Monday, December 29, 2014

Drop in Oil Price 2015

Amazing its been nearly eight years since I started writing blogs a lot of things have changed since then the main one being the number of people that read blogs now.

Am really interested in why the price of oil has reduced so dramatically and usually I can get a good idea from my sources in the internet but their is no consensus so I thought will write something to consolidate my thoughts on the issue.

For me the world is shaped in petrodollars so when I comprehend about what is happening in the world, the main factor that influences my thinking is the petrodollar. Actions of Iraq and Libya and now Russia are more inline with defending petrodollar then whatever reasons are being touted.

My original feeling was that the drop was an attack on Russia, then I thought it was to do with supply and demand based on changing needs of society,  but I feel it has to be something to do with the decoupling of the petrodollar to reality.

In terms of supply there has been a drop of projected number of barrels needed per day as the IEA has forecasted around 20% drop in demand.In Fiji I remember that a large amount of our electricity was produced by oil and now have read that UK and China are setting records in renewable solutions for generating electricity. My gut feeling is that renewable solutions and peoples disposable income are having the biggest impact on the amount of oil needed.

If it is mainly to do with the petrodollar decoupling with reality. I need to first work out why the petrodollar function is so important in the reduction of prices. Dollar Notes need to be backed by something so that you know it can be redeemed. Originally the US dollar was backed by gold then then that changed in the seventies and it become oil from Saudi Arabia hence the name petrodollars.

There is also the influence of AIPAC type motives in a significant number of decisions being made and that factor is what to me has caused biggest issues in terms of keeping interest rates low and printing of dollars which has made Oil Producing nations look at alternatives to the Dollar.

Before oil producing nations sold their oil for dollars then they would use those dollars by purchasing US financial instruments e.g in 2012  there net effect of 248 billion of purchases but what is expected in 2014 is actually net effect of taking out around 8 billion dollars. So how can they be a petro dollar if the oil producing nations don't want to invest in the dollar.

My understanding is that the US dollar will be the last fiat currency to drop when there is a reset and that is why value of dollar is increasing.  So the drop in oil prices is not logical as I would think the value of the dollar would decrease and oil prices increase but the opposite has happened. So what is happening?.

QE printing for me is also done to meet the shortfall of what was being supplied by the oil producing countries  i.e. 500 billion in 2006 and bailout TPTB.

Following the silver and gold market has given me many examples of how the market is able to be manipulated. I have feeling of what is happening to the oil prices is last throes of the dollar being backed by a commodity as other nations start trading in their own currencies.

Goes back to conversation had with deputy of chine embassy who in 2009 told me they were moving away from US dollars to basket of Huan, Ruble and Eurpean currencies.

I am interested with Deputy of Russia saying that the manipulation can only last around six months then we will see what happens


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