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Mini Me
01-01-2015, 07:25 PM
Who Is Behind The Oil War, And How Low Will The Price Of Crude Go In 2015? Who is to blame for the staggering collapse of the price of oil? http://hw.infowars.com/wp-content/uploads/2014/10/oil-well.jpg (http://www.infowars.com/who-is-behind-the-oil-war-and-how-low-will-the-price-of-crude-go-in-2015/)
Image Credits: Eric Kounce, Wikimedia Commons
by Michael Snyder
| January 1, 2015


Who is to blame for the staggering collapse of the price of oil? Is it the Saudis? Is it the United States? Are Saudi Arabia and the U.S. government working together to hurt Russia? And if this oil war continues, how far will the price of oil end up falling in 2015?
As you will see below, some analysts believe that it could ultimately go below 20 dollars a barrel. If we see anything even close to that, the U.S. economy could lose millions of good paying jobs, billions of dollars of energy bonds could default and we could see trillions of dollars of derivatives (http://theeconomiccollapseblog.com/archives/plummeting-oil-prices-destroy-banks-holding-trillions-commodity-derivatives) related to the energy industry implode. The global financial system is already extremely vulnerable, and purposely causing the price of oil to crash is one of the most deflationary things that you could possibly do. Whoever is behind this oil war is playing with fire, and by the end of this coming year the entire planet could be dealing with the consequences.
Ever since the price of oil started falling, people have been pointing fingers at the Saudis. And without a doubt, the Saudis have manipulated the price of oil before in order to achieve geopolitical goals. The following is an excerpt from a recent article by Andrew Topf (http://oilprice.com/Energy/Oil-Prices/Did-The-Saudis-And-The-US-Collude-In-Dropping-Oil-Prices.html)…
We don’t have to look too far back in history to see Saudi Arabia, the world’s largest oil exporter and producer, using the oil price to achieve its foreign policy objectives. In 1973, Egyptian President Anwar Sadat convinced Saudi King Faisal to cut production and raise prices, then to go as far as embargoing oil exports, all with the goal of punishing the United States for supporting Israel against the Arab states. It worked. The “oil price shock” quadrupled prices.
It happened again in 1986, when Saudi Arabia-led OPEC allowed prices to drop precipitously, and then in 1990, when the Saudis sent prices plummeting as a way of taking out Russia, which was seen as a threat to their oil supremacy. In 1998, they succeeded. When the oil price was halved from $25 to $12, Russia defaulted on its debt.
The Saudis and other OPEC members have, of course, used the oil price for the obverse effect, that is, suppressing production to keep prices artificially high and member states swimming in “petrodollars”. In 2008, oil peaked at $147 a barrel.
Turning to the current price drop, the Saudis and OPEC have a vested interest in taking out higher-cost competitors, such as US shale oil producers, who will certainly be hurt by the lower price. Even before the price drop, the Saudis were selling their oil to China at a discount. OPEC’s refusal on Nov. 27 to cut production seemed like the baldest evidence yet that the oil price drop was really an oil price war between Saudi Arabia and the US.



If the Saudis wanted to stabilize the price of oil, they could do that immediately by announcing a production cutback.
The fact that they have chosen not to do this says volumes.
In addition to wanting to harm U.S. shale producers, some believe that the Saudis are determined to crush Iran. This next excerpt comes from a recent Daily Mail article (http://www.dailymail.co.uk/news/article-2884454/How-oil-s-world-s-potent-weapon-Forget-nuclear-arms-U-S-Saudis-oil-price-crash-topple-regimes-Russia-Iran-sabotage-Scot-Nationalists.html)…
Above all, Saudi Arabia and its Gulf allies see Iran — a bitter religious and political opponent — as their main regional adversary.
They know that Iran, dominated by the Shia Muslim sect, supports a resentful underclass of more than a million under-privileged and angry Shia people living in the gulf peninsula — a potential uprising waiting to happen against the Saudi regime.
The Saudis, who are overwhelmingly Sunni Muslims, also loathe the way Iran supports President Assad’s regime in Syria — with which the Iranians have a religious affiliation. They also know that Iran, its economy plagued by corruption and crippled by Western sanctions, desperately needs the oil price to rise. And they have no intention of helping out.
The fact is that the Saudis remain in a strong position because oil is cheap to produce there, and the country has such vast reserves. It can withstand a year — or three — of low oil prices.



