Did the virus cause the stock market crash? No, actually it was Putin
As most of you know, last week the stock market dropped about 2,000 points. With few exceptions the Lying Mainstream Media have blamed this crash on the coronavirus--because they can blame Trump for either under- or over-reacting, or telling Americans it's no more dangerous than the common flu--which has