Geopolitical Undercurrents Whorl About the Oil Price Vortex

Poorly constructed buildings are more vulnerable to tornadoes, hurricanes, and earthquakes, than are buildings of sounder construct. The same principle applies to economic constructs. A relative economic vacuum is accompanying the “black hole vortex” of low oil prices, causing human devastation from Russia to Iran to Venezuela to Nigeria.

How deep will it plunge, and how long will it last?

Whenever anyone tells you where the prices of oil and other commodities are going, ask them for their predictions from five, ten, or twenty years ago. Did they predict the ongoing slump? If not . . . . Caveat emptor.

Oil’s collapse does mark the end of the commodity supercycle. And that means that oil-exporting countries are now in the same boat as other commodity-exporting countries — struggling with yawning gaps in their budgets, low growth or recession, austerity and bitterness, and the potential for social and political turmoil. The countries that benefited so much from the heat of China’s growing economy are now suffering from the impact of the “China chill.”

… Meanwhile, oil’s turmoil will continue. For new petroleum supplies are likely to come into the market in 2016. Assuming the nuclear sanctions are lifted on Iran in late winter or spring, Iran could bring what we currently estimate to be another 400,000 to 600,000 barrels of oil a day within several months. Iran’s oil minister pegs the number higher — around a million barrels per day. __ Oil Prices Sucking Life From BRICS

Russia and Saudi Arabia are battling for share of the lucrative European markets, and Iran is eager to get back into the game. Meanwhile, North American producers are proving more savvy in dealing with the price slump than their overseas competitors believed possible. And the North Americans are just getting started.

To meet demand and remain competitive, the IHS authors said in the BP report, operators are pursuing a range of cost-cutting and efficiency initiatives including automation and mechanization of high-cost, repetitive oil and gas activities, such as drilling. They are also looking to apply data-driven analytics to draw key insights from high-volume data streams, such as detecting when a piece of equipment is going to fail or identifying “sweet spots” in unconventional oil and gas plays. In still other instances, operators are increasing their use of mobility technologies to improve the efficiency and effectiveness of their field workforces.

These same operators are adapting technologies developed in the defense and manufacturing sectors to address oil and gas requirements, IHS said. Applications include deploying robots to inspect difficult-to-access elements such as offshore risers, and piloting unmanned aerial vehicles (i.e., drones) into areas that are dangerous for human intervention. Another area is process control optimization, which applies sophisticated modeling and simulation tools to increase production regularity and run equipment and facilities closer to their designed capacities.

Saudi Arabia continues to ramp up oil production, and Russia is struggling to keep pace. Russia’s harsh winters will continue to beleaguer the bear’s efforts to keep up with Persian Gulf state production for the foreseeable future, fantasies of climate apocalypse notwithstanding.

As for Iran, it is the threat of future production that weighs on oil futures, as much as whatever reality may emerge. The same continues to be true for future potential production from Iraq and many African countries.

But the behind the scenes human tragedy playing out in Russia, Iran, Venezuela, Africa, and other emerging oil / commodities exporting nations, reflects a massive corruption and lack of economic planning within those rickety stick nations. This ongoing tragedy is compounded by China’s debt / credit / overproduction / capital misallocation / and corruption crises.

Unfortunately, the advanced world is not doing much better, with its own demographic implosion combined with a dysgenic immigration catastrophe. Europe and much of the Anglosphere remain overly focused upon climate apocalypse fantasies, green energy delusions, and politically correct multiculturalism — and not at all concerned about building a resilient, abundant, and expansive human future. The consequences of such dysfunctional diversions of time, energy, and resources will come back to haunt them.

Hope for the best. Prepare for the worst. Learn to make yourself, your family, and your community more resilient, anti-fragile, creative, energetic, and Dangerous to threats and predators.

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3 Responses to Geopolitical Undercurrents Whorl About the Oil Price Vortex

  1. bob sykes says:

    All commodity prices are down, and freight transportation is also down. Furthermore, world-wide qualitative easing has failed to move the world economy. Part of the commodity price fall must be over production and the struggle for market share. But the fall in transportation volume and the failures of QE indicate that the world is already in recession, and might be in a deflationary phase.

    Toss the Syrian situation, with air forces from six countries, naval fleets, including two aircraft carrier task forces, from four countries, all operating cheek by jowl, and anything is possible. Now, we learn that the Erdogan family had a financial interest in the illegal Syrian/Iraq oil trade and that the US was apparently protecting that trade, or at least turning a blind eye and taking it off the target list. The shoot down of the SU24 was obvious retaliation for Russian interference in the trade, and the US apparently provided the information needed for the shoot down.

    “Hope for the best. Prepare for the worst.” Indeed. More and more this looks like the run up to 1939.

    • alfin2101 says:

      Right — if you examine the graphic of oil prices, you will see that commodity prices run closely alongside. Russia exports commodities, including oil & gas. But at a significantly discounted price. It is ironic that Putin showed his poker hand of imperialist expansion just before oil and commodities took a big plunge. No doubt he expected the opposite movement in prices to occur, as it normally would have done without new North American production.

      Putin is certainly making things interesting on the geopolitical front. He is recreating the runup for both 1914 and 1939 simultaneously.

      Did the corrupt putz truly think he could operate with impunity in Turkey’s “near abroad” — even violating Turkey’s airspace on multiple (predictable) occasions? Particularly after multiple and increasingly insistent warnings from his former friend Erdogan?

      Putin hates reality almost as much as his co-putzes Obama and Hollande. And reality is beginning to hate Putin.

      Stratfor and multiple Russian analysts and military people have been predicting the fragmentation of the Russian Federation sometime before 1925. Here at the Institute, we feel the process may not run to significant completion — the contraction of the Russian state to a small core surrounding Moscow and St. Petersburg — until 1930. The interim is likely to prove very painful to the Russian people, most thanks for that going to Putin.

  2. jccarlton says:

    Reblogged this on The Arts Mechanical and commented:
    The oil oligarchs bet that they could outmaneuver the boys from Texas. Not a good bet to place.

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