Publications: Notes at the Margin

Neglecting Hoarding; Blackmailing Allies (June 4, 2018)


This issue of Notes at the Margin addresses two very important issues. The first is the differing views of future prices. One group of forecasters led by Citibank sees much lower crude prices. A second group led by Goldman Sachs sees high prices. Investors in the BP Prudhoe Bay Royalty Trust (BPT) are voting for higher prices. This view is almost certainly correct, as we explain.


The second topic relates to trade and good relations with allies. The United States this week unilaterally imposed tariffs on the steel exports of our European, Canadian, and Mexican allies. Among others, Canada’s prime minister Justin Trudeau responded with a pointed attack against the action. Such complaints, though, fall on deaf ears.


We suggest that the Europeans and Canadians may be able to exact revenge within a year by forcing the United States to ratify the Paris Climate Accord as a treaty. Our former allies could demand this action as the price for relaxing the International Maritime Organization (IMO) 2020 marine-fuel sulfur rule, a regulation that threatens to cause a serious recession in the US. This would be the most extreme form of payback levied on the Trump administration.


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