Oil cheaper than the “barrels” it’s delivered in.
First of all, I’m not someone you should take economic advice from, but I remember the economics crisis 8 years ago very well. Do you? We were told, much like now, that the market was correcting itself, and just days before the whole thing really took off, the newspapers, not one, but all of them, announced that the recession was diverted and there were unprecedented opportunities to invest, particularly in the housing market.
Well – it all went sour from there. Millions of people in China got unemployed almost overnight, hundreds of thousands got evicted in America. Governments took hundreds of billions from the taxpayers, to give to the big banks, in order to keep their “liquidity” (money) flowing.
(Not) Fun fact: I was hired to work for a bank in 2008 (Landsbankir). During my first day at work, the bank declared bankrupcy.
This period of my life I started to understand that there is something fundamentally wrong with the world, at least how it has been described to us. It seemed that the reality I found myself in was the exact opposite of what everyone believed, and what the news media told us.
Soo – I figured that media had made an honest mistake… and I started to learn about what had really been going on. This is of course only one dog’s opinion, but what I learned over time about the housing bubble was that there was a small click of people, who had good insight in what was going on, and who knew were things was heading. Not only that, because it was certain to them, they were betting against the market, making ten times their money, even twenty times their money.
I don’t know if there is a housing bubble today, or not, but it seems quite probable that there are an oil and gas bubble. You see, over the last couple of years, the banks have lent out a lot of money to oil and gas projects, all over the world. Now that the price of energy is going down soo much, these projects is losing money on all oil / gas they are producing and selling. How do I know this to be true? Well, oil is now cheaper to purchase than the barrel it comes in.
Another way to describe the current situation: The value of what the world is producing, is less than what is needed to repay global debt.
While I’m not Nostradamus, and I’m not a finance guy, it was pretty clear that things would head in this direction, so I went to LinkedIn and participated in groups, where oil and energy are discussed. At that time, people were discussing if oil could drop all the way to 60 dollars a barrel. At some point, I wrote a few lines claiming that I believed oil could go much further, and people started attacking me. One oil price guru even wrote me in private criticizing me not only for being delusional, but also reprimanded me for claiming that oil was not good for the environment, and sustainable for the economy.
To belive that oil was going below 60 dollars was apparently not a good topic of conversation. If you wan’t career progression in oil and energy, then you’r not allowed to voice certain ideas or opinions.
No person should take financial advice from a Dog on the Internet, and I’m not saying that the economy is reacting to a new energy product on the market, however, the market is behaving, very predictable, as if there were a competitive energy product on the market. Another thing I would point out is that very little action has been taken on Wall Street to mitigate problems that led to the crisis in 2008 – all that has been done is QE. QE means that you print new money to pay old debt. As we can learn from Zimbabwe, this is not necessarily a very sophisticated way of solving a problem.
QE Analogy= If someone stabs you, you need to go to hospital, it’s not enough to just put on a clean shirt.
So – now we are facing very intricate financial situations, and while I’m sure the smart people is aware what’s going on, I have very little confidence in that this is being reported on with transparency to the public. Obama recently said that his “economy is doing well, and everyone who says differently is peddling fiction“. But you only need to scratch very little on the surface to understand that there have to be trillions of new debt, floating around in the world economic systems.
In the eyes of Obama, I’m reducing myself to a peddler of science fiction and conspiracy, just for writting this…..
Developing countries are no longer looking to the west because they see where things are heading. Instead, they are looking to the east, to Russia, to China. In the aspect of consumers, lower oil prices are good, but in the aspects of a (flawed) global economy, low oil prices are bad, really bad. That is why we know what is coming!
The low price of oil is not sustainable for many countries economies, and what happens when the economy is doing bad? Well, there is international friction, and people go to war. Iran just started to sell their oil on the global market again, that might be good news for Iran, and the idea of a free market, but definitely not good news for a global economy based on the price of oil.
What we see today, unfortunately, is that people are betting money on the price of oil going down. This is just what happened before the housing bubble when a few people got rich from betting on the housing market going down. What assets do you think your pension fund is invested in?
So there is a party going on – and all though you were not invited, you’re most likely to be left with the bill.
As I’m writing this, the world’s top financial policymakers are gathered in Davos (tickets cost 27 000 dollars) to discuss “a fourth industrial revolution”. They don’t mention Cold Fusion. Instead, they are speaking about Artificial Intelligence and Robots. Those darn robots are taking away all the jobs! While that is true, that is only a part of the truth, and most of all, a brilliant way of focusing the public’s attention away from what is really going on.
With or without taking Cold Fusion in consideration, the system is not functioning very well, The situation is becoming ideal for making transitions and change. However what is going to happen the next couple of years is hard to predict. I’d love to speak about solutions, improvements …. but then again, I’m just a dog on the Internet.
To conclude this article – in recognition of Obama’s statement about science fiction peddling conspiracy theorists – allow me to make the following statement:
I LIKE PARTY