(Bloomberg Opinion) -- Oil is becoming a problem.
Nymex crude-oil futures fell a bit today, but have lately rallied to their highest levels in nearly four years, more than doubling from the bottom of a crash a couple of years ago. Prices aren’t catastrophically high yet – at about $74 a barrel, they’re still much lower than the $100 or so of earlier this decade, when the economy was on shakier ground. (And if you want society to swear off fossil fuels, then $74 isn’t high enough.)
But oil is expensive enough that many people, including the most important person in the world, President Donald Trump, are noticing. Trump has tweeted his anger over this situation a couple of times, including a recent declaration that he had convinced Saudi Arabia to pump more oil. That is … not how this works; Saudi Arabia’s OPEC buddies at least have to pretend to be OK with such a thing. And they did sort of agree recently to pump more, partially in response to another Trump tweet. But oil prices have surged anyway, pushing gas prices higher, “timed exquisitely for November’s midterms,” writes Liam Denning. He notes the whole episode illustrates how little Trump controls, or even understands, the oil market.
In fact, Trump’s own policy of squeezing Iranian oil exports has the market worried about supply, at a time when Venezuela’s ineptitude has crippled its own output, and infrastructure bottlenecks are keeping U.S. shale oil off the market (for now). Add it all up, and it starts to look like an oil-price shock that could eventually crush prices, but by destroying demand first, warns David Fickling. Oil shocks don’t last long, but they do often bring recessions with them.
Another thing oil-price shocks do is make people look for alternatives. That’s why it’s a good time for an oil-buyers’ cartel to band together to boost electric-car use and other ways to consume less oil, writes Carl Pope. China and India are already talking about such a thing, and Europe and Japan might be convinced to go along (forget the U.S.; Trump’s not much of a “joiner”).
Such a club might be great news for, say, electric-car maker Tesla Inc. – although it still remains to be seen whether Tesla can ever manage to consistently produce enough cars to take full advantage. The company used a manufacturing “burst” to finally hit its Model 3 target production, but Liam Denning wonders whether this is sustainable, or profitable.
Stop the Gerrymandering Madness
Partisan gerrymandering of congressional districts is one of the less-democratic features of our democracy. Lately the Supreme Court has been unwilling to weigh in on the constitutionality of such measures, but Bloomberg’s editors suggest the best way to solve this problem is with panels of neutral citizens in each state.
Trade-War Casualties Mount
The stock market briefly tumbled this morning on worries about the effects of Trump’s threats to prosecute trade wars around the globe. It bounced back, but such action should give the administration pause – political repercussions will surely mount once trade wars start to hit retirement accounts, writes Stephen Gandel.
But Trump’s targets shouldn’t feel too comfortable either – particularly German car makers that could be subject to massive tariffs, writes Chris Bryant (though U.S. car makers and workers will suffer too).
In China, meanwhile, its support for auto-parts makers could make its manufacturing base more resilient, writes Anjani Trivedi. It’s still not exactly a fair actor on trade; its winnowing of a “negative” list of prohibited foreign investment is all for show – but at least it’s moving in the right direction, writes David Fickling.
The Transportation Problem
Speaking of alternatives to oil: Scooter sharing is suddenly a big thing. Virginia Postrel and Nathaniel Bullard discuss this phenomenon and its future (trigger warning for frequent use of the word “meatspace”).
Leonid Bershidsky argues ride-hailing and -sharing services (including, one imagines, scooter sharing) are no substitute for good public transportation.
Dell Technologies Inc. just underwent a convoluted financial-structure overhaul meant to address problems with its previous convoluted financial structure. This configuration may not be sustainable either, warn Brooke Sutherland and Shira Ovide.
Amazon.com Inc. has rapidly closed what was a huge valuation gap between it and Apple Inc., as both race toward a ridiculous $1 trillion market capitalization – a sign of the dramatic trust upgrade investors have given Amazon in a very short time, writes Shira Ovide.
“The president ordered something inept; he’s not going to get what he wanted; and everyone in the administration has egg on their faces over it.” – Jonathan Bernstein
Putin should fear Russia’s underdog World Cup team doing too well against impossible odds – it might give citizens some ideas. – Leonid Bershidsky
Note: Please send corpse paint, suggestions and kicker ideas to Mark Gongloff at firstname.lastname@example.org.
Like Bloomberg Opinion Today? Subscribe to Bloomberg All Access and get much, much more. You'll receive our unmatched global news coverage and two in-depth daily newsletters, The Bloomberg Open and The Bloomberg Close.
©2018 Bloomberg L.P.