Oil: Our Biggest Ally

At its current price of $33.52/barrel, oil has moved below its closing low of $33.87 on December 19th. Along with acting as an effective tax cut for US consumers, at least oil's decline is also causing a severe about face for a dictator who hates the US. With a few more months of declines, oil could end up getting rid of the all of the leaders of oil-rich countries that dislike the US as their people revolt. Who would have thought oil could be such a key ally of the US!

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Comments

[Firat Ünlü:]

You are aware that geopolitical events that can be engineered do have an influence, aren't you? Some regimes may do something extremely stupid feeling the pressure but here's hoping it stays down as the short-term fundamentals would indicate.

Jan 15 05:42 PM

[welcome2work:]

My question is how could Oil Companies share prices (like XOM--Exxon) be increasing while the price of Oil plummets like this. The news blames some of it on middle east war news. Maybe also companies are decreasing their supply. I'm shorting Oil companies that's why I'd like to know this answer.


finance.yahoo.com/news...

Jan 15 05:53 PM

[Assouli:]

Silly.

Yes, Venezuela, Iran, and Russia do benefit from higher oil prices, but so do key allies like the UK and Norway, and not to mention Saudi Arabia, Kuwait, Qatar, the UAE and Oman, all of whom happen to be major creditors to the US and important investors in our economy, especially banking and real-estate. Should their oil revenues significantly decline, we would lose a major source of cash flow into our economy, and this will not be offset by gasoline savings to drivers.

I would also add that lower oil prices also means less money flowing through the Middle East and less remittances to non-oil producing Middle Eastern countries as well as Africa and Southeast Asia. This means more economic and social instability, and spurring militancy and chaos that threaten US interests. It also means declining trade and globalization, which despite their drawbacks, have resulted in more open and freer societies, the empowerment of lower classes, and vast advances in education and innovation.

The other facet that makes the argument presented plain silly is well-known - low oil prices are a poor consumer incentive and a long-term detriment to the US economy. We need to wane Americans away from their inefficient vehicles and lifestyle habits. We need to expand mass transit and improve urban efficiency, thereby boosting productivity, enhancing urban life and culture while also creating employment. We also need to justify the costs of renewable energy development, one of the few tangible areas from which we can create economic activity and promote innovation, while addressing the growing global warming concern.

Higher oil prices are good for global society and economy so long as there is some sensible regulation in place to prevent speculation-driven bubbles. As for belligerent nations benefiting, this is something that should be addressed with strong diplomacy and international cooperation.

Jan 15 06:26 PM

[silverwood:]

Although it is nice to save money at the gas pump, falling oil price is derived from trader's perceptions. One of these perceptions unfortunately is falling demand due to a collapse in world business activity. This may have consequence that will give us little to cheer about down the road. Personally I hope these traders are incorrect and that falling oil price has more to do with the pendulum of price discovery being over done now on the downside by the likes of fund managers who love to chase momentum.

Jan 15 08:18 PM

[scotty1560:]

understand the point about higher oil forcing people to conserve and forcing
alternative energy...all for it.

Not in favor of massive bubbles and speculation..so high prices really benefit who? not the driver or the consumer..would prefer to see price controls to
create stability to consumers and propucers..$40-$50 barrel?

That said we are likely headed via the scenic route towards depression...
long term style...say 15-20 years...so oil and virtually every asset class may
see prices unimaginable...be careful 2010-2011...perfect storm is here..
credit bubble...demographic bubble...multi asset bubble..stay liquid...
hopefully we get a counter rally in here for 6 months soon....real estate
and stocks will take years to reach 05-07 levels...

Jan 15 08:21 PM

[Roger Knights:]

On the late-night talk show "Coast to Coast AM" for Jan. 6 the guest was Jim Norman, author of "The Oil Card Global Economic Warfare in the 21st Century," who "argued that the United States manipulates the price of oil as a kind of economic weapon against countries such as Russia and China."

Here's a link to Norman's site:
theoilcard.com/

Here's a link to the page on Amazon where his book can be bought for about $10:
www.amazon.com/s/ref=n...

Jan 15 10:23 PM

[Al-USA:]

Assouli said:
"
Higher oil prices are good for global society and economy so long as there is some sensible regulation in place to prevent speculation-driven bubbles. As for belligerent nations benefiting, this is something that should be addressed with strong diplomacy and international cooperation.
"

Oil went up about 500% at its peak the last couple of years. Or did you not notice? Its obscene run-up was a major contributor to tipping the USA into recession and possible depression; remember the 1970's Arab oil embargo?

