Crashing Oil Prices could crush Vladimir Putin (CNN)

[stevenleser]

Last edited Wed Oct 15, 2014, 09:59 AM - Edit history (1)

http://money.cnn.com/2014/10/15/investing/oil-price-fall-russia-hurt/index.html

In early March when Russia first sent troops into Ukraine, oil was trading comfortably above $100 per barrel. Now, it's around $81, a level not seen in three years.

That's a tough pill for Russia to swallow since the country relies heavily on oil revenues to bankroll its budget -- over half of the government's revenues come from oil and gas.

"We're probably getting closer to the point of pain," said Phil Flynn, an energy analyst at the Price Futures Group. "It's definitely putting the squeeze on their balance sheet."

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The US should be pursuing a renewable energy program as if it is a national security issue, because it is one. Russia and the countries in the Middle East who pursue hostile internal and external policies should be starved of funds. US firms should develop renewable technology and sell it globally.

[DetlefK]

1. Oil as a weapon. This time the other way round.

What will the oil-exporting countries do 20, 30 years from now, when electric cars are mainstream?

Russia doesn't have a technological brand and currently scientists are emigrating en masse. (Almost 1 in 4 Russians with a higher degree are leaving because of Putin or plan to do so.)

The arabic states only have tourism as a second leg. They don't the industrial infrastructure for a large-scale export of manufactured goods. They do have the money to set up a technology-driven industry (simply by buying everything and everyone they need) but they don't have a structure for higher education that will supply them with homegrown scientists. That tradition was destroyed by islamic extremists in the Middle-Ages (science=bad) and I don't see how that trend could be reversed in the current climate of religious extremism.

[stevenleser]

2. Yep. I'm posting another article now that explains this.

Veddy intedesting

[chrisa]

24. Putin wants to bring back the society of dumbasses that was The Soviet Union,

No tech innovation, no goods produced, no attempt at trying - just corrupt cronyism all around.

[DetlefK]

29. The stunted development of the Soviet Union wasn't intentional.

This was a side-effect of a society where doing something new could land you in jail. The Soviet Union wasn't simply a political system, it was a way of life, deeply ingrained into the mindset of the populace.

[aquart]

3. Is ISIS crushing oil prices?

Anyway, this nicely defangs Putie's silent threats to turn off Europe's gas if he gets annoyed.

Go sanctions!

[Nuclear Unicorn]

5. "Is ISIS crushing oil prices?"

I doubt it. Their angle is to sell to embargoed entities and/or below market prices. And they aren't really selling new product, they're selling what was already being produced by other parties in Syria and Iraq.

[aquart]

11. They're selling below market prices? How does this not crush the market?

[Nuclear Unicorn]

15. First, it's black market, while the OP deals with retail prices.

Second, while they are selling they aren't selling in appreciable volume; but the US is. More than likely the price drop is from the fact that the US has overtaken Saudi Arabia in production.

[aquart]

17. Thank you.

I appreciate the explanation.

[Nuclear Unicorn]

19. Thank-you, yourself. I appreciate the conversation.

[Munificence]

33. You said

"More than likely the price drop is from the fact that the US has overtaken Saudi Arabia in production."

I think the price drop is to break Putin's back. The U.S and Saudi have set this up, just like in the late 80's. The "willy nilly" sanctions against Russia over the past few months only hurt Europe and Russia laughed in our face so we have pulled out the big guns and are having Saudi Arabia drive down the price by pumping at near full capacity.

Now I don't mind this action, however what is it going to do to our "petroleum based industries" here in the U.S? Anything below $85 per barrel is gonna cause a lot of hardships here in the U.S when it comes to the oil industry and the "smaller" outfits. The larger ones can weather the storm for a while, but for how long before they shut it down? Higher prices have caused a boom in oil out west, take those pries away and it will shut down.

It really is a double edged sword.

[Nuclear Unicorn]

34. Well-stated and I accept without argument. Still, I would add

consumption might go up as well. I have neighbors who are ecstatic to see the prices dropping as we moving into the home heating season (mine is a rural home).

It will also translate into lower upstream costs for manufacturers, distributors and retailers which may also go to kick start the sluggish economy.

[stevenleser]

35. It's going to make the economy take off like a rocket ship.

Assuming the low prices are maintained. That's my prediction, anyway.

[Nuclear Unicorn]

36. I really need to start listening to your show.

I have to say, about 90% of the time I find myself nodding at your posts and the other 10% I go, hmmm.

