Weekend Oil Reads

Good news – I survived final exams, although stunned it was my second to last one. Chilled out for a bit, but I got bored pretty quickly which is why I’m excited to spend more time with you all over winter break! Lots of stuff been happenin’, so let’s get to it! December 20 Weekend […]

Good news – I survived final exams, although stunned it was my second to last one. Chilled out for a bit, but I got bored pretty quickly which is why I’m excited to spend more time with you all over winter break! Lots of stuff been happenin’, so let’s get to it!

December 20 Weekend Oil Reads

In my last post (I worked hard, so go read it) I talked about the falling oil prices. Well last week, prices continued to plummet…. Currently at $57.80

WTI

Someone asked me to illustrate the supply and demand gap for oil prices. I found this in one of the comments (Roger Andrews) from Energy Matters illustrates it pretty well. Note that historically, oil price changes have a gap. The high production has obviously caught up with us…

Oil supply demand

Pictures speak billions of barrels of words. I also mentioned in my previous post that Russia is getting squeezed from declining oil prices, since their economy is highly dependent on exports. Their currency is getting murdered because of it. Ever wonder how Putin may react? Recall I also had a link where Vladdy was vowing to get revenge on speculators driving down the Russian Ruble. (It was pretty funny). I digress.

What happens if the huge decline in oil prices makes it impossible for Russia to meet their national debt obligations? King World News has a great commentary from Dr. Roberts. Basically Russia doesn’t have enough money coming in from oil exports, so they can’t (or won’t-depending what side of the bed Putin gets up on that morning) meet debt payments.

Oh yeah, those debt payments….. that includes payments to none other than the European Central Bank. Unless you have been living under a rock (no offense intended if you have), the ECB has not been doing too hot. At all.

So what do you think the lowest price would need to be before Mr. Putin decides to flip European Banks the middle finger and not pay them back? They’re debt rating is currently BBB- and on negative outlook. WHAT IF the “stars align?” and the debt rating agencies downgrade while oil prices continue to fall? All of this political tension could have catastrophic results in Europe and have a major negative impact on the world economy. The linked article says unemployment from Russia skipping 1 year of debt payments to European Banks could result in unemployment levels above 20%…. Then a series of events could occur that completely shift the influence (or dominance) of world power back to the East. Just like Mr. Putin wants. That would be so terribly ironic.

Just some food for thought.

Five days until Christmas! I am asking Santa for a Tablet, and sufficient final exam curves.

Leave a Reply

Your email address will not be published.