Yes those Arabs that are now, supposedly, our "good" friends put a choke hold on the USA in the 1970's. I don't know about you, but I clearly remember the long lines, 2-3 hours, just to gas up, and this after going according to your assigned date. Yes, the Arabs didn't give a ___ then, so now we're supposed to care about their welfare because oil is reflecting, finally, real market demand?

I don't think so...

Jan 15 11:07 PM

[Tradememe:]

The sooner we move away from oil as primary energy source to more diversified energy sources, the better. The oil price will move up and down in the future and along the way it will create boom and bust as in the past.

Jan 16 02:26 AM

[Steven Hansen:]

the problem with revolutions is that the outcome could be worse than the current situation.

Jan 16 04:14 AM

[billp37:]

Oil might be headed higher if George Ure's speculations are correct?

"I fully expect by the end of the month we'll see a major flare-up over Iran (Israel bombing) because the headlines are starting to fill with possible 'justifications' and 'leading indicators'. I mean beyond the US just sending 6-million pounds of arms to Israel. There's a void/window between administrations, of course...which would avoid placing blame on the outgoing or incoming for giving 'the nod'.

By the way, let's pencil something out: A ship making 20 miles per hour, leaving from the US this week would arrive in Israel when? Call it 6,200 miles, divided by 20 MPH gives us 310 hours of steaming time (OK, dieseling time, but don't be so picky). About 13-days. If the goodies had left middle of last week, they'd be offloading just in time for the 'dark of the moon' - ideal timing for an attack - on the cusp of 'change at the helm' of the U.S."

www.urbansurvival.com/...

Jan 16 09:15 AM

[thinkaboutit:]

Reluctant as I am to find myself provoked to respond to a US-centric one-paragraph "article"; as a resident in South America, and no fan of Chavez, I understand the reasons for his democratic election. Whatever oil games Chavez might conspire to play, the US' democratically elected players are far more astute at the blood for oil game. Venezuelans know this from the US backed coup a couple of years back; Chileans know this from the CIA backed coup on 9/11/71, Argentina, Bolivia...

So while (temporary) low oil might effectively be a tax break for the rich; it may be a relief from the "oil curse". Using the term "dictators who dislike the US" seems antithetical to sensible discourse about geopolitics and the cause/effect of oil price.

Jan 16 09:25 AM

[john s. gordon:]

well if oil revenues are slumping it might act to slow down iran's nuclear bomb development - for a while.
> jack

Jan 16 09:39 AM

[john the ba...:]

what a bunch of propogand hogwash, go wave you flag little man

Jan 16 10:42 AM

[Ferdinand E...:]

"Oil could end up getting rid of ALL the leaders......" Not one or two of them mind you, but ALL of them will soon be applying for welfare, and in addition their people will be revolting. What a crock!

I've seen a couple of interview with the leaders of oil rich countries in the Middle East on CNN or something, and I somehow suspect that if men as smart as those gentlemen were calling the shots in the US, The Republic would be in pretty good shape today.

Jan 16 10:49 AM

[User 338631:]

" We also need to justify the costs of renewable energy development"...

and how long and how much are we to pay to justify these boondoggles?
Is not part of the reason we are in this financial mess, is that we chased "windmills" in housing, consumerism, and government spending?
Let the market decide winners and science, GW.

Jan 16 10:51 AM

[Dave Wrixon:]

Dream on Buddy.

Brent is now $10 a barrel more expensive than Texas Intermediate.

All this say is that it is America that cannot afford it. Not Saudi cannot produce it.

All that will happen is that much of the surplus oil will be diverted to India and China.

Will America ever be able to afford the same proportion of the World's resources again?

I would say, that it doesn't look like it.

Jan 16 01:22 PM

[billp37:]

"Wednesday August 6, 2008 07:19

The charge infuriates Dr. Etemad. "With the Shah, we also came to the conclusion that Iran was in great need of nuclear energy because our population was steadily growing and our gas and oil will run out. That's why even though I was in the old regime, I should be fair to the new regime because they are following the same line.
----------------------...


Friday September 5, 2008 07:56
Wed, 03 Sep 2008 22:32:58 GMT Currently suffering from electricity shortage, Iran has been forced to adopt a rationing program by scheduling power outages - of up to two hours a day - across both urban and rural areas in the country. "

Iran and the US both need to address possible future electricity shortages.

Bombing Iran nuclear electric power development sites is likely a BAD idea which could possibly lead to WWIII.

home.comcast.net/~bpayne37/socialsecur...

Jan 16 09:42 PM

[bill d:]

Sure - oil is continuing to drop - WHY THE F**K IS GASOLINE GOING UP 2 - 10 CENTS DAY ?????

Jan 16 10:45 PM