Brexit moves forward following the parliamentary vote. Senate considers cabinet appointments as both chambers move to end regulatory protections. IEA report likely to indicate whether OPEC production cuts will be successful. Kosovo and Serbia encouraged to talk following escalating tensions. All in The Week Ahead.
Brexit moves forward following parliamentary vote
This week, the House of Commons will further consider legislation that last week received a preliminary 498-114 vote to formally approve invoking Article 50 to withdraw the UK from the European Union. Following a final vote from the House of Commons, the bill will move to the House of Lords, where it faces a somewhat uncertain environment.
The Liberal Democrat Lords have expressed extreme skepticism regarding Brexit. The few remaining Lib Dem MPs voted against the bill in the House, and the Conservatives do not have a majority in the upper house. Although it is unlikely that the House of Lords will vote down the bill in its entirety — though in August Conservative Baroness Patience Wheatcroft argued the Lords may delay Article 50 — it may seek further clarification regarding certain elements that will have to be answered by May’s cabinet and could delay the formal withdrawal.
The Commons vote also exposed yet another rift in the Labour Party, with over 40 Labour MPs voting against the whip. The business community, as well as the government, has come to realize that Brexit will in all likelihood be fairly bumpy, as the European Union has given no indication that it intends to soften on its core principles and doesn’t have much reason to do so.
Senate considers cabinet appointments as both chambers move to end regulatory protections
Starting Monday morning, the Senate will begin moving forward on a number of Cabinet nominees from the new administration. First will be Betsy DeVos, who has experienced a firestorm of criticism over her lack of qualifications, strong support for vouchers, and her unprepared remarks and unforced errors. After that, the Senate may move to vote on Senator Jeff Sessions as Attorney General, Scott Pruitt as head of the Environmental Protection Agency, and former Carl’s Jr. CEO Andrew Puzder as Secretary of Labor.
If these nominees make their way through this week, attention will likely shift to the Administration’s Supreme Court nominee to fill Justice Antonin Scalia’s seat, Neil Gorush. Democrats in the Senate have criticized his voting record and his youth which means he’ll have possibly decades to shape the direction of the court. Senate Democrats are likely to filibuster because Senate Republicans refused to consider the Obama administration’s nomination of Merrick Garland to the Supreme Court for 10 months and view the seat as having effectively been “stolen” by the Senate Republicans. The President has advocated getting rid of the filibuster to move the nominee through, but a number of institutionalist Republicans remain opposed to getting rid of the filibuster for Supreme Court nominees.
IEA report likely to indicate whether OPEC production cuts will be successful
On Wednesday, the International Energy Administration will provide a stocks forecast for U.S. crude oil inventories. Current projections are that stocks will have risen by 80,000 barrels after a rise of over 6.5 million previously. The surge in U.S. production is likely to undermine OPEC’s decision in November to cut production, in part because it was not likely able to keep production up at the breakneck pace it had achieved at that point.
In order for oil prices to rise to levels before the significant price decline — though probably not likely to hit the $146 per barrel it reached in June 2008 — global oil inventories would have to fall substantially, and could take as much as a year. In the event that the short term price rise from the OPEC and Russian cuts causes U.S. oil production to rise and prices to subsequently fall, oil inventories are not likely to change demonstrably and could require OPEC to maintain low production for well over a year. This proposition may be very difficult to maintain, given the swaying back and forth on U.S. policy in the Middle East that is likely to upset the delicate balance necessary to have the Venezuelans, Iranians, Nigerians, Russians, Saudis, and Iraqis among others on the same side when it comes to production cuts. Iran may boost production with any major U.S. Iranian sanctions to fill any gaps in its domestic economy.
Kosovo and Serbia encouraged to talk following escalating tensions
Last week, NATO was concerned enough to publicly urge Kosovo and Serbia to ease tensions after a train was sent from Serbia to Kosovo with the words “Kosovo is Serbia” and Kosovo stopped the train at the border. Kosovo’s government has already claimed that Serbia will attempt to annex Kosovo much like Russia annexed Crimea, while Serbia has claimed Kosovo is trying to start a war between the two countries.
Although Kosovo has been accepted by most major European countries and the United States as an independent nation, following its split from Serbia in 2008, Serbia still views it part of Serbian territory. Both countries need to normalize relations before joining the European Union, providing the two nations with a hefty economic rationale to de-escalate tensions.
Talks mediated by the EU last week to end tensions between Serbia and Kosovo abruptly came to a halt and the EU is working to get the talks back on track. Tensions between these two European neighbors is not exactly at the top of the EU’s list of things it wants to deal with as it concerns itself with Brexit, divisive elections in France and the Netherlands, and the disconcerting aggressiveness of Russia.
The Week Ahead provides analytical foresight on the economic consequences of upcoming political developments. Covering a number of future occurrences across the globe, The Week Ahead presents a series of potential upside/downside risks, shedding light on how political decisions affect economic outcomes.
This edition of The Week Ahead was written by GRI Analyst Brian Daigle.