So it’s been a pretty eventful week since Canadians settled around their dining room tables to eat a little turkey and, if they were in Toronto, to also eat a little humble pie as the beloved Jays were swept aside like so much garbage in their Wild Card series with the Seattle Mariners. Wait. What? They lost to the Mariners? Ha! That’s almost as embarrassing as the Leafs losing to the Canadiens in the NHL season opener! What? That happened too?
Sheesh, I’m sorry. At least in the rest of Canada nothing untoward happened. Right? It’s not like we got a new premiere in any province that thinks that anti-vaxxers are more persecuted than gay people, trans kids, Jewish people, Black people or women. Right? All kidding aside, that cold open for Danielle Smith was more reminiscent of a Saturday Night Live parody of a conservative than something a politician would say of their free will, which leads me to the only obvious conclusion – Danielle Smith is being held hostage by the Coutts blockade people and what we saw at the podium was one of those Elon Musk robots with a burnt out empathy chip.
What about the United States? Anything newsworthy there? Not really. Trump is still Trump – guilty and belligerent as hell. Joe Biden for his part is super mad heading into the midterms and has basically told Putin “not to fuck with a Biden”. Of course what really gets Joe’s dander up is the whole malarkey with OPEC and oil prices. He’s pretty steamed that at last week’s OPEC+ meeting those darned oil boys did exactly what I had said they were going to do – cut back production. Joe was so upset that he vowed retaliation! No, not to Russia. On Saudi Arabia.
So that’s it then. All the storm and fury, the price gyrations, the leaks, the tweets, the media frenzy. It has all culminated in this – a very predictable cut in oil production from the OPEC/NOPEC/OPEC+/RUSSIA whatchamacallit.
Phew right? I told you that something momentous and earth-moving was in the offing and I wasn’t wrong. Big things!
It was admittedly pretty exciting to watch from the safety of my chair here in Calgary, but I bet it was far more exciting to be standing around outside the OPEC building in Vienna for the first time since the pandemic.
Fortunately, I am able to give you all that window into the deliberations – the secrets behind the curtain – true insight. The chance to see into the inner workings of one of the most mysterious organizations in the world outside of the Illuminati, the Freemasons and the Nickelback Fan Club of Greater Atlanta.
That’s right folks, I have managed to get my hands on a recording of the OPEC meeting. The words of wisdom from this most accomplished gathering of despots, tinpot dictators, sycophants and enablers are about to travel from my grubby little hands to your eager eyes.
As I did last year, I have enlisted the services of crack translators to lift the curtain on the discussions and where possible I have tried to describe some of what appeared to be happening, supplemented by an on the ground mystery source who I cannot reveal. Suffice it to say, it’s been a while since they have met in person, so it got pretty weird in there this year.
Here goes nothing, right?
<<Shuffling of chairs, muttering, quiet laughter>>
<<Gavel banging and call to order by Secretary General.>>
<<throat clearing>>
Sec Gen – Welcome everyone to our first official in-person gathering since 2020. I am glad to see some new faces and if we might, I propose a moment of silence in honour of my predecessor… <<quiet – breathing – a weak cough>>. Alright, thank you everyone. First order of business, I call on the Russian delegation to give us a timeline for when the Ukraine invasion will be over, it’s causing a lot of problems.
Russia – I’m sorry, there is no invasion. It is a Special Military something or other and is designed to liberate Ukraine from its democratically elected and hugely popular government that was in the process of making the country wealthy… I mean Nazis.
<<Muffled laughter>>
Sec Gen – OK, OK, calm down everyone. Russia, just answer the question.
Russia – Fine. We don’t know.
Saudi Arabia – That’s great. A pointless war, with no end in sight, that you are losing – badly by the way and once again Saudi Arabia is expected to prop up the energy markets, control inflation and get Joe Biden off the hook in the upcoming midterms. Thanks Russia.
<<Sound of applause>>
Venezuela – Speaking of Joe Biden. Anyone else here been getting weird calls from the White House?
Saudi Arabia – Weird doesn’t even begin to describe it. They call like 5 times a day. They are like a jilted teenage girl. Sometimes the calls are nice, sometimes they are yelling. Last night it was just a call with heavy breathing.
Iran – I’ve been getting those calls too. Every second day it’s “hey guys, you know if you give up that nuclear program, we’ll let you sell oil again”.
SG – They aren’t concerned about you killing teenaged girls?
Iran – Apparently not a thing for the Americans when gas prices are rising before an election. It’s open season on extracting concessions I guess.
