Saturday, January 10, 2015

Mish's Global Economic Trend Analysis: What's Behind the Plunge in Oil? Winners and Losers? Boon to Spending or Recessionary?

What's Behind the Plunge in Oil?

In the wake of a widely unexpected, huge oil price decline, I have received many questions and comments.

Some speculate US pressure on Saudi Arabia to punish Russia. Others think "big oil" is out to punish the frackers.

I responded to a friend today that the explanation is simple. No conspiracy theories needed. This was my proposal.

Explaining the Plunge in Oil

Slowing global economy, especially China and Europe
US production expansion
OPEC pumping above quotas – they all cheat
Iran embargo failing
Increased fuel economy
Attitudes of millennials towards cars and driving

I give heaviest weight to number one, but they all cascade.

To maintain revenue with US producing more of its own oil, OPEC members cheated more to maintain revenue. Increased fuel economy and attitudes of millennials are longer-term factors, but they become more important as demand drops due to the slumping global economy.

Discarding Conspiracy Theories

I am a big fan of Occam's Razor, a principle that suggests the simplest workable explanation is likely to be the best one. (For a tie-in to bank lending, please see Occam's Razor and Bank Lending.)

In this case, a slowing global economy thesis is a far simpler explanation than the notion that the US pressured Saudi Arabia and OPEC, and both of them agreed to cooperate, simply to punish Russia at the request of the US.

Did that happen? Not likely!

OPEC and or "Big Oil" attacks on frackers are equally ridiculous for exactly the same reason.

Complete story at - Mish's Global Economic Trend Analysis: What's Behind the Plunge in Oil? Winners and Losers? Boon to Spending or Recessionary?

No comments:

Post a Comment

All comments subject to moderation.

Recommended Reading via Amazon

If you're seeking more information about how the world really works, and not how the media would want you to believe it works, these books are a good start. These are all highly recommended.

If you don't see pictures above, you likely have an adblocker running.  If so, here are the links.

1. The Shock Doctrine - Naomi Klein
2. Confessions of an Economic Hit Man - John Perkins
3. Manufacturing Consent - Edward Herman, Noam Chomsky
4. Gladio - NATO's Dagger at the Heart of Europe - Richard Cottrell
5. Profit Over People - Noam Chomsky
6. Soviet Fates and Lost Alternatives - Stephen Cohen
7. The Divide - American Injustice in the Age of the Wealth Gap - Matt Taibbi

How this works.  Follow one of the links.  Should you decide to buy that item, or any item, I get a small percentage, which helps to maintain this site.  Your cost is the same, whether you buy from my link or not.  But if the item remains in the cart too long, I don't get a thing.  
Related Posts Plugin for WordPress, Blogger...