There are others out there that are fully convinced that the Saudis and the U.S. are actually colluding to drive down the price of oil, and that their real goal is to destroy Russia.
In fact, Venezuela’s President Nicolas Maduro openly promoted this theory during a recent speech on Venezuelan national television (http://www.reuters.com/article/2014/12/30/us-venezuela-oil-idUSKBN0K802020141230)…
“Did you know there’s an oil war? And the war has an objective: to destroy Russia,” he said in a speech to state businessmen carried live on state TV.
“It’s a strategically planned war … also aimed at Venezuela, to try and destroy our revolution and cause an economic collapse,” he added, accusing the United States of trying to flood the market with shale oil.
Venezuela and Russia, which both have fractious ties with Washington, are widely considered the nations hardest hit by the global oil price fall.



And as I discussed just the other day (http://endoftheamericandream.com/archives/this-is-how-much-russians-hate-america), Russian President Vladimir Putin seems to agree with this theory…
“We all see the lowering of oil prices. There’s lots of talk about what’s causing it. Could it be an agreement between the U.S. and Saudi Arabia to punish Iran and affect the economies of Russia and Venezuela? It could.”



Without a doubt, Obama wants to “punish” Russia for what has been going on in Ukraine. Going after oil is one of the best ways to do that. And if the U.S. shale industry gets hurt in the process, that is a bonus for the radical environmentalists in Obama’s administration.
There are yet others that see this oil war as being even more complicated.
Marin Katusa believes that this is actually a three-way war (http://finance.yahoo.com/news/oil-wars--opec--russia---shale-182539804.html) between OPEC, Russia and the United States…
“It’s a three-way oil war between OPEC, Russia and North American shale,” says Marin Katusa, author of “The Colder War (http://amzn.to/1rB1dyA),” and chief energy investment strategist at Casey Research.
Katusa doesn’t see production slowing in 2015: “We know that OPEC will not be cutting back production. They’re going to increase it. Russia has increased production to all-time highs.” With Russia and OPEC refusing to give up market share how will the shale industry compete?
Katusa thinks the longevity and staying power of the shale industry will keep it viable and profitable. “The versatility and the survivability of a lot of these shale producers will surprise people. I don’t see that the shale sector is going to collapse over night,” he says. Shale sweet spots like North Dakota’s Bakken region and Texas’ Eagle Ford area will help keep production levels up and output steady.



Whatever the true motivation for this oil war is, it does not appear that it is going to end any time soon.
And so that means that the price of oil is going to go lower.
How much lower?
One analyst recently told CNN (http://money.cnn.com/2014/12/31/investing/crude-oil-52-dollars-even-lower/index.html?iid=HP_LN) that we could see the price of oil dip into the $30s next year…
Few saw the energy meltdown coming. Now that it’s here, industry analysts warn another move lower is possible as the momentum remains firmly to the downside.
“If this doesn’t hold, we could go back to price levels in late 2008 and early 2009 — down in the $30s. There’s no reason why it couldn’t happen,” said Darin Newsom, senior analyst at Telvent DTN.



Others are even more pessimistic. For instance, Jeremy Warner of the Sydney Morning Herald (http://www.smh.com.au/business/comment-and-analysis/oil-could-fall-to-us20-over-the-coming-year-20141231-12fv9q.html), who correctly predicted that the price of oil would fall below $80 this year, is now forecasting that the price of oil could fall all the way down to $20 next year…
Revisiting the past year’s predictions is, for most columnists a frequently humbling experience. The howlers tend to far outweigh the successes. Yet, for a change, I can genuinely claim to have got my main call for markets – that oil would sink to $US80 a barrel or less – spot on, and for the right reasons, too.
Just in case you think I’m making it up, this is what I said 12 months ago: “My big prediction is for $US80 oil, from which much of the rest of my outlook for the coming year flows. It’s hard to overstate the significance of a much lower oil price – Brent at, say, $US80 a barrel, or perhaps lower still – yet this is a surprisingly likely prospect, the implications of which have been largely missed by mainstream economic forecasters.”
If on to a good thing, you might as well stick with it; so for the coming year, I’m doubling up on this forecast. Far from bouncing back to the post crisis “normal” of something over $US100 a barrel, as many oil traders seem to expect, my view is that the oil price will remain low for a long time, sinking to perhaps as little as $US20 a barrel over the coming year before recovering a little.



But even Warner’s chilling prediction is not the most bearish.
A technical analyst named Abigail Doolittle recently told CNBC (http://www.cnbc.com/id/102303607) that under a worst case scenario the price of oil could fall as low as $14 a barrel…
No one really saw 2014’s dramatic plunge in oil price coming, so it’s probably fair to say that any predictions about where it’s going from here fall somewhere between educated guesses and picking a number out of a hat.
In that light, it’s less than shocking to see one analyst making a case—albeit in a pure outlier sense—for a drop all the way below $14 a barrel.
Abigail Doolittle (http://www.cnbc.com/id/46101575), who does business under the name Peak Theories Research, posits that current chart trends point to the possibility that crude has three downside target areas where it could find support—$44, $35 and the nightmare scenario of, yes, $13.65.