SG – By the way, I should point out for the record that you aren’t technically part of OPEC while under sanction, the invitation was just extended to allow you in the room today because you sell so much on the black market.
Venezuela – We got calls too! It’s been so long, we’d actually forgotten they were sanctioning our oil. We told the Americans we were ready and willing to increase our production to historic levels.
Saudi Arabia – Please, not this again. It’s never going to happen. Are you still even in OPEC? What is your production? 250,000 barrels a day? Most of the oilsands companies in landlocked Alberta have higher production. Aren’t you importing fuel? What is wrong with you people?
Venezuela – No one wants to work and we have no money, however we deserve some respect. We are a founding member of OPEC and a proud South American Bolivarian Democracy!
Saudi Arabia – Spare us your drama. You are a bankrupt kleptocacy that has squandered one of the great fossil fortunes in the world. A dictatorship built around a cult of personality with little regard for your regular citizens. Plus you can light your lakes on fire.
Vz – Umm, kettle, pot here. You’re black.
Saudi Arabia – whatever, you are owned by Russia and China.
Russia – Russia denies any invasion of Venezuela.
<<Gavel banging several times>>
Sec Gen – Gentlemen, order please. It is well past the scheduled start time and every minute the matter at hand – our cooperation agreement, cuts to production, how big and for how long – is delayed keeps us away from food, Twitter and the traditional post meeting show. The agenda for today is simple. We agree on a target that we think the market will accept, determine how much cheating we can allow and play some cards while the media sweats it out. I will give everyone in the room (except maybe Gabon) the opportunity to bore us with their rationale for a cut and then we will open up the floor to discussion. Then if it’s alright with everyone else, Saudi Arabia and Russia will tell us what we are doing. Venezuela, you may go first.
Vz – Well your eminence…
Sec Gen – Time’s up. Kuwait, you are next.
Vz – Wait a minute, I was talking. Our view is import…
Saudi Arabia – will no one rid me of this turbulent twit?
<<sound of scrambling, a chair tips over, there’s a yelp and then a noise that sounds like tape unwinding followed by sawing, suitcases open and close – really it’s not very clear what is happening here but after a minute it all settles down>>
Russia – Venezuela will be no longer be a problem.
Kuwait – Wait, why is Russia in the room? Aren’t they the bad guys who invaded Ukraine? Do we really want to deal with them?
Russia – Russia is not in the room.
Saudi Arabia – Russia is not in the room
Kuwait – Wait, what? Oh fine, never mind. Kuwait will do what Saudi Arabia tells us to do.
Saudi Arabia – Everyone will do what Saudi Arabia tells you to do.
<<This statement was followed by a number ayes and yesses in agreement>>
Russia – Except Russia. Even though we are not actually in the room. Russia has not invaded Kuwait.
Iran – The great nation of Iran wishes to advise that as a result of the rash and harsh sanctions imposed on Iran by the Great Satan United States and Sleepie Joe Biden that Iran will no longer accept any assignment of cuts.
Saudi Arabia – Dude, cool it. You’re not even officially here.
Iran – <<clearly annoyed>>COOL IT?!?!?! We will be heard! These sanctions are killing our productive capacity. These sanctions are clearly designed to foment regime change and crush our economy and unlike Venezuela we can actually produce more than pollution and million percent inflation. For Iran there is no “cut”, it is just what it is. And thanks for all the help, you spineless puppets.
Saudi Arabia – Enough grandstanding. Your black market oil and facilitation of Russian oil shipments is partly responsible for this mess in the first place since we increased production to offset your sanctioned barrels. But now we see you disabling the GPS units in your tankers. You are still producing and shipping. For how long remains to be seen.
Russia – Russia has not invaded Iran.
Iraq – Umm, Iraq agrees to temporary cuts, although truth be told, we don’t intend to honour them and will cheat as much and as often as possible. Plus everyone seems to ignore us as a rule. Except Iran, which bombs us occasionally. Still haven’t figured that out.
Russia – Russia has not invaded Iraq.
Saudi Arabia – Very well then, we are agreed. We will cut barrels from production. The agreement will be to the end of the year. Wait, why not all of 2023 too? Does it really matter? We will all just do what we want anyway, right?
<<loud laughter>>
Saudi Arabia – Calm my friends, it will soon be time to call in the non-OPEC members of the cooperation agreement to tell them what they have to do, I mean, solicit their valued feedback. Russia, I assume you have your neighbouring countries in line? Russia, can you gather the others together so we can determine the number of barrels we are going to cut?
