Above the Fold

How Oil Prices Are Shifting Global Power

When the pandemic began, oil prices hit a low of $6.50. While that obviously was a temporary jolt to the marketplace, most analysts were planning on a range of somewhere between $40 and $60 per barrel in 2021 and 2022. But with global economies picking up steam, unfavorable domestic policy shifts, and a looming conflict between Russia and Ukraine, oil futures are now approaching $100, the highest level in nearly eight years. Unfortunately for American drillers, bringing rigs and wells online just isn’t that easy, and new policies further limit feasibility and profitability. In other words, there’s little domestic producers can do about supply. President Biden even went so far as to tap our strategic oil reserves, but that did little to calm rising energy costs or solve the supply issue at hand. 

So, as American supply and control over oil prices declines, others, like the Organization of the Petroleum Exporting Countries and Russia (called OPEC+) are reaping big monetary rewards and increasing in their defiance to “stabilize” prices. For Russia, which pumps about 10% of the world’s oil and has a stronghold on European energy prices, its growing income stream and market control gives it (Putin) an advantage in negotiations with Ukraine, the west and other allies. And ironically, a U.S. sanction of Russian oil exports would likely drive prices higher, not lower. Putin’s standoff at the Ukrainian border is already a trigger for higher prices, so while OPEC representatives refuse to increase production, the global energy and power dynamic is becoming even more complex. Prices should continue to motivate domestic producers to increase output, but restrictive regulations and market instability make it a risky proposition.

Three Things 

1. Retail Sales Jump … but at a Cost – According to the Commerce Department, U.S. retail sales, at stores, restaurants and online, rose at a seasonally adjusted 3.8% in January (from the prior month). This was the largest monthly gain since March 2021 and a dramatic turnaround from the decline of 2.5% seen in December. Unfortunately, inflation continued to rise above a 40-year high and is slowly eroding Americans’ spending power. 
2. Berkshire Hathaway’s Impeccable Timing in Activision-Blizzard – The Wall Street Journal reported that Warren Buffett’s holding company purchased nearly 14.7 million shares (worth more than $1.1 billion) in Activision Blizzard in fourth quarter 2021. According to sources, the purchase was made in October, at an average price of $77. Berkshire’s acquisition came just before Microsoft announced it would purchase Activision in an all-cash deal for $75 billion. If Microsoft’s deal closes, it could net Berkshire a couple hundred million dollars. Activision is also under an unrelated, ongoing Securities and Exchange Commission investigation.
3. Jaguar Land Rover Gets a Tech Upgrade – The luxury carmaker is partnering with Nvidia to equip its vehicles with ultra-high-powered computer systems that will enable cutting-edge driver-assist and even autonomous features. Beginning in 2025, all Jaguar Land Rover vehicles will have Nvidia’s full, end-to-end Drive Hyperion platform installed. Nvidia and its Orin chip-driven system is also making its way to a myriad of other automakers’ products.  

Did You Know? 

America’s Oil Thirst 

In 2019, America produced the most amount of crude oil in history, at nearly 12.3 million barrels per day. In 2020, our country’s oil consumption dropped to a 25-year low … yet we still used an average of 18.19 million barrels per day. That difference is more oil than the entire country of Canada produces per day.