Monday, December 15, 2014

WTF's Happening to the Erl?

The gas-pump price is currently visiting levels last seen 5 years ago, when there was still lots of 'accessible' world oil and the market was unaffected by 'green cars'.  Now-a-days we're told there is still lots of oil, but it's not the Jed Clampett 'bubblin' spume' variety, and it costs a lot more to get out out of the ground and purify for the use of your transportation device.

So why, after decades of steadily rising gas prices,  has 'the bottom' apparently fallen out of the market? You can bet yer gas can that oil speculators almost didn't see this one coming.

So what was 'this one', and why?

At face value we're expected to believe that the Saudis, and their oil-loving cousins in the UAE,  took it into their minds to sell-off their oil for what it's worth, rather than the price 'the market' was willing to pay. After decades, again, of inflated oil profits, OPEC has decided to 'buy the world a coke' literally, if not figuratively. From an accepted world price of around $100 bucks a barrel , the Arabs have decided to let that barrel fall to the $45 per barrel level "on which their economy is based".  Somebody mixed up  a batch of special Kool-aid and the Arabs delightedly drank it. Or so we're told.

 But why, along with the saga goes the foundation myth. apparently the middle eastern oil potentates have decided that now is the time to bring the North American frack industry - which threatens to put them right out of business - to a grinding halt. This is to be accomplished by reducing the cost of imported oil so low that the fracked stuff can't compete. The frack industry withers-up and, after all the rig and corporate structure has been bankrupted into paper losses, the price will resume it's natural ascension.

 If the same logic wasn't also being applied to America's endeavor to knock Putin's 'Russian empire' for  six, it might be almost credible. But it all flies in the face of God and human nature. Ain't nobody that good, or that stupid. And believing that a gas glut, now, will somehow stop fracking, or even boiling oil out of tar sands, is playing with less than a full deck.

There is still a finite supply of oil on earth, and burning it is screwing up the planet's  ecosystem. That's the gospel here, the rest is 'ennertainment'.

What I think is going on is that the Saudis and the Emirates, which are phenomenally indebted to the World Bank, IMF and the USA, along with sitting on the 'rest' of their oil, are being threatened with the same sort of sanctions - for 'harboring' terror - as is Russia, Syria, Iran et al -  with the essential difference being that sanctions WILL hurt Arabs, who spend a considerable amount of time and money in the west. The Arabs are just 'backing their friends in the west', again, this time with more substance than form.

The question is how long can it go on? And how much 'collateral damage' will be done to 'the innocent'? The bottom line for oil-producing nations is that the thirst for oil isn't being depleted by feeding it the cheap stuff first. Inevitably when the 'good stuff ' runs short,  the market for the second-rate product will rise to make it 'worthwhile' again. What isn't sold-off cheap, will be available to sell-off at a better price. That includes fracked fuel, the hard-to-recover  or  the 'dirty' stuff.

Or at least that's what they say about supply and demand  in "Economics for Dummies".

Fill-up cheap while you can. Don't think of the poor starving Russians, they certainly aren't thinking about you.

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