Sunday, January 11, 2015

Brussels is bent on destroying the private sector - apart from the European conglomerates. We will become like Russia - controlled by the State and a few oligarchs in hock to the leaders. The agenda is of course to destroy the independence of the States that make up the EU and what better way, than by destroying their independent businesses.  Hopefully Europe, the sick old man of the global economy, quietly shuffles off into further isolation and less prominence, with a whimper and not a bang. If European history of the last 2 centuries is of any indication however, that may prove to be wishful thinking. These verbose toffs may look effeminate to American eyes, but they have a peculiar genius for slaughtering each other and much worse, dragging every one else into the fray with them...It probably won't play-out quite as bloodily as in the past, but it could all be just as damaging when all is said and done, I'm afraid....If I remember rightly, I read somewhere (probably in the DT) that a senior member of the Saudi government had declared the country's intention to maintain current production even if the price of oil fell to $20 a barrel -- hence, presumably, the headline of this article....Motivation? Well, the high price of oil for the last number of years, driven in large part by the rapidly expanding Chinese economy, has motivated the exploitation of previously unviable sources of oil, as well as the development of shale, and the development of new technology in engine fuel economy. This wasn't a problem as long as the Chinese were prepared to buy whatever oil the world could produce, but now that the Chinese economy's expansion is slowing, they need less oil, which means there is now a glut. Saudi, which can produce it relatively easily and cheaply, has an opportunity to regain market share and put the kibosh on all the new technologies....If the long term average is $60/bbl, why would it drop to $20/bbl this year? $20/bbl in today's money doesn't compare at all with $20/bbl 15 years ago - this is a silly assumption. Similarly, $100/bbl oil price won't cause a revolution in major oil producing countries, $20/bbl risks widespread budget defects and revolution's. The ruler's of Saudi Arabia and their ilk have enough domestic issues to allow a low oil price to add to it. The US will not allow Saudi Arabia to persist with low oil prices indefinitely, they have a shale industry to protect. If the last goodness knows how many years has shown anything, it is that America survives on protectionism and aggression to protect its economy.

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