is there a war coming?

[theskull1]

Does anyone believe that this oil price collapse isn't a power play by the west and their Arab cohorts?

[deiseach]

Does anyone believe that this oil price collapse isn't a power play by the west and their Arab cohorts?

I think it's fair to say that Saudi Arabia is happy to see the price plummet to put a lot of the competition out of business. But seeing as the most vulnerable competitors are American frackers, it's not really in the interests of the west, i.e. America.

[seafoid]

Does anyone believe that this oil price collapse isn't a power play by the west and their Arab cohorts?

I think it is, to smoke out Iran and Russia.

[muppet]

Does anyone believe that this oil price collapse isn't a power play by the west and their Arab cohorts?

I think it's fair to say that Saudi Arabia is happy to see the price plummet to put a lot of the competition out of business. But seeing as the most vulnerable competitors are American frackers, it's not really in the interests of the west, i.e. America.

The pros for the US include destroying the Russian economy, hammering the Iranian economy and cheap prices at the gas station for a couple of years in the run up to a presidential election.

The con is a delaying in the extraction of wealth for the frackers.

I think it is definitely in the interests of the US.

[deiseach]

The pros for the US include destroying the Russian economy, hammering the Iranian economy and cheap prices at the gas station for a couple of years in the run up to a presidential election.

The con is a delaying in the extraction of wealth for the frackers.

I think it is definitely in the interests of the US.

I'm not sure the US has as much influence over the Saudis as is made out. After all, it hasn't been in the interests of the US for oil prices to soar the way they have in recent years. Not that I would dismiss your argument out of hand though.

[muppet]

The pros for the US include destroying the Russian economy, hammering the Iranian economy and cheap prices at the gas station for a couple of years in the run up to a presidential election.

The con is a delaying in the extraction of wealth for the frackers.

I think it is definitely in the interests of the US.

I'm not sure the US has as much influence over the Saudis as is made out. After all, it hasn't been in the interests of the US for oil prices to soar the way they have in recent years. Not that I would dismiss your argument out of hand though.

The rise of oil prices always see money flood into the dollar thus strengthening it. Considering the state of their debt mountain and their ongoing deficit this might have been seen as useful. The Russians and the Iranians have been trying to trade oil/gas outside the dollar thus attempting to undermine it. (The first country to try this was Saddam Hussein's Iraq in 2000).

There are pros and cons on all of these actions but at the moment, especially when Putin was mooning at the White House in Ukraine, I would say that this scenario was appealing.

The Saudis would hardly deliberately piss off the US (NATO), Russians & Iranians all at the same time?

[seafoid]

Does anyone believe that this oil price collapse isn't a power play by the west and their Arab cohorts?

I think it's fair to say that Saudi Arabia is happy to see the price plummet to put a lot of the competition out of business. But seeing as the most vulnerable competitors are American frackers, it's not really in the interests of the west, i.e. America.

The pros for the US include destroying the Russian economy, hammering the Iranian economy and cheap prices at the gas station for a couple of years in the run up to a presidential election.

The con is a delaying in the extraction of wealth for the frackers.

I think it is definitely in the interests of the US.

The fall in the oil price is bad for the Eurozone which is fighting deflation.
It needs inflation to get the debt burden down.
It's bad for highly leveraged frackers as well. And countries like venezuela.

[seafoid]

http://www.theguardian.com/business/2014/dec/16/russia-has-lost-economic-war-with-west-rouble-currency

[deiseach]

As I said, I wouldn't dismiss suggestions of US manipulation of oil prices out of hand. But the simpler explanation is that US oil production has rocketed. Good luck trying to separate that out from the fall in price to be able to identify the manipulation.

[seafoid]

As I said, I wouldn't dismiss suggestions of US manipulation of oil prices out of hand. But the simpler explanation is that US oil production has rocketed. Good luck trying to separate that out from the fall in price to be able to identify the manipulation.

Fair enough, Deiseach, but this took the market by complete surprise
Might be linked to China slowing down as well. 

[deiseach]

The accepted wisdom was that fracking couldn't produce the amount necessary to make a dent in Opec's share of the market. Looks like this may have been wrong. Bye-bye, Yogi Bear!

[muppet]

Does anyone believe that this oil price collapse isn't a power play by the west and their Arab cohorts?

I think it's fair to say that Saudi Arabia is happy to see the price plummet to put a lot of the competition out of business. But seeing as the most vulnerable competitors are American frackers, it's not really in the interests of the west, i.e. America.

The pros for the US include destroying the Russian economy, hammering the Iranian economy and cheap prices at the gas station for a couple of years in the run up to a presidential election.

The con is a delaying in the extraction of wealth for the frackers.

I think it is definitely in the interests of the US.

The fall in the oil price is bad for the Eurozone which is fighting deflation.
It needs inflation to get the debt burden down.
It's bad for highly leveraged frackers as well. And countries like venezuela.

Surely lower energy prices for the EU will reduce 'imports', improve national trade deficits and leave more money in people's pockets? Not that this is the objective of course.

[deiseach]

Larry Elliott thinks it is down to US manipulation:

Russia has just lost the economic war with the west
The Guardian, Tuesday 16 December 2014 11.58 GMT

A full-blown currency crisis. That's one way to describe the situation in Russia, where even the attempted "shock and awe" of a 6.5 percentage point-hike in interest rates failed to halt the rouble's slide on the foreign exchanges. The other is to say that Russia has been engaged in an economic war with the west – and has just lost.

