What is the point of sanctioning Russia? The Law of anticipated consequences states that “most actions are taken to achieve anticipated, rather than unanticipated results”. It is hard to believe that politicians had not anticipated that economic sanctions on Russia are inflationary. Russia is producing approximately 8 million barrel of oil per day. If sanctions on Russia are as successful as sanctions on Iran, Russian production can go down by 50%. Finding another source producing 4 million barrel per day over the next few years will be next to impossible. Even if OPEC has spare capacity of that magnitude, they should prefer price over volume: the Western world is telling them that it wants to shift away from oil, and that demand for oil is about to peak. Historically, OPEC was balancing the market at a price which discouraged competition. Now that oil producers are pressured by shareholders and governments to limit investments into the oil business and increase payouts, OPEC can enjoy a period of exceptional profitability. It is hard to say how high the price of oil can go, because demand for transportation fuel is inelastic in the short term.
The law of anticipated consequences…
The law of anticipated consequences…
The law of anticipated consequences…
What is the point of sanctioning Russia? The Law of anticipated consequences states that “most actions are taken to achieve anticipated, rather than unanticipated results”. It is hard to believe that politicians had not anticipated that economic sanctions on Russia are inflationary. Russia is producing approximately 8 million barrel of oil per day. If sanctions on Russia are as successful as sanctions on Iran, Russian production can go down by 50%. Finding another source producing 4 million barrel per day over the next few years will be next to impossible. Even if OPEC has spare capacity of that magnitude, they should prefer price over volume: the Western world is telling them that it wants to shift away from oil, and that demand for oil is about to peak. Historically, OPEC was balancing the market at a price which discouraged competition. Now that oil producers are pressured by shareholders and governments to limit investments into the oil business and increase payouts, OPEC can enjoy a period of exceptional profitability. It is hard to say how high the price of oil can go, because demand for transportation fuel is inelastic in the short term.