But the truth is that none of those scenarios need to happen in order for this oil war to absolutely devastate the U.S. economy and the U.S. financial system.
There is a very strong correlation between the price of oil and the performance of energy stocks and energy bonds. But over the past couple of weeks this correlation has been broken. The following chart comes from Zero Hedge (http://www.zerohedge.com/news/2014-12-31/crude-carnage-resumes-wti-52-handle-new-cycle-lows-heres-why)…
http://theeconomiccollapseblog.com/wp-content/uploads/2014/12/Energy-Stocks-Zero-Hedge-425x225.jpg (http://theeconomiccollapseblog.com/archives/behind-oil-war-low-will-price-crude-go-2015/energy-stocks-zero-hedge)
It is inevitable that at some point we will see energy stocks and energy bonds come back into line with the price of crude oil.
And it isn’t just energy stocks and bonds that we need to be concerned about. There is only one other time in all of history when the price of oil has crashed by more than 50 dollars in less than a year. That was in 2008 – just before the great financial crisis that erupted in the fall of that year. For much, much more on this, please see my previous article entitled “Guess What Happened The Last Time The Price Of Oil Crashed Like This?… (http://theeconomiccollapseblog.com/archives/guess-happened-last-time-price-oil-crashed-like)”
Whether the price of oil crashed or not, we were already on the verge of massive financial troubles.
But the fact that the price of oil has collapsed makes all of our potential problems much, much worse.
As we enter 2015, keep an eye on energy stocks, energy bonds and listen for any mention of problems with derivatives. The next great financial crisis is right around the corner, but most people will never see it coming until they are blindsided by it.

"The illusion of freedom will continue as long as it's profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way and you will see the brick wall at the back of the theater."

Frank Zappa

Mini Me
01-01-2015, 07:26 PM
I don't think its any coincidence that we got involved in Iraq, Syria and the oil soaked ME at the time we did. There must have been advance signals that this oil price plunge was in the making beforehand.

We know that the PNAC Neocon War group wants to force oil hegemony in the ME, and is willing to pay any price, or risk WW III to do so. They will NOT STAND for low oil prices, and never have.

Saudi Arabia is no friend of ours, or Russia or Iran, and this is a major SHAKEOUT of expensive oil producers as I see it. They would like nothing better than to break the Petrodollar stranglehold that the US has, and go with another world currency, which is the wish of the BRIC countries(Brazil, Russia,India, and China). Wiping out shale oil producers, and expensive sea platform oil is their goal, and they are certainly wealthy enough to ride out the low prices, then only to skyrocket prices when the competitors are gone.

My biggest fear is that Russia and Iran may team up toghether and invade SA and other Arab OPEC nations and seize production of the oil fields. Or that the US would do so! At any rate, this will lead to massive war in the ME, and new, contrived shortages will occur with the bombing of oil pipelines and refineries, and a blocking of the Persian Gulf.

I think this year(2015) will be the year that major currency crisis hits, and the dollar goes down, with systemic market collapses around the globe. The only safe position to have is GOLD in your hot hands, as the IMF will try to impose its SDR's of worthless fiat currency upon the world. Anyway, its going to be one Hell of a rough ride for all of us!

Just one mans opinion, and I hope I am wrong.

Peter1469
01-01-2015, 07:31 PM
Lots of factors contributed to the drop in prices. It is possible that one or more nations saw the trend and contributed to the drop with their polices. It has put Russia in its place. And it will likely dry up lots of funding for the Jihadists.

Private Pickle
01-01-2015, 07:35 PM
Called it.

Mini Me
01-03-2015, 06:06 PM
Bump. Serious minds need to discuss this in earnest!

Peter1469
01-03-2015, 06:07 PM
Lots of factors contributed to the drop in prices. It is possible that one or more nations saw the trend and contributed to the drop with their polices. It has put Russia in its place. And it will likely dry up lots of funding for the Jihadists. bump

Mini Me
01-03-2015, 06:23 PM
DEFLATION is the big danger!

Decreasing demand!