Put simply, this was Moscow's Norman Lamont moment. Back in September 1992, the then chancellor said he would defend the pound and keep Britain in the exchange rate mechanism by raising official borrowing costs to 15%, even though the economy was in deep trouble at the time.

Russia is in even worse shape than Britain was in 1992. With a clapped-out manufacturing sector, it is over-reliant on its massive stocks of oil and gas at a time when the price of oil is falling through the floor. A barrel of Brent crude was trading at below $60 a barrel on Tuesday, compared to a recent peak of $115 in the summer.

The west knows all about the vulnerability of Russia's economy. When the introduction of sanctions over Russia's support for the separatists in Ukraine failed to bring Vladimir Putin to heel, the US and the Saudi Arabians decided to hurt Russia by driving down oil prices. Both countries will face some collateral damage as a result – and this could be considerable in the case of the US shale sector – but both were prepared to take the risk on the grounds that Russia would suffer much more pain. This has proved to be true.

At some point, lower oil prices will lead to stronger global growth, because consumers will have more money to spend and businesses will have more spare cash to invest. At that point, the price of oil will rise. But we are not there yet; in the short term the oil price is likely to keep falling.

So where does that leave Russia? Like Lamont, it has reached the end of the road with interest-rate increases. If a 6.5-point rise proves insufficient to halt the collapse of the rouble, it is hard to know what would do the trick. What's more, it's clear that some members of the policy elite in Moscow are unhappy with the idea of further damaging an already weak economy through draconian increases in interest rates to defend the currency.

As a result, there are now only two options. The first is to allow the rouble to find its own level, in the hope that the decline in the oil price will prove temporary and that rising demand for energy as the global economy recovers will push up the rouble against the dollar. The other is to introduce stringent capital controls. These are seen very much as a last resort by Moscow, but may prove necessary if the rouble rout continues.

The phrase "perfect storm" is much over-used, but in Russia's case it is entirely apposite. The country has a collapsing currency, a collapsing economy and sky-high interest rates. The question now is how the Putin government responds. If Moscow softens its line over Ukraine, it will be a case of mission accomplished for the west. But if economic agony makes a wounded Russian bear even more belligerent, it could prove to be a hollow victory.

[seafoid]

Does anyone believe that this oil price collapse isn't a power play by the west and their Arab cohorts?

I think it's fair to say that Saudi Arabia is happy to see the price plummet to put a lot of the competition out of business. But seeing as the most vulnerable competitors are American frackers, it's not really in the interests of the west, i.e. America.

The pros for the US include destroying the Russian economy, hammering the Iranian economy and cheap prices at the gas station for a couple of years in the run up to a presidential election.

The con is a delaying in the extraction of wealth for the frackers.

I think it is definitely in the interests of the US.

The fall in the oil price is bad for the Eurozone which is fighting deflation.
It needs inflation to get the debt burden down.
It's bad for highly leveraged frackers as well. And countries like venezuela.

Surely lower energy prices for the EU will reduce 'imports', improve national trade deficits and leave more money in people's pockets? Not that this is the objective of course.

All that but it will put downward pressure on wages leading to more price falls which lends to heavier debt burdens since deflation increases the real value of debt.
EZ inflation was something like 0.2% in September  with falling oil prices blamed.
The ECB has a target of 2% inflation.   And needs more like 3-4%.

[muppet]

Does anyone believe that this oil price collapse isn't a power play by the west and their Arab cohorts?

I think it's fair to say that Saudi Arabia is happy to see the price plummet to put a lot of the competition out of business. But seeing as the most vulnerable competitors are American frackers, it's not really in the interests of the west, i.e. America.

The pros for the US include destroying the Russian economy, hammering the Iranian economy and cheap prices at the gas station for a couple of years in the run up to a presidential election.

The con is a delaying in the extraction of wealth for the frackers.

I think it is definitely in the interests of the US.

The fall in the oil price is bad for the Eurozone which is fighting deflation.
It needs inflation to get the debt burden down.
It's bad for highly leveraged frackers as well. And countries like venezuela.

Surely lower energy prices for the EU will reduce 'imports', improve national trade deficits and leave more money in people's pockets? Not that this is the objective of course.

All that but it will put downward pressure on wages leading to more price falls which lends to heavier debt burdens since deflation increases the real value of debt.
EZ inflation was something like 0.2% in September  with falling oil prices blamed.
The ECB has a target of 2% inflation.   And needs more like 3-4%.

I am no economist but I don't get this sweeping statement that all deflation is bad.

Certainly overall deflation is not good. But, for example, technology always has deflation. A plasma TV or 1 Terra-byte computer would have cost a fortune 8 years ago. But their price always deflates and it still doesn't stop people buying what is actually a luxury item, while they wait for the price to come down, which they know it will. (Actually whey do wait initially and then buy away regardless one it is affordable. After that deflation is irrelevant.).

Obviously property deflation is problematic as it is linked to debt and bank balance sheets, and for most people is probably their largest purchases in their lifetimes.

But energy prices falling and affecting inflation. How can that be bad? Cheaper energy for people. It is not as if they will put off buying energy due to the falling price. We buy it when we need it.

What am I missing here?