Something more sinister going on?

[AtlCDore]

Anyone think this drop in oil prices was orchestrated purposely to get the world economies growing again? Will this get the world economies growing again as the average person will now spend less on energy costs?

 

It's my personal belief that Saudi Arabia orchestrated the lower oil prices for the following reasons:

 

1) It's a shot at Iran.  Maybe putting pressure on Iran will entice them to give up their nuclear program.

 

2) ISIS has been selling oil.  I believe that is where they have been getting the majority of their profits.  Lower oil profits means less money for them and may weaken their base.  SA is certainly no friend of ISIS and it must scare the shit out of them to think that Iran is on one side and ISIS is on the other.

 

3) To a lesser degree, this hurts Russia and shale producers.  If this takes out some of the supply then it's icing on the cake.

 

I would be interested in hearing other's thoughts about the above?  Does anyone get anything from Stratfor?  I would be curious their take on this whole thing.

 

Thanks,

 

AtlCDore

 

I initially thought there was a strong geo-political aspect to the Saudi's decision to maintain production even in the face of falling crude prices.

 

However, the more I read about the Saudi's experience and thought process in the 70's and 80's, the more I think that this is entirely an economic decision on the part of the Saudi's.  This is illustrated by the Saudi's experience over the previous three decades.  In the past, in the face of falling crude, they cut production to maintain crude pricing.  A couple of things happened that negatively impacted Saudi Arabia.  First, Certain OPEC members have historically always exceeded their quotas, so the Saudis bear the brunt of the production cuts.  Second, by cutting production and maintaining higher crude prices, this has stimulated a higher rate of growth in non-OPEC production.  And third, as non -OPEC production has increased, the share of oil supplied by OPEC has declined substantially.  Fourth, higher crude prices reduce future crude demand substantially given that higher crude prices stimulate investments in alternative energy sources.  Fifth, the Middle East ships a substantial amount of crude to Asia, particularly China.  The Chinese have the largest shale deposits in the world, and they are getting ready to exploit them given their reliance on imported crude and imported gas.  Lower crude prices make it much less economic to pursue development of Chinese shale, thereby ensuring continued reliance on Middle East crude.  (Ultimately I think the Chinese will fail to exploit their vast shale deposits given their severe water issues, but that is a discussion for another day)

 

So I am led to believe that the Saudi's actions are entirely to maintain market share, and by doing so, the low prices will encourage an increase in demand while cutting the legs out from under development of certain crude alternatives. 

 

 

Was it anything specific that you read that made you change your mind?