Let's Relive the '70s and Pretend OPEC Still Matters

Today’s Agenda

• OPEC’s Influence
• Bank Stress Tests
• Trump vs. Nixon
• Chief Justice Roberts, Swing Voter?
• Regulations Illegal

OPEC Throws Its Small Weight Around

(Bloomberg Opinion) -- Today was one of those days when it’s easy to get fooled into thinking OPEC still matters.

I mean, it matters a little: It made oil prices jump 5 percent today simply by hinting at less of a boost in oil output than the market feared. But come on, a 5-percent change in oil prices is nothing compared to the Hammer-of-the-Gods-like power it wielded back in the 1970s. Its 1973 embargo crushed economies around the world, freaking America out so much that it created the Strategic Petroleum Reserve and set fuel-economy standards and a nationwide 55-mph speed limit, leading to the terrifying rise of Sammy Hagar.

But such episodes, including the 1979 oil crisis, also planted the seeds of OPEC’s destruction as a world power. The U.S. and other nations turned to energy alternatives and conservation and started hunting around for their own oil. Forty-five years later, renewable energy is growing fast (Nathaniel Bullard breaks down latest the numbers in his Sparklines newsletter); the U.S. shale industry has made it increasingly safe from 1973-style nightmares; and OPEC is less a powerful cartel than a large herd of very wealthy, very combative cats, needing outside help from Russia and other oil producers to get anything done.

Under the circumstances, OPEC’s agreement to boost output could be nothing more than a fuzzy, “we’ll do our best” promise, writes Liam Denning. Saudi Arabia and its closest friends, the members best able to boost output, will be the biggest winners here, taking market share from frenemies such as Iran, writes Julian Lee. Also #winning is Saudi Arabia’s BFF President Donald Trump, who has blamed OPEC for high oil prices, even though (as Julian has written) his own scotching of the Iran nuclear deal has been the main driver.

It will probably take more than just a day or two to really tell if the U.S. is as influential over OPEC as it seems at the moment, writes Meghan O’Sullivan. And certainly that 5 percent jump in oil prices isn’t quite what Trump had in mind. It’s easy to push the oil market around for a day or two; lasting influence is much more complicated.

The Stresses of Stress Tests

Congratulations, big U.S. banks: You all passed the Federal Reserve’s latest round of stress tests – although Wells Fargo & Co. “ had to cram the most,” given its struggles of the past year, writes Stephen Gandel. The Goldman Sachs Group Inc., meanwhile, complained about its results; a test of the Fed’s Trump-era regulatory zeal will be how much it lets Goldman’s arguments sway it, Stephen writes.

Next week, the Fed will review the banks’ capital plans and decide how much cash they can shower on shareholders. Bloomberg’s editors warn the banks are already plenty magnanimous and that regulators have mistakenly let them be too generous before. That didn’t end well.

Trump V. Nixon

You hear Trump get compared to Richard Nixon a lot, possibly because he too seems at risk of being run out of office. But this comparison is unfair to Nixon – who was a crook and made Vietnam far more horrible, yes, but also managed to get some constructive things done, points out Al Hunt. He signed and defended Title 9, founded the Environmental Protection Agency, opened relations with China and truly tried to fix health care. So far Trump has done little but cut taxes, just as any generic Republican President would have done.

And though his influence feels strong, it is actually diminishing, writes Jonathan Bernstein – as demonstrated by how House Republicans  wouldn’t let him get away with lying about their reaction to his mockery of outgoing South Carolina Representative Mark Sanford.

Trump’s presidency has already rehabilitated the public image of George W. Bush. Nixon’s probably next to get an upgrade.

Chief Justice Roberts, Swing Voter?

The Supreme Court’s decision today in Carpenter v. U.S. was important in a couple of ways. On one level, it means law enforcement can’t track your cell-phone-tower pings without a warrant. That means we’re all safe from at least that aspect of a “1984-style surveillance state,” writes Noah Feldman.

So that seems good? More important from a longer-term perspective, though, was the fact that Chief Justice John Roberts was the swing vote in this case. Noah suggests this may be a sign Roberts is preparing to be the “court's most centrist swing voter" when Justice Anthony Kennedy (who sided with the conservatives today) retires.

Financial Regulations Are Illegal, Apparently

In a separate decision yesterday, the Supreme Court ruled some Securities & Exchange Commission enforcement actions are unconstitutional. Meanwhile, a New York court declared the Consumer Financial Protection Bureau is also unconstitutional. What it all adds up to is still unclear, writes Matt Levine, but: 

“The specific issues in these cases … are very dull and technical. But their overall drift is significant; it amounts to a nibbling away at the theoretical underpinnings and practical operations of the regulatory state.”

What could possibly etc.?

Chart Attack

A U.K. company goofed up when it dumped Airbus on the cheap. The U.K. government would compound the mistake with a hard Brexit, writes Chris Bryant.

China’s stock market looks like it can handle a trade war better than the U.S. market can, writes Nir Kaissar.

Weekend Reading

How to solve global warming? Suck the carbon out of the air. – Noah Smith 

China’s movie-making bubble looks like it’s about to pop. – Adam Minter 

Don’t forget: America wasn’t exactly saintly before Trump. – Pankaj Mishra

Trump has inspired other countries to fight their own dumb trade wars. – Mihir Sharma

Ten reasons finance will keep changing. – Barry Ritholtz 

Italy’s new government is just sitting back and letting its version of Donald Trump run the show. – Ferdinando Giugliano

Dumping Facebook Inc. from a sustainable-investing fund is a bit of an overreaction. – Mark Gilbert 

It’s easy and fun to beat up on Juul and vaping, but maybe it really is cutting down on cigarette smoking. – Joe Nocera

ICYMI

Trump threatened still more tariffs. Trump doesn’t want Congress to act on immigration. Stocks rose because oil rose, or something like that.

Kickers

France’s diversity will help it go far in the World Cup.

Here are the greatest TV writers’ rooms ever.

Why did Melania Trump wear that jacket? Virginia Postrel breaks down the theories.

Scientists have found a problem that only quantum computers can ever solve (spoiler: It’s the Melania Jacket Question).

Trump’s young staffers are struggling to get dates.

How can we colonize Mars when we can barely camp on Mauna Loa? 

Note: Please send TV scripts, suggestions and kicker ideas to Mark Gongloff at mgongloff1@bloomberg.net.

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To contact the editor responsible for this story: Timothy L. O'Brien at tobrien46@bloomberg.net

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