I am not political at all but I have a good friend that is and he keeps me abreast of what’s happening in the world when I want to know what the heck is going on. He lives and breathes the news of any kind.. has traveled fairly extensively.. worked in middle eastern countries and is tolerant of my complete ignorance.
I recently got into an argument with a new American friend of mine over why gas is so cheap .. she said because the Iraqis are pumping it out and flooding the market. Sooooo… I turned to my expert on worldly happenings and asked him. The following is his reply .. I love it! He explains and sums it up so we can all understand it in a nutshell! (his view of course but it is good enough for me)
World economics analysis .. for you kid (he calls me kid)
so like ok.. the Americans jump on the frac technology and drill like a thousand wells that start producing oil, the Canadians figure out how to run their pipelines better and make more Canadian oil available and those middle eastern guys just keep pumping like normal, that’s the supply side.. lots of oil around..
but out on the consumer side.. the Chinese economy slows a bit.. the European economy goes to sleep.. and every body and his brother is buying a Prius.. well if they are not buying a Prius they are replacing the old car with a more fuel efficient new one.. and the middle eastern guys just keep pumping oil .. so that’s the demand side.. not that much demand
ok when you have a lot of stuff.. like say oil.. and you want to sell it.. but the guys doing the buying don’t need as much as they did before.. guess where the price has to go so that you can do the deal.. and the middle eastern guys just keep pumping oil
So the Russian economy tanks, the Venezuelan economy is hurting more than usual, guess there will be flurry of junk mail from Nigeria as they look for better ways to make money, the oil sands guys lose interest in investing for low returns, and the middle eastern guys just keep pumping oil
so bottom line… the US economy gets a shot in the arm.. cheap energy prices will help kick start the US manufacturing sector.. and everybody else scrambles to keep their head above water .. and the middle eastern guys just keep pumping oil..
Now is it the Iraqi’s? nope.. their infrastructure is so screwed up and no one wants to fix it yet cause its so unstable .. its not the Iranians either .. cause they are so screwed by all the sanctions that they cant develop shit.. well maybe a nuclear program but that’s about it. The Libyans just stopped selling oil due to a large fire at their port.. that happens when some guy fires a rocket into a fuel tank.. nope is not due to any of the small players
Hmm.. how about those Saudi guys?? biggest producer in the world .. now how about them? great friends of the USA.. are they willing to take a profit cut in the short term to cripple the Russian economy and jump start the American economy? yep.. that kinda makes sense.. course the fact that the expensive oils.. the frac stuff and the oil sands in north America get beat up in the process … well shit happens.. and if the oil sand expansion slows or stops .. well ya don’t need those pesky pipelines… double bonus…
now if you believe in conspiracy theories Mr. Obama and his agenda is the guy behind it.. hurting the Russians, removing the need for pipelines, getting more folks working and keeping the middle class spending. Pretty much win win all around for democratic politics.. setting Hilary up for success in the next election..
oh and just before I end this.. gas is not cheap.. it hasn’t come down as far or as fast as the price of a barrel of crude oil.. right now the seven elevens and gas stations are making a killing.. buy low.. sell high.. shit everyone is happy
so there ya go.. the world economy in 300 words or less.. now how do we make money from this?