The big danger is DEFLATION, where prices of many things fall so low, there is no more profit to be made, such as occurred during the Great Depression. This oil price collapse could be the harbinger of a total global collapse! And the Fed, the IMF, Central banks, World Bank have leveraged so much debt that can never be paid off, and currencies are so over valued now, that an enormous collapse in assets could happen, and a hyper inflation will be the result.Imagine having a whole wheelbarrow full of cash just to buy a loaf of bread, like in Germany during the 30's?

Now add to this debt, over 600 TRILLION in suspect derivitives that Hedge Funds gamble with that could go ka-blooey!

The problem is, none of the "great minds" have come up with any kind of a solution to the Perfect Storm that is brewing.

Bob
01-03-2015, 06:24 PM
When you guys get screwed with a tax system called carbon taxes, you can use the CA model. We saw an instant spurt up in gasoline prices by 6 cents per gallon.

Sounds like chump change till you realize we do not deserve this left winger tax and it won't fix a thing.

Peter1469
01-03-2015, 06:27 PM
The inflation-deflation debate has been raging since 2008. Most economist think inflation was our problem and that is why the Fed forced inflation so low via monetary policy.

Deflation kills business. But I think it is better for main street than inflation. Of course neither would be better.

CaveDog
01-03-2015, 07:55 PM
Rewind to 2011 and Michael Snyder was saying...


The entire U.S. economy was designed to operate on massive amounts of very cheap oil. Americans do more driving than anyone else in the world. Many of us are so lazy that we won’t even walk to a store if it is on the other side of the parking lot.
If oil hits record levels in 2011, it is going to be a massive shock to the U.S. economic system. Any hopes for an "economic recovery" will be completely dashed.

 
http://theeconomiccollapseblog.com/archives/wars-rumors-of-wars-skyrocketing-oil-prices-and-global-economic-chaos-why-is-all-of-this-happening

I wouldn't panic yet. As proprietor of "The economic collapse" blog this guy makes a living stirring the pot. I've been hearing these predictions for a very long time and they usually come from people selling A) Thier book or B) Gold. Mr.Snyder falls into category A. Fear mongering helps his bottom line. In fact, it is his bottom line.

In real terms our economy is driven by consumerism underwritten by the petrodollar as the world's reserve currency. The dominance of the petrodollar is shored up my American military might (which still lacks a serious challenger). Falling energy costs just put more money into the hands of the consumer which is a positive for our economy. Will some investors take a bath? Probably but I'd be surprised if it lead to a true deflationary spiral. More money in the consumer's pocket is more likely to shore up prices according to the good old laws of supply and demand.

I could be wrong but I doubt it. What I watch for is central banks dumping the dollar on the international market. That's most likely when the proverbial balloon will go up.

Mini Me
01-03-2015, 09:02 PM
Thoughtful!

Yes, watch watch the central banks are doing.

Low gas prices should lower consumer goods prices, but I think the corps will mainly just take profits, instead of passing on lower prices.

Read: "The Death of Money" by James Rickards.

It explains all the devious shenanigans that bankers do with money. Its brilliant.

CaveDog
01-03-2015, 09:17 PM
I'll have a look at it. You're probably right that they won't pass on the savings. They'll likely just sop up the lower operating costs and enjoy the windfall of extra consumer dollars.

Peter1469
01-03-2015, 10:05 PM
Thoughtful!

Yes, watch watch the central banks are doing.

Low gas prices should lower consumer goods prices, but I think the corps will mainly just take profits, instead of passing on lower prices.

Read: "The Death of Money" by James Rickards.

It explains all the devious shenanigans that bankers do with money. Its brilliant.

If there is competition in a market where transportation costs and energy costs are significant, someone is going to lower prices and if the others want to keep more profit they will lose.

Mac-7
01-03-2015, 10:18 PM
I think the only ones who lose are the man-made global warming alarmists who need expensive oil to support their dreams of alternative energy.

CaveDog
01-04-2015, 12:06 AM
If there is competition in a market where transportation costs and energy costs are significant, someone is going to lower prices and if the others want to keep more profit they will lose.


To a degree maybe but outside of a competitive business like air travel where fuel is a significant operating cost there's not a lot of incentive for price wars. Other operating costs not energy related are probably going to remain pretty flat and energy related savings still fairly limited. No crystal ball here but predictions of a widespread deflationary spiral sound alarmist to me.

Private Pickle
01-04-2015, 12:10 AM
To a degree maybe but outside of a competitive business like air travel where fuel is a significant operating cost there's not a lot of incentive for price wars. Other operating costs not energy related are probably going to remain pretty flat and energy related savings still fairly limited. No crystal ball here but predictions of a widespread deflationary spiral sound alarmist to me.

Fuel is a significant cost in all things. Not to mention the plastic industry.

