Tuesday, October 14, 2014

Oil Price Collapsing (What it means)

The oil price has been in a major downfall since mid-June of this year. This is going to put downward pressure on price inflation indexes such as the CPI and the PPI. This, in turn, will reduce any fear they might have of opening up the monetary spigots as the stock market down turn.

But the downturn in the oil price is mostly caused by gains in US oil production.. Those gains will stop as the price falls, since it will become unprofitable to produce much of the new oil at the new low prices.

Further, money printing can always overcome productivity gains if the printing accelerates, Indeed, on a longer term perspective, oil remains in a strong up trend.


  1. U don't think the drop has anything at all to do with geopolitics/financial warfare ?

  2. This should also increase/cause a bubble somewhere, right? The extra money driven by the ongoing printing will find its way somewhere.

    1. Haven't they started ramping QE down? Supply surely helps, but this may also be a factor of QE ramping down so there's less money for speculation to drive the prices up. I may be wrong, but as they taper down QE, shouldn't we expect deflation?

      I also heard another pontificator saying that the Saudis and Venezuela are lowering their prices to undercut American fracking in order to keep us dependent on their oil. Makes sense to me. Competition drives down prices. I recall they said that Saudi Arabia said they would keep prices as low as 80 or 90 for a year or so which would make fracking unprofitable.

  3. The only recent development in oil is the increase Saudi output. By driving the price of oil down the Saudis squeeze the Iranians and Russians. They will offer concessions. Expect Iran to give up their uranium enrichment . Russia isn't doing much to fight ISIS in Syria and Irak. Obama also benefits in the midterms and europe can sure use some help.

    The neocons were right, oil is worth fighing for.

  4. Isn't it because Chinese demand for the stuff is way down, due to the PRC's own economic problems?