Crude Confusion And Authoritarian Capriciousness

The “recent rally has lost steam on concerns that a surge in COVID-19 cases from the Delta variant could derail the recovery just as more barrels hit the market,” the IEA said, in its monthly report. Demand, the Paris-based body assessed, has “abruptly reversed course.”

A marked cut (550,000 barrels a day) to the agency’s second half demand outlook appeared somewhat incongruous with the White House’s urgent call for OPEC to hasten the reversal of pandemic production cuts. The pace of recent supply hikes is “simply not enough,” National Security Advisor Jake Sullivan remarked.

Joe Biden hinted at collusive activity. “That’s not what you’d expect in a competitive market,” he said, juxtaposing the falling price of oil with elevated prices at the pump. Obviously, there’s a lag and there are people who can tell you exactly what the numbers are on such things, but no matter. The point is simply that the Biden administration is keen to avoid exacerbating the inflation impulse at a critical moment for Democrats’ fiscal agenda.

Crude’s down around 6% in August so far, with generic narratives centered mostly around the Delta variant and what it might mean for demand.

The conflicting rhetoric around crude underscores (again) the difficulty in forecasting during a pandemic. The IEA suggested that supply increases from OPEC+ are being offset by dwindling demand and increased output by producers outside the cartel alliance. The agency’s projection for non-OPEC supply was lifted by an average of 1.1 million barrels a day for 2022. That, apparently, means OPEC would risk pushing the market into oversupply should it ramp up production beyond July’s levels. “The scale could tilt back to surplus in 2022 if OPEC+ continues to undo its cuts and producers not taking part in the deal ramp up in response to higher prices,” the IEA said.

I doubt that matters much to the White House, although, as Bloomberg dryly reminds you, “the US [is] the IEA’s most influential member.”

In other news, questions about the likely duration of China’s sweeping regulatory crackdown were at least partially answered by the State Council and the Central Committee. A newly-updated five-year plan suggested the push for stricter regulation across the economy will persist in what may as well be perpetuity.

As ever, running the text through a simple translator produces a bevy of amusing quotables. The overarching goal is to enhance the rule of law through — and I don’t know any other way to put this — doubling down on the kind of authoritarian capriciousness that runs directly counter to western notions of the rule of law.

For example, the very first bullet point calls for more “in-depth study and implementation of Xi Jinping’s thoughts on the rule of law.” That’s comically oxymoronic. The rule of law, as westerners know the concept, is necessarily separate and distinct from any one man’s “thoughts” on it. If it weren’t, it wouldn’t be “the rule of law.” That was among the most pressing concerns during Donald Trump’s presidency.

There were allusions to monopolies (e.g., “Strengthen and improve anti-monopoly and anti-unfair competition law enforcement”) and to the kind of vague, catch-all initiatives that could apply to almost anything (e.g., “Actively promote legislation in important areas such as national security, technological innovation, public health, culture and education, ethnic religion, biosecurity, ecological civilization, risk prevention, anti-monopoly, and foreign-related rule of law”). New tech, in all its manifestations, received a mention (“Timely follow-up and research on the digital economy, internet finance, artificial intelligence, big data, cloud computing and other related legal systems”).

“The central thrust is ‘Much more of what you have just been seeing,'” Rabobank’s Michael Every wrote Wednesday.

The document was all at once nebulous and specific. That’s on purpose. It lets the Party interpret its own mandates however it sees fit while providing more than enough specificity to give officials scope to claim that anyone who runs afoul of some dictate they didn’t know existed simply didn’t read close enough.

The following sentence (which wraps up the first paragraph under the bullet point about “studying” Xi’s “thoughts”) is priceless in that regard: “A government under the rule of law… must be based on the overall situation, focus on the long-term, make up for shortcomings and forge ahead.”

Good luck “complying” with that. If you want to suggest it’s not meant to be prescriptive, I’d remind you that everything the Party says is prescriptive — if and when it needs to be.

One Stanford researcher told Bloomberg that “We can’t draw too much insight about enforcement and the potential shape of crackdowns from one document or another [because] much depends on what bureaucrats and their higher-ups land on in terms of priorities month after month.”

That should win an award for circuitous euphemisms. What that person meant to say is precisely what I said above. Namely that authoritarian capriciousness is the law of the land, figuratively and, as the latest iteration of this particular medium-term “plan” shows, literally.

Oh, and in case you were wondering about inspirations, the plan includes a list of “guiding ideologies.” The government will “adhere to the guidance of Marxism-Leninism, Mao Zedong Thought, Deng Xiaoping Theory [and] Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era.”

Don’t forget, China’s will be the largest economy in the world in relatively short order.

Rabo’s Every conjured a characteristically hilarious quip. “Let’s use Bloomberg as a barometer of the market zeitgeist as this sinks in,” he said, before listing the titles of two Bloomberg articles, “China regulators Go After Online Insurance in Widening Crackdown” and “China Signals Regulatory Crackdown Will Deepen in Long Push.”

“They didn’t say Long March,” Every joked. “But most of Wall Street would probably think that was akin to a leap year February if they had.”