Peter1469
01-04-2015, 12:28 AM
To a degree maybe but outside of a competitive business like air travel where fuel is a significant operating cost there's not a lot of incentive for price wars. Other operating costs not energy related are probably going to remain pretty flat and energy related savings still fairly limited. No crystal ball here but predictions of a widespread deflationary spiral sound alarmist to me.

I pick deflation over inflation. Stick it to the man.

Peter1469
01-04-2015, 12:29 AM
Fuel is a significant cost in all things. Not to mention the plastic industry.

Most people shop at stores that don't sell local stuff.

Private Pickle
01-04-2015, 12:34 AM
Most people shop at stores that don't sell local stuff.

And that stuff is priced predominately on the cost of transportation. Transportation cost is defined by fuel costs.

Private Pickle
01-04-2015, 12:35 AM
I pick deflation over inflation. Stick it to the man.

This. Deflation is good for the common man and extremely bad for all of the "streets".

Peter1469
01-04-2015, 12:40 AM
This. Deflation is good for the common man and extremely bad for all of the "streets".

Deflation is not good, but if you have to pick between a normal economy, an inflated economy, or a deflated economy. Pick normal first, deflated second, and inflated third. Of course degrees matter, but this is already beyond people.

Private Pickle
01-04-2015, 12:47 AM
Deflation is not good, but if you have to pick between a normal economy, an inflated economy, or a deflated economy. Pick normal first, deflated second, and inflated third. Of course degrees matter, but this is already beyond people.

I agree with the exception of oil. Oil has become the most important commodity to civilization as we know it. Without oil we have no economy. No water. No food. No electricty. No heat.

Deflation of oil brings the overall cost of living down. This is the one area where Nationalization of a natural resource is debatable for me...

Peter1469
01-04-2015, 12:52 AM
I agree with the exception of oil. Oil has become the most important commodity to civilization as we know it. Without oil we have no economy. No water. No food. No electricty. No heat.

Deflation of oil brings the overall cost of living down. This is the one area where Nationalization of a natural resource is debatable for me...

Disagree. We can replace oil immediately. Previously posted about.

Private Pickle
01-04-2015, 12:55 AM
Disagree. We can replace oil immediately. Previously posted about.

Its not a matter of quantity. We have plenty. It's a matter of price.

Peter1469
01-04-2015, 12:58 AM
Its not a matter of quantity. We have plenty. It's a matter of price.

The infrastructure is the cost. The fuel is much cheaper than gas mile per mile.

CaveDog
01-04-2015, 01:06 AM
Fuel is a significant cost in all things. Not to mention the plastic industry.

There are plenty of other costs. Employees, buildings, insurance, outside services, taxes and equipment for example. I won't argue that energy costs don't impact wholesale prices but I don't see the percentage as enough to trigger significant enough deflation to crash the entire economy. That's all I'm arguing.

Peter1469
01-04-2015, 01:10 AM
There are plenty of other costs. Employees, buildings, insurance, outside services, taxes and equipment for example. I won't argue that energy costs don't impact wholesale prices but I don't see the percentage as enough to trigger significant enough deflation to crash the entire economy. That's all I'm arguing.

Economic crashes are not solely caused by deflation. Just watch the current USD. :wink:

donttread
01-04-2015, 07:23 AM
Who Is Behind The Oil War, And How Low Will The Price Of Crude Go In 2015? Who is to blame for the staggering collapse of the price of oil? http://hw.infowars.com/wp-content/uploads/2014/10/oil-well.jpg (http://www.infowars.com/who-is-behind-the-oil-war-and-how-low-will-the-price-of-crude-go-in-2015/)
Image Credits: Eric Kounce, Wikimedia Commons
by Michael Snyder
| January 1, 2015