Russia – All will be delivered as already agreed. Russia has not invaded any of these countries.
<<sound of door opening and closing>>
Sec Gen – We still haven’t heard from everyone. Nigeria were on the agenda as well.
UAE – Perhaps we should order food and spend some time eating so that the assembled media outside can get all agitated by how long this is taking and get all wound up in crazy conjecture and send the price of oil bouncing up and down. The volatility is fun – especially the effect it seems to have on those nasty non-OPEC crude blends, like that black hummus they dig up out of the frozen tundra in Canada.
<<Apparently it’s just not an OPEC meeting if they don’t make fun of Canada>>
Sec Gen – Done. Servants, bring us lunch!
<<sound of door opening and closing>>
Russia – Did someone say lunch? I’m starving.
<<At this point the meeting devolved into a lot of small talk as lunch was brought in. There was a fair amount of rattling of plates and cutlery – this could have been a food fight, although no one declared one, so… After the lunch break, it sounded like a number of the delegates played a few hands of poker before all were called back to order>>
Sec Gen – OK, a few matters to discuss before we rubberstamp, I mean vote on, Saudi Arabia’s plan for OPEC. First up, Nigeria.
Nigeria – We are happy to participate in any cuts, but we are so hopelessly behind our quota that we don’t even know where to start. To be honest, we aren’t even sure what our production is. We lose so much to spills and theft. Do we cut the official or the actual number?
Saudi Arabia – These sound like a ‘”you” problem and not a “me” problem. Do you need technical help from anyone?
Venezuela – We are happy to help.
Saudi Arabia – Ahem. From someone who knows how to measure and grow production…
<<Laughter all around>>
Nigeria – No. We are good.
Saudi Arabia – Very well. We will set your quota way higher and you can produce what you’ve been producing all along. It will look like a cut, but if you ever get yourself figured out, you get to produce more.
Nigeria – I love OPEC.
Russia – I have question on US shale. Is shale threat?
Saudi Arabia – No.
Russia – Elaborate please. Is not US number one producer?
Saudi Arabia – Yes, as per our plans from 2014, the Americans are now the number one producer of oil in the world. And through the remarkable stroke of luck that is the American penchant to overinvest in something, they have lost so much money in the past decade that investors now demand dividends and capital discipline. So, US production is no longer on a free money growth curve, rather it is a predictable component of global supply. Plus, in Joe Biden we have a president who is openly trying to wind back the entire industry and further scare away capital. He’s literally doing the cartel’s job for us!
But back to your point – US tight oil is an important contributor to global supply and the threat of massive expansion of shale acts as an artificial buffer to keep prices in check. But really, at up to $14 million per well and average production of 1000 barrels per day per well, the Americans will need to complete 1000 wells and spend up to $15 billion in a rising interest rate environment just to add 1 million barrels per day of production. I can add this by using this app on my phone. We are not threatened by the Americans and neither should you be. Their total dependency on OPEC will come back. You must be patient.
Iraq – Interesting. What about Canada?
<<at this point the background noise and muttering in the room stopped completely. It was almost as if EF Hutton had walked into the room. It stayed completely silent for about 10 seconds until someone slowly started chuckling and was soon joined by others until it sounded like the entire room was rolling around on the floor laughing like schoolkids. Eventually, this died down and the room regained its composure.>>
Saudi Arabia – Phew, I needed that. We take ourselves far too seriously here at OPEC. Canada! (more laughter at this point) Oh Canada… (muffled chuckles). Will you ever figure it out and join the club?
Russia – Russia has not invaded Canada. Yet.
Sec Gen – OK. Now for the number?
Saudi Arabia – Very well. Here is what we will say. 2 million barrels of oil cut. Starting now and lasting to the end of 2023. Option to review in June right?
Iran – Wait, what about us?
Saudi Arabia – Egads Iran! You’re sanctioned. Keep up.
Iran – Right. What about when the Americans call? No way Feisty Joe Biden lets this go quietly with a mid-term coming?
<<sound of a cell phone ringer>>
Saudi Arabia – Oh my god. It’s him? What do I do?
<<ringer stops>>
Saudi Arabia – I sent him straight to voicemail.
<<muffled laughter>>
<<different cell phone rings>>
Venezuela – That’s me. Should I answer?
<<ring stops, new ring>>
Iran – This is too funny.
<<ring stops, new ring>>
Russia – This has got to be a wrong number…
<<ring stops. Saudi ring starts again>>
Saudi Arabia – Arg, fine, I’ll answer – assume you guys want it on speaker phone… <<pause>> Hello Saudi Oil Baron speaking. Who is this?
