American motorists are enjoying the lowest gasoline prices since the depths of the Great Recession in 2008-09, but Saudi Arabia’s strategy of keeping its oil production high and prices low – and thus punishing some of its geopolitical and economic rivals – may have a number of unintended and unpleasant consequences.
While most attention has focused on how the Saudi success in pushing prices down – now around $45 a barrel for benchmark crude – is hurting its Mideast adversary Iran and Iran’s big-power backer Russia, the cheaper oil is also harming a number of other key oil-producers from Mexico to Nigeria, from Canada to Algeria, from Venezuela to the North Sea.
Fine. If you want to give away your one and only resource that you depend entirely on, keep production flowing dragging the price of the barrel down to nearly that of a litter bottle of Evian water. I guess Wahhabistan can wither this but I wonder for how long. Shale in the US is all hyped up with production much, much less than ever anticipated. See the Report from the Oxford Institute for Energy Studies, “US Shale Gas and Tight Oil: Industry Peformance” and the New Eastern Outlook’s reports on shale gas. Shale gas does NOT pay. See Art Berman – Decade of US Shale Plays. It is NOT viable. I think the US has just shot its partner in crime Canada and will drag down others. USA Think Tankland banter.
“I’ve noticed that while gas prices have plunged… the price of everything else has stayed the same. In recent years, prices for food and other goods that depended on oil (transportation/distribution) went up when oil did… It’s like they know it’s just temporary.”
OCDG is exactly correct. For Western nations that have monetary sovereignty (like the USA and Canada, but unlike the euro-zone nations) the chief determinant of price inflation is (or used to be) the price of energy (e.g. oil and gas).
Normally when the price of energy goes up or down, the price of everything else goes up or down, since energy is involved in the production and consumption of all goods and services.
That’s how it normally works.
However economics no longer works “normally.” Financial capitalism (making money from money) has eclipsed industrial capitalism (making money from industry). The financial economy has eclipsed the real economy. Wall Street has eclipsed Main Street. This is part of the Judification of life, and it’s a global plague.
Ours is the era of the Jew, in which the old models and formulas no longer apply. For example, GDP no longer measures industrial output, or the amount of money that changes hands in the real economy. Today in the era of the Jew, GDP includes all the money that changes hands in the financial economy, which itself is a world of mere numbers. Thus, the nation’s real economy can be in a severe depression (as ours is), and yet the corporate media outlets claim that the USA is in “recovery” because Wall Street is booming. In other words, because the rich are getting richer than ever, we are all supposedly benefitting, even though the gap between rich and poor grows wider each day.
Anyway the article itself is full of speculation and guesswork, as the author tries (and fails) to make a case that the Saudis are manipulating prices and production for economic reasons, when in fact the reasons are strictly political.
From the article…
“There’s no doubt that by lowering oil prices Saudi Arabia can both hurt its international foes and its economic rivals. It is squeezing its competitors in what amounts to a classic monopolistic gambit. If Saudi Arabia can succeed in reducing prices to a level that makes many of its competitors uncompetitive, it hopes that it can reorder oil markets to its benefit.”
I don’t see the Yehudis gaining a monopoly. They are the largest producers, but they don’t have the largest reserves. And in any case their oil will eventually run out.
“By striking now, the Saudis could hope to put some competitors out of business or at least retard their progress.”
More guesswork. Will shale oil will no longer exist? Will Venezuela’s oil reserves (the largest in the world) no longer exist? The author is idly speculating.
“There is a limit to how long the Saudi strategy can work. Not only is there internal financial pressure on Riyadh to collect more money from Saudi Arabia’s only valuable resource but there is an economic logic that ultimately should negate the lower prices – the burst of business activity (outside the energy sector) that cheaper oil will generate, thus raising demand for oil.”
Wrong. The real economy needs oil, but the financial economy does not. The financial economy is king, and it only needs the databases of computers. This is why low oil prices have not boosted the real economy, and never will. Big corporations are not using the low oil prices to buy more trucks, or hire more workers, or produce more goods and services. Instead, they are speculating in the casino-markets. Stocks, bonds, commodities, currencies, derivative, arbitrage – none of these require oil. The Saudis are manipulating prices and production to hurt Russia, Iran, and Venezuela.
The point, again, is that the Saudis and manipulating prices and production for political reasons, not economic.
“Citibank analysts, for example, more than doubled their demand growth forecasts for 2015 and 2016, although others, like HSBC, have been more cautious. As that demand rises, so should oil prices. At least that is what vulnerable oil producers hope.”
Nonsense. Big banks and financial firms are constantly making projections that turn out to be wrong. The IMF and World Bank routinely admit that their projections were wrong.
The author is speculating again. He doesn’t know. He’s just guessing.
All that greed and political bias really stinks to high heaven. The price of oil and gas has been inflated double-price for far too long, and I could care less about the politics of a bunch of self-serving conglomerates and weapons-dealers. I don’t care about Canada’s tar-sands, which should not be harvested at all, nor do I care about Russia’s oil and gas sector, that it uses like a weapon in negotiations with Europe, while people freeze to death every year because they can’t afford to heat their homes, and the rest of us are pointing the finger everywhere else, at the usurers for doing what they do, and at Arabia for selling oil, when the downturn in oil prices goes far beyond just them. With the lowered prices, governments will be picking your pockets less, and so will the Koch brothers, have to take a couple of their filthy fingers out from your purse.
The reason that commodities have not lowered in price yet, is so simple it’s stupid to deny — unadulterated greed, and not prescience, in the same way that the gas station doesn’t lower their prices right away when oil goes down, but raises the price right away at any news of conflict.
Maybe a few more people will be able to afford to live, with some of these parasites off of our backs!