respond well to Poland sending in peacekeeping troops to Ukraine.
  • A change of messaging from the Pentagon about Russia’s strategy?

    [This is what I have been alluding to all along. Just assuming Putin is being sloppy and weak rather than tactical seems like wishful thinking. Here’s one of the main pieces referenced. Another “alternative” read which sees Russia’s strategy as “hypersonic” is here.]

  • Volunteers may be doing more damage in Ukraine than helping.

    [One of the main takeaways from my brief spell in a conflict zone back in 2003 when I travelled to report from Kabul was that I had been an utter idiot for going there in the first place. Also, after a lot of reflection, I came to realise that many of my motivations for going were entirely selfish and focused on being able to tell impressive war stories back home. The experience taught me how lucky I was to live in a stable and safe country with lots of opportunity. That’s why I decided to focus firmly on Europe-based financial reporting from then on. One of the ways I came to this realisation was as a result of the many questionable people I met in Kabul. Many I would describe as adrenaline junkies, who just happened to get their highs from being in conflict zones rather than from conventional drugs. These types were present in the full rosta of professions out there, from NGO workers to mercenaries. Yes there were also a lot of people of integrity there too– so it’s wrong to generalise too much. And many were genuinely brave individuals. But I later had to face up to the fact that people like me were more of a liability than an asset. These experiences come to mind when I see things like this Reddit page dedicated to volunteering in Ukraine. Anyone considering volunteering should not be treating it as an opportunity to engage in a new type of extreme sport — but I worry many are only doing it for the selfies. Luckily this is the top rated post on the site.]

Is Covid still a thing?

  • The BMJ is really going all in on the Pfizer integrity story.

Journo news

  • Dan McCrum’s tell all book about the German payment company that refused to go quietly has finally been materialised.

    [There’s a Netflix doc in the making too. But buy the book because it really is an amazing story and Dan deserves as much support as possible given what he personally went through to bring this story to light. It’s an absolutely incredible tale of corruption, fraud, espionage and fake news.] 

  • Watch out for the latest edition of former FTer Jonathan Ford and city reporting veteran Neil Collins’ “A long time in finance” podcast, out at 0800am UK time on Friday. It features an interview with Eddy Chancellor, the financial historian, talking about the Ukraine and whether the financial system is headed for a 1930s style break up.

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