Who is to blame for the staggering collapse of the price of oil? Is it the Saudis? Is it the United States? Are Saudi Arabia and the U.S. government working together to hurt Russia? And if this oil war continues, how far will the price of oil end up falling in 2015?
As you will see below, some analysts believe that it could ultimately go below 20 dollars a barrel. If we see anything even close to that, the U.S. economy could lose millions of good paying jobs, billions of dollars of energy bonds could default and we could see trillions of dollars of derivatives (http://theeconomiccollapseblog.com/archives/plummeting-oil-prices-destroy-banks-holding-trillions-commodity-derivatives) related to the energy industry implode. The global financial system is already extremely vulnerable, and purposely causing the price of oil to crash is one of the most deflationary things that you could possibly do. Whoever is behind this oil war is playing with fire, and by the end of this coming year the entire planet could be dealing with the consequences.
Ever since the price of oil started falling, people have been pointing fingers at the Saudis. And without a doubt, the Saudis have manipulated the price of oil before in order to achieve geopolitical goals. The following is an excerpt from a recent article by Andrew Topf (http://oilprice.com/Energy/Oil-Prices/Did-The-Saudis-And-The-US-Collude-In-Dropping-Oil-Prices.html)…
We don’t have to look too far back in history to see Saudi Arabia, the world’s largest oil exporter and producer, using the oil price to achieve its foreign policy objectives. In 1973, Egyptian President Anwar Sadat convinced Saudi King Faisal to cut production and raise prices, then to go as far as embargoing oil exports, all with the goal of punishing the United States for supporting Israel against the Arab states. It worked. The “oil price shock” quadrupled prices.
It happened again in 1986, when Saudi Arabia-led OPEC allowed prices to drop precipitously, and then in 1990, when the Saudis sent prices plummeting as a way of taking out Russia, which was seen as a threat to their oil supremacy. In 1998, they succeeded. When the oil price was halved from $25 to $12, Russia defaulted on its debt.
The Saudis and other OPEC members have, of course, used the oil price for the obverse effect, that is, suppressing production to keep prices artificially high and member states swimming in “petrodollars”. In 2008, oil peaked at $147 a barrel.
Turning to the current price drop, the Saudis and OPEC have a vested interest in taking out higher-cost competitors, such as US shale oil producers, who will certainly be hurt by the lower price. Even before the price drop, the Saudis were selling their oil to China at a discount. OPEC’s refusal on Nov. 27 to cut production seemed like the baldest evidence yet that the oil price drop was really an oil price war between Saudi Arabia and the US.



If the Saudis wanted to stabilize the price of oil, they could do that immediately by announcing a production cutback.
The fact that they have chosen not to do this says volumes.
In addition to wanting to harm U.S. shale producers, some believe that the Saudis are determined to crush Iran. This next excerpt comes from a recent Daily Mail article (http://www.dailymail.co.uk/news/article-2884454/How-oil-s-world-s-potent-weapon-Forget-nuclear-arms-U-S-Saudis-oil-price-crash-topple-regimes-Russia-Iran-sabotage-Scot-Nationalists.html)…
Above all, Saudi Arabia and its Gulf allies see Iran — a bitter religious and political opponent — as their main regional adversary.
They know that Iran, dominated by the Shia Muslim sect, supports a resentful underclass of more than a million under-privileged and angry Shia people living in the gulf peninsula — a potential uprising waiting to happen against the Saudi regime.
The Saudis, who are overwhelmingly Sunni Muslims, also loathe the way Iran supports President Assad’s regime in Syria — with which the Iranians have a religious affiliation. They also know that Iran, its economy plagued by corruption and crippled by Western sanctions, desperately needs the oil price to rise. And they have no intention of helping out.
The fact is that the Saudis remain in a strong position because oil is cheap to produce there, and the country has such vast reserves. It can withstand a year — or three — of low oil prices.



There are others out there that are fully convinced that the Saudis and the U.S. are actually colluding to drive down the price of oil, and that their real goal is to destroy Russia.
In fact, Venezuela’s President Nicolas Maduro openly promoted this theory during a recent speech on Venezuelan national television (http://www.reuters.com/article/2014/12/30/us-venezuela-oil-idUSKBN0K802020141230)…
“Did you know there’s an oil war? And the war has an objective: to destroy Russia,” he said in a speech to state businessmen carried live on state TV.
“It’s a strategically planned war … also aimed at Venezuela, to try and destroy our revolution and cause an economic collapse,” he added, accusing the United States of trying to flood the market with shale oil.
Venezuela and Russia, which both have fractious ties with Washington, are widely considered the nations hardest hit by the global oil price fall.



And as I discussed just the other day (http://endoftheamericandream.com/archives/this-is-how-much-russians-hate-america), Russian President Vladimir Putin seems to agree with this theory…
“We all see the lowering of oil prices. There’s lots of talk about what’s causing it. Could it be an agreement between the U.S. and Saudi Arabia to punish Iran and affect the economies of Russia and Venezuela? It could.”



