Breaking News : EU Bans All Russian Oil Imports, Some Countries Are Going "To Die", Recession By Year End, But It Is Not The End Of The World. Do Not Fear.

 Ok folks there is some really bad news from The Guardian (actual headline news)  after that there is even worse news (from Joe's Blogs on YouTube) and then a little more sensible observation as well by the Afrikaner fellow on his Skidmark YouTube channel. 

Today the EU has completely banned (again and again and again?) all oil imports from Russia. But not gas. Gas will still be coming through Nordstream 1 and other gas pipelines running from Russia to Europe. 

N'theless oil prices have spiked again today. Some doomers are saying oil will hit US150 per barrel  soon. It is around US$117 - US$120 per barrel now. Lets see. I dont think oil will hit US150 per barrel. I have some reasoning at the end. But I may be wrong - who knows. 

(By the way it looks like my earlier point that the Malaysian Government may have to subsidise up to RM8 per liter of RON95 may not be too far off after all. If oil hits US$150 per barrel, the petrol subsidy may be even higher).

Ok before all that, there is already this two day old terrible news from the UK: 

https://www.theguardian.com/business/2022/may/30/almost-500000-uk-small-businesses-at-risk-of-going-bust-within-weeks
 

• Almost 500,000 UK small businesses ‘at risk of going bust within weeks’
• Federation of Small Businesses calls to deal with ‘ticking timebomb’
• Cost of living crisis: most small firms fear long-term fallout
• Rising costs created “ticking timebomb” for UK small business
• workers lose jobs unless govt rolled out targeted measures for employers
• small businesses facing double the production costs
• literally weeks before run out of cash 
• hundreds of thousands of businesses closing
• National Stats showed 2m small businesses less than 3 months’ cash
• about 200,000 in “serious trouble”
• another 300,000 “have only got weeks left”
• they don’t have cash reserves. No way they can tackle this problem.
• hotel in Scarborough profits wiped out by five times normal energy bills
• inflation hit 9% in April, highest level since 1982 (40 years ago)
• jump in energy bills, record petrol prices, rising cost of weekly shopping
• Bank of England estimates inflation hit 10% later this year
• soaring factory input costs increasing 18.6% 
• firms raising their prices, fueling inflation across country
• 75% of SMEs worried about cost of living crisis, energy bills, inflation 

My comments :

 

Ok so the UK is in deep shit. Their SMEs especially are suffering. And folks all this is before the EU decided TODAY (1 June 2022) to fully ban the import of Russian oil. Things are only going to get much, much worse.

 

To get a clearer understanding of how much worse things will become and (more importantly) how long they will last  please take about 20 minutes to listen to Joe's Blog. Joe is an educated man and a good story teller.  His only drawback is his anti-Russian stance, which I believe clouds some of his conclusions. I will add to this at the end. Here is Joe. Hold on to your seats because this is the really scary analysis:

 

Ok now please take 12 minutes to listen to this Afrikaner guy Colyn Serfontein (who was a soldier in the South African apartheid regime shooting at the black people). 'e speeks with an Afrikaaner aksent but you can oonderstand what 'e is saying.

 

My comments :

First of all I dont think Russia will suffer too much because Europe does not wish to buy their oil.  Russia still pipes gas to Europe. So the gas revenue is still there.

Also the price of oil has shot up already from early 2022 (about US$60 - US$90 per barrel) to around US$120 now. This means by selling half the volume of oil at about twice the price, Russia's oil cash flows should remain about the same. Status quo. Plus the revenues from the sale of gas are still ok.

Here is the Russian Ruble vs US$ exchange rate. When the Ukraine War began in Feb 2022 you can see the Ruble dipped down. Then from March 2022 it began to appreciate against the US$. It is still climbing. The Ruble is now the strongest currency in the world. 

 

Russia is selling more oil to China and India - at discounts of up to 25% - 30%. What does this mean? It means countries like Singapore (which are anti Russia, because they are pro US) will soon be hiring "Indian flagged" oil tankers to secretly buy cheap Russian oil and somehow ship it to Singapore. If you think the Singaporeans (and others) will not find ways to get a few shipfuls of discounted Russian oil then there were no wise men who stopped by the barn on your birthday. 

40 years ago when I was at university in the US my economics professor took pains to explain why embargoes and cartels always never work. Someone from within will always break the embargo or break from the cartel. We see this happening already. Meaning these sanctions will not ruin Russia anytime soon. The Russians will still be shipping their oil.

Which brings us to the rest of the world and to Europe. Ok those 500,000 SMEs in the UK are at serious risk of closing shop. Here are some pump prices in UK and Europe:

 

Above : UK pump prices between Jan 2021 and March 2022. It has shot up more. 

Below: European countries with petrol at more than US$2.00 per liter

That is RM9.00 to RM12.37 per litre in Europe. (This is old news.) Latest prices will be higher.

In comparison our prices in Malaysia are still RM2.05 per liter (RON95). Thats a difference (a subsidy) of between RM7.00 to RM10.00 per liter.

The Europeans are going to get their goose cooked. 

But western Europe is a democracy. What does this mean? It means that soon the European people will start throwing stones at the Police and start burning their own buses. 

Secondly they will kick their governments out. There will be changes in government. Emmanuelle Macron was super lucky. If the French elections had been held just one month later Marine Le Pen (who is pro-Russian) would have won the presidential elections. 

Because as that Afrikaner guy says in the video this really stupid Ukraine War has really got nothing to do with Europe. There is no threat from Russia to Europe. Georgia, Chechnya, Crimea and now the Donbas are old historical leftovers. They speak Russian in these places. 

Whereas in Afghanistan the people speak Pashtun, which the US Marines could not understand.  

So why the hell should Europeans pay RM10.00 or RM12.00 per liter of petrol when they should be paying half or less of the price.

Inflation in the UK is going to hit 10% soon and factory production costs are increasing by almost 20%. That means their factories will close shop.

For what? For the Russian speaking Donbas? For the Russian speaking Donetsk?

So folks the sooner the Europeans start throwing stones at their Police, and burning their buses,  the sooner this stupidity will come to an end.

Someone please do tell them.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.