Source: The Economist
The Plunge in Petroleum
January 8, 2015 11:30am by Barry Ritholtz
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160 for Venezuela? XLent! the devil’s excrement
I find it interesting that all the people who didn’t predict the Arab Spring know the cost of petrol production to the thaler.
So the 3 biggest net importers are US, China and Japan. They would also be the biggest beneficiaries of the drop in prices.
So what is this, the 3rd financial bubble(even though, you could say 97-06 was one big one, but they had different parts of allocation) that has crashed. This is what happens when wealth doesn’t “trickle down”. You create a big wealth class while everybody else loses wealth. Monetary policy tries to fill in the gaps by manipulating interest rates to boost the economy and that causes rampant speculation where ever the animal spirits feel it.
Even though it would suck, I would print 10 trillion in currency and shove it into economy just to piss the wealthy off.
This isn’t the bubble pop. That could be when the bankruptcies start to hit the frackers. Remember those real estate derivatives? I just heard a phrase the other day that seems apropos, though is escapes me who said it…”All those who have been seeking risk are going to find it.”
The table that no one wants to look at, while cheering the current decline in the price of oil, is the cost of production, by country – and for investors, by oil company.
It looks much more like a price war than anything else. The key tell is going to be, for us, how much production is going to go off line over the next year or so. The era to consider is what happened in the late 1990’s and the aftermath: oil fell to the $10-12 price range, and production, along with new exploration, went do, and prices then nicely rose back up; benefiting mostly the KSA.
In case you ever wondered where many coal company profits come from and how big a subsidy we are giving them when they mine on federal land:
http://thinkprogress.org/climate/2015/01/07/3609210/coal-companies-selling-to-themselves/
US$ unlikely to collapse anytime soon.
Have the Saudis and USA secretly conspired to push oil prices lower to crush Russia/Syria, Iran, Venezuela, etc. Just my conspiracy theory.
That is a widely held perception here (GCC).
The Economist leaves out, inexplicably, the biggest net oil importer of all: Europe (mainly Western Europe: Germany, France, Italy, Spain etc. ex Norway and of course Russia) at some 12 million bpd.
So, those low, low income tax rates in Russia hailed by the GOP Media Machine for years now aren’t so workable.
I guess the Republican thought leaders will come out and change their minds about low taxes for the lucky rich are always good no matter what.