Showing posts with label Oil. Show all posts
Showing posts with label Oil. Show all posts

Thursday, December 10, 2015

Cheap Oil




A barrel of oil goes for about $39 right now:

Oil fell below $37 a barrel on Thursday, after new data showed OPEC is still pumping like there is no tomorrow.


The mighty oil cartel produced 31.7 million barrels a day in November, its latest monthly report shows. That is the highest output in over three years and 1.7 million barrels a day over its former production ceiling.

Oil hasn't been this cheap in a long time. About a year and a half ago, it was $108 a barrel.

The implications of this probably aren't well understood. There are a number of countries--Iran, Venezuela, Mexico, Nigeria, and Saudi Arabia that face unique circumstances at home. They have restive, unhappy populations that are trying to live in struggling economies. The governments of those nations (only Mexico is a non-OPEC state) are forced to chase revenue and produce oil in abundance, working against their common interests in the name of maintaining a revenue stream that is drying up.

If those countries come apart at the seams because of cheap oil, we'll have interruptions in supply and the possible intervention on the US military as a result. Sure, I like paying less than $2 for a gallon of gas, and I laugh about it all the time because what else could be more hilarious, but there are some really difficult choices here. Do we continue to live like this and hope the oil producing states can remain stable or do we welcome a modest price hike? It would seem to me that someone has to figure out how to cut production, bring the price up, and do this quietly.

Monday, December 15, 2014

The Russian Ruble is Collapsing




Couldn't have happened to a nicer kleptocracy:

The ruble tumbled the most since 1998, sliding past 60 for the first time, as traders tested Russia’s willingness to defend the currency amid an oil slump that’s pushing the economy toward recession.


The ruble weakened 9.1 percent to 64.0005 per dollar at 7:57 p.m. in Moscow, the steepest slide on a closing basis since the year Russia defaulted on local-currency debt. The 10-year government bond yield rose 23 basis points to 13.23 percent. Three-month implied volatility for the ruble climbed to a six-year high as the rout triggered the Bank of Russia to sell foreign exchange, according to BCS Financial Group and MDM Bank.


Traders are pressing the central bank to buy more rubles to limit a selloff that has wiped out 22 percent of the currency’s value this month. Oil’s slide toward $60 a barrel in London and sanctions over the conflict in Ukraine are undermining confidence in Russian assets as evidence mounts that the economy is entering a recession. Industrial output fell the most in more than a year in November, data showed today.


Everyone who bet on oil being expensive is losing money right now. And I think that this is largely driven by the fact that alternative forms of energy are making inroads and so there's a glut of oil on the world market. I don't want to be around (but I will be) when the major producers scale back--the price will shoot up, no doubt.

Is it time to get that electric car and invest in solar panels? It's always time to get the electric car and put solar panels everywhere.

The decision made by the Western nations (The U.S. and Europe) to put a shiv into the side of Russia's economy is paying off. The price for all of this has to be for Russia to give up two things: Eastern and Southern Ukraine and Edward Snowden.