[stevenleser]

37. Absolutely! And I think its even better since Rude Pundit has been cohosting most shows with me

IMHO!

[Munificence]

38. Oh I agree

with you on this helping some, but what we both don't know is at what price to jobs? I know a lot of our young adventurous men moved out west to make some money in this "boom"...are we going to be sending them home with no work now? Will the oil industry here in the U.S now force them to work for lower wages?

What is the ramifications of this, how will it shake out.....for better or worse? That is what we do not know. I'd rather see it stay between $80-$100 a barrel.

Oil is something that is a "world economy". If in fact this turns out to be a "demand issue" then that says that the global economy is slowing down a lot, which will still mean lower prices for "Joe Blows" like you and I, however will the sluggish "world economy" hit us in the unemployment lines?

Lots of interesting stuff going on. I'm not much into the tin foil hat crowd but there's a lot of big issues we have been faced with over the past year or so that are "global" issues. We are still the leader of the world and within that we do have a global economy now, I mean just look how we have propped up pretty much the entire world over the past 5-6 years....Newton had an interesting theory about actions and reactions.

[stevenleser]

10. NY Times Thomas Friedman seems to think its deliberate action by US and Saudis

See link downthread with/to another OP.

[Nuclear Unicorn]

4. Couldn't happen to a nicer a-hole. nt

[stevenleser]

7. Agreed. nt

[stevenleser]

6. All, see this other OP that has a NY Times article link that seems to explain what is happening

http://www.democraticunderground.com/10025668202

[cilla4progress]

8. Some good news

for a change!

[Fumesucker]

12. Every dark cloud has a silver lining

A slowing world economy is why the oil price is dropping.

See post #9 on this thread.

[stevenleser]

20. Yes it is.

And for all those folks who said the US had no cards to play in the Ukraine issue, it looks like those folks were seriously mistaken.

[Fumesucker]

9. More interesting and relevant to Americans is why the oil prices are dropping

It's because the global economy is slowing and demand for oil is down.

The Baltic Dry Index is a measure of shipping activity, a strong indicator of the physical as opposed to the financial economy, it's been trending downward for at least a year.

[KoKo]

13. +1

[stevenleser]

23. That is part of the reason. Friedman says its also deliberate action by the US and Saudis

See my OP here--> http://www.democraticunderground.com/10025668202

[Fumesucker]

25. I read that

Not a big fan of Mr Suck-On-This.

[Cirque du So-What]

14. I am convinced

that stagnant oil prices - more than any other factor - led to the collapse of the Soviet Union. Revisionists insist that St. Ronnie whupped the Rooskies singlehandedly, but it's just another example of Reagan falling into a pile of shit and coming out smelling like a rose...at least to conservative noses, that is.

[stevenleser]

16. In the OP I linked above, Friedman makes the point that the US and Saudis deliberately did it last

time too to hurt the then Soviet Union and are doing it again now.

[Cirque du So-What]

18. I hate to be a smarty-pants

but I figured that out over 20 years ago.

[sweetapogee]

21. Venezuela...

Way before Russia begins to feel any economic pain from falling oil prices, Nicolás Maduro and his fragile economy will take the hit big time. Oil must trade at around $75.00-$80.00/barrel for the government of Venezuela to simply break even with respect to social program funding.

[stevenleser]

22. Literally 8 days after the policy was initiated on Oct 3, Russia pulled its troops from the Ukraine

border (Oct. 11th). So, I don't think the policy will be in place for very long but we'll see. So far also the prices are in the 80's still.

[Fumesucker]

27. Correlation does not imply causation

Statistics 101.

http://en.wikipedia.org/wiki/Correlation_does_not_imply_causation

[stevenleser]

28. You're not telling me anything I don't know. I often use the same quote.

I would be happy to hear your alternative explanation.

[sweetapogee]

30. so, help me out here...

in your mind it's all about bringing Putin down and not about control over certain oil fields within politically unstable countries in the ME, Africa or South America?

[stevenleser]

31. I believe the policy is aimed at Russia, and so do the Russians, by the way.

I am sure if and when the ideas for the policy was/were brought up, those other elements were also brought up and found to be either happy coincidences or acceptable for whatever reason.

[Fumesucker]

26. Sounds like a twofer for America

Ruin Russia and that socialist hell hole of Venezuela.

[Blue Owl]

32. Soon he'll be rearing his head gasket in Palin' airspace

n/t