USA Joe – It’s Joe. Joe Biden. President of the United States. We met at MBS’s tent party last summer. And I’ve got Liz Granholm my energy secretary and Janet Yellen who’s in charge of something, we’re not sure what, with me. I don’t think they will contribute, but they know so little about energy they make me look smart and well-informed.
Saudi Arabia – Hi Joe. Liz. Janet. What can I do for you?
USA Joe – Lots hopefully. See we’ve got ourselves a bit of an inflationary pickle here and I’m hearing some malarkey about you folks wanting to cut your oil production or something, right when gas prices were coming down and my poll numbers were going up. It’s pretty inconvenient.
Saudi Arabia – Well Joe, we just voted and we are going to cut production. Prices have been coming down too much since you started using up your Strategic Petroleum Reserve to game your electoral chances and none of us are making enough money.
USA Joe – Well I wish you wouldn’t do that. It’s really gonna hurt America.
Saudi Arabia – All due respect Mr. President, that’s really not my problem.
USA Joe – Well what if we cut arms sales to y’all?
Saudi Arabia – I don’t think you will do that – we are a buffer against Iran and that would force us to buy Russian arms.
Russia – we welcome the foreign exchange.
USA Joe – is that Russia? Is Russia there? Do you have me on speaker phone? What kind of cockamamie skullduggery is this?
Saudi Arabia – OPEC is a very transparent organization Joe, we never do backdoor deals. Look, our cut is nominal. We are heading into a global recession that your US Fed and stupid dollar has caused. No one is investing in production aside from us and to be frank, we like the high prices because they allow us to shower our population with money and our leader to pursue multi-trillion dollar vanity projects. Plus I got to buy one of those Swedish supercars, it’s awesome.
USA Joe – well that just blows. You don’t want to mess with a Biden!
Saudi Arabia – You know Joe, you can always open up more oil leases in the Gulf of Mexico or encourage your domestic industry to produce more.
USA Joe – I can’t do that. Have you met AOC? She’s crazy! Besides, the whole point of my Inflation Propagation Act was to subsidize renewables so heavily that the domestic oil and gas industry would turn its back on hydrocarbons. Do you know votes there are in renewables? Plus, we always have the SPR to lean on.
Saudi Arabia – What, 400 million barrels against our 400 billion? My money is on us outlasting you.
USA Joe – well what if we offered to refill our SPR with OPEC barrels at $75?
Saudi Arabia – Joe, come on. You have an election to win, I get it. But if I take that deal, when oil is trading at $90 and I can manage it up to $120, I will end up hanged in the city square. We just can’t help you with more barrels, it just doesn’t make economic or political sense.
USA Joe – OK fine. So where are we supposed to get more oil from? Canada??????
<<brief pause and then everyone starts laughing hysterically again for easily five minutes. Every time it seems like they are gathering their composure, someone says “business case” or “Trudeau” and the laughter starts all over again.>>
USE Joe – Phew. Thanks guys, I needed that. All this inflation this, Trump that, Ukraine Armageddon stuff is getting me down. I needed a good laugh.
Saudi Arabia – You’re welcome, Joe. Look, it won’t be that bad. You can make us out to the be the bad guys for gas prices. Americans love to blame the Arab world for high gas prices instead of their own taxes. I don’t think this will hurt your mid term chances.
USA Joe – OK, I’ll take your word for it. No more killing journalists though, OK? And buy an American car, will ya?
Saudi Arabia – You got it. <<call disconnect>> Phew, that was close.
Sec Gen – So, we are all agreed then. A fake cut of 2 million barrels. The Americans are going to act all huffy and pissed. And fingers crossed someone spends a little bit of money in the rest of the world to grow production.
All – Yes, we agree.
Saudi Arabia – Excellent. Let’s go tell the media. Does anyone have dinner plans? I’m starving.
<<Lots of handshaking and backslapping followed by footsteps shuffling out of the room>>
So what did we learn from this recording?
Lots actually.
First off, Saudi Arabia was, is and always will be the boss of OPEC. Second, all the decisions are based on self-interest. Third, even regional foes will put aside their differences for the mutual padding of the national accounts. Fourth, the Americans can bluster and harangue as much as they like – this is a long game that lasts more than an election cycle. Fifth, the cooperation between Saudi Arabia and Russia is real.
Finally, Venezuela may be a joke, but only Canada can make OPEC laugh.