Without a doubt, Obama wants to “punish” Russia for what has been going on in Ukraine. Going after oil is one of the best ways to do that. And if the U.S. shale industry gets hurt in the process, that is a bonus for the radical environmentalists in Obama’s administration.
There are yet others that see this oil war as being even more complicated.
Marin Katusa believes that this is actually a three-way war (http://finance.yahoo.com/news/oil-wars--opec--russia---shale-182539804.html) between OPEC, Russia and the United States…
“It’s a three-way oil war between OPEC, Russia and North American shale,” says Marin Katusa, author of “The Colder War (http://amzn.to/1rB1dyA),” and chief energy investment strategist at Casey Research.
Katusa doesn’t see production slowing in 2015: “We know that OPEC will not be cutting back production. They’re going to increase it. Russia has increased production to all-time highs.” With Russia and OPEC refusing to give up market share how will the shale industry compete?
Katusa thinks the longevity and staying power of the shale industry will keep it viable and profitable. “The versatility and the survivability of a lot of these shale producers will surprise people. I don’t see that the shale sector is going to collapse over night,” he says. Shale sweet spots like North Dakota’s Bakken region and Texas’ Eagle Ford area will help keep production levels up and output steady.



Whatever the true motivation for this oil war is, it does not appear that it is going to end any time soon.
And so that means that the price of oil is going to go lower.
How much lower?
One analyst recently told CNN (http://money.cnn.com/2014/12/31/investing/crude-oil-52-dollars-even-lower/index.html?iid=HP_LN) that we could see the price of oil dip into the $30s next year…
Few saw the energy meltdown coming. Now that it’s here, industry analysts warn another move lower is possible as the momentum remains firmly to the downside.
“If this doesn’t hold, we could go back to price levels in late 2008 and early 2009 — down in the $30s. There’s no reason why it couldn’t happen,” said Darin Newsom, senior analyst at Telvent DTN.



Others are even more pessimistic. For instance, Jeremy Warner of the Sydney Morning Herald (http://www.smh.com.au/business/comment-and-analysis/oil-could-fall-to-us20-over-the-coming-year-20141231-12fv9q.html), who correctly predicted that the price of oil would fall below $80 this year, is now forecasting that the price of oil could fall all the way down to $20 next year…
Revisiting the past year’s predictions is, for most columnists a frequently humbling experience. The howlers tend to far outweigh the successes. Yet, for a change, I can genuinely claim to have got my main call for markets – that oil would sink to $US80 a barrel or less – spot on, and for the right reasons, too.
Just in case you think I’m making it up, this is what I said 12 months ago: “My big prediction is for $US80 oil, from which much of the rest of my outlook for the coming year flows. It’s hard to overstate the significance of a much lower oil price – Brent at, say, $US80 a barrel, or perhaps lower still – yet this is a surprisingly likely prospect, the implications of which have been largely missed by mainstream economic forecasters.”
If on to a good thing, you might as well stick with it; so for the coming year, I’m doubling up on this forecast. Far from bouncing back to the post crisis “normal” of something over $US100 a barrel, as many oil traders seem to expect, my view is that the oil price will remain low for a long time, sinking to perhaps as little as $US20 a barrel over the coming year before recovering a little.



But even Warner’s chilling prediction is not the most bearish.
A technical analyst named Abigail Doolittle recently told CNBC (http://www.cnbc.com/id/102303607) that under a worst case scenario the price of oil could fall as low as $14 a barrel…
No one really saw 2014’s dramatic plunge in oil price coming, so it’s probably fair to say that any predictions about where it’s going from here fall somewhere between educated guesses and picking a number out of a hat.
In that light, it’s less than shocking to see one analyst making a case—albeit in a pure outlier sense—for a drop all the way below $14 a barrel.
Abigail Doolittle (http://www.cnbc.com/id/46101575), who does business under the name Peak Theories Research, posits that current chart trends point to the possibility that crude has three downside target areas where it could find support—$44, $35 and the nightmare scenario of, yes, $13.65.



But the truth is that none of those scenarios need to happen in order for this oil war to absolutely devastate the U.S. economy and the U.S. financial system.
There is a very strong correlation between the price of oil and the performance of energy stocks and energy bonds. But over the past couple of weeks this correlation has been broken. The following chart comes from Zero Hedge (http://www.zerohedge.com/news/2014-12-31/crude-carnage-resumes-wti-52-handle-new-cycle-lows-heres-why)…
http://theeconomiccollapseblog.com/wp-content/uploads/2014/12/Energy-Stocks-Zero-Hedge-425x225.jpg (http://theeconomiccollapseblog.com/archives/behind-oil-war-low-will-price-crude-go-2015/energy-stocks-zero-hedge)
It is inevitable that at some point we will see energy stocks and energy bonds come back into line with the price of crude oil.
And it isn’t just energy stocks and bonds that we need to be concerned about. There is only one other time in all of history when the price of oil has crashed by more than 50 dollars in less than a year. That was in 2008 – just before the great financial crisis that erupted in the fall of that year. For much, much more on this, please see my previous article entitled “Guess What Happened The Last Time The Price Of Oil Crashed Like This?… (http://theeconomiccollapseblog.com/archives/guess-happened-last-time-price-oil-crashed-like)”
Whether the price of oil crashed or not, we were already on the verge of massive financial troubles.
But the fact that the price of oil has collapsed makes all of our potential problems much, much worse.
As we enter 2015, keep an eye on energy stocks, energy bonds and listen for any mention of problems with derivatives. The next great financial crisis is right around the corner, but most people will never see it coming until they are blindsided by it.

