So I’m sitting beside the little pond on the family farm, pondering what exactly I want to say about the global state of things, and how events in the national news may impact your royalty checks. I picked up a stone from the bank, gave it a toss into the clear water- “Splunk” then I had an idea. He’s what I came up with.
Picture this: Uncle Sam tosses a stone in a pond and “slap”- a tariff lands on Chinese goods, hoping to give American industry a leg up. But like a stone tossed in a still pond, the ripples reach all the way around the edge- to every cattail and lily pad. With China’s economy slowed to a trickle, oil consumption would drop. China, the world’s greatest guzzler of imported oil would impot less crude. The Ripples would reach Russia, where oil money fuels more than the economy—it powers the Kremlin’s military ambitions. If tariffs slow down China’s economy and shrink its thirst for oil, Russia could find itself holding a surplus of black stuff with fewer buyers willing to pay top ruble. And when the market speaks, the price of oil takes a swan dive, leaving Russia in a financial pickle.
This would hit Russia where it hurts. Nationalized Russian Oil money isn’t just for flashy parades or cushy yachts—it’s what keeps the Russian tanks rolling and the troops fed. With oil revenues dwindling, the war chest could start looking more like a piggy bank, and not the fat kind. Budget cuts would force tough choices: fewer missiles or fewer paychecks for soldiers? Either way, the Kremlin’s war effort would start to feel the wave, much like a man bobbing in a canoe.
The broader economy wouldn’t escape getting wet, either. With less oil money coming in, the Russian government might raid their national piggy bank for social programs to keep the war going. That’s not a recipe for happy campers. At the same time, losing China as a big buyer could leave Russia knocking on the doors of India and Turkey with a desperate sales pitch. Begging isn’t a good look for anyone, least of all a nation trying to project strength.
In the grander scheme, this synchronized swim of tariffs, oil, and geopolitics could sink the price of oil in the Good Ol’ U.S of A, driving down the price of energy for consumers. However, the decline of oil in 2020 wasn’t a lake side picnic for those who work directly in the industry. International global market volatile markets could impact more than global affairs on your network television. For China, the memo would be Bold and loud, “we’re not goanna take it”. For Russia, the message might become clear as a spring feed stream: you can only skate on the thin ice of oil money for so long before it cracks. And when it does, you’d better hope you’ve got a backup plan—or at least a sturdy life vest.
“So” you say, “James, Buddy, Pal of Mine… how does the price of oil in Russia, and ships on the China Sea impact my little ‘Ol royalty check?” Well- that’ll take me a few more stones and a little more time outside, I understand what it means but I must sit here on this pond bank and think a little longer to put it into some crafty lines that you, my dear reader, might want to see.
Howdy! Grab your favorite coffee and join me as we journey through the Marcellus shale. I’m your guru’ for all things oil and gas. Expect some hearty chuckles as we wonder the ins and outs of the Appalachian Basin, because let’s face it, the new energy revolution is – full of surprises.
James A. Asbury