"The illusion of freedom will continue as long as it's profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way and you will see the brick wall at the back of the theater."

Frank Zappa


So we have built a world economy dependent upon keeping the price of oil artificially high in order to make the megacorps rich and now it may backfire. Even if the price goes back up the sheep will now know that we keep the price high on purpose and they may get angry.
What strikes me is this : what an utterly stupid, absurd situation for supposedly intelligent creatures to have put themselves in to begin with.

Peter1469
01-04-2015, 08:41 AM
High oil prices help oil exporters (and Big Oil)
Low oil prices help oil importers and consumers

Where is the conspiracy?

[It is in Big Oil convincing the sheep that oil is the best energy source.]


So we have built a world economy dependent upon keeping the price of oil artificially high in order to make the megacorps rich and now it may backfire. Even if the price goes back up the sheep will now know that we keep the price high on purpose and they may get angry.
What strikes me is this : what an utterly stupid, absurd situation for supposedly intelligent creatures to have put themselves in to begin with.

donttread
01-04-2015, 10:23 AM
High oil prices help oil exporters (and Big Oil)
Low oil prices help oil importers and consumers

Where is the conspiracy?




[It is in Big Oil convincing the sheep that oil is the best energy source.]

Everywhere. Where is your free market?

Peter1469
01-04-2015, 10:56 AM
Everywhere. Where is your free market?

I have often said there is no free market in transportation fuels.

donttread
01-04-2015, 11:43 AM
I have often said there is no free market in transportation fuels.

Or food, or healthcare, defense contracts and coming soon water

CaveDog
01-04-2015, 11:48 AM
Economic crashes are not solely caused by deflation. Just watch the current USD. :wink:

The dollar has done quite well in recent months. It's up over 12% against key competing currencies on the ICE index. It's position as the world's reserve currency remains strong. I don't see where that indicates an imminent collapse.

My point was that the author of this article is not unbiased. He's selling a book on pretty much the same topic. Like most of his contemporaries he's in a business where stirring the pot is good for his bottom line. Go back to 2011 and he's writing that the economy is in trouble because it depends on cheap oil and rising prices will crash the economy. No matter which way oil prices swing he's got it covered. I used to get drawn in by the same arguments but I've seen so many that I check the source before taking it too seriously.

Peter1469
01-04-2015, 12:01 PM
Or food, or healthcare, defense contracts and coming soon water

Food, I disagree. My farmers market is as free market as you can get in VA. If the state ended its restrictions on raw milk it would be perfect.

Peter1469
01-04-2015, 12:03 PM
I agree the dollar is doing well against other currencies. That is not the same thing as saying the dollar is healthy. :smiley: I predict a dollar collapse. Not the timing of it.




The dollar has done quite well in recent months. It's up over 12% against key competing currencies on the ICE index. It's position as the world's reserve currency remains strong. I don't see where that indicates an imminent collapse.

My point was that the author of this article is not unbiased. He's selling a book on pretty much the same topic. Like most of his contemporaries he's in a business where stirring the pot is good for his bottom line. Go back to 2011 and he's writing that the economy is in trouble because it depends on cheap oil and rising prices will crash the economy. No matter which way oil prices swing he's got it covered. I used to get drawn in by the same arguments but I've seen so many that I check the source before taking it too seriously.

CaveDog
01-04-2015, 04:18 PM
I agree the dollar is doing well against other currencies. That is not the same thing as saying the dollar is healthy. :smiley: I predict a dollar collapse. Not the timing of it.

Historically all fiat currencies tend to collapse. I won't argue that one. I'm just guessing that it will be preceded by central banks dumping the dollar when it eventually loses it's de facto oil trading currency status. Until I see that I'm not panicking.

Peter1469
01-04-2015, 04:23 PM
Historically all fiat currencies tend to collapse. I won't argue that one. I'm just guessing that it will be preceded by central banks dumping the dollar when it eventually loses it's de facto oil trading currency status. Until I see that I'm not panicking.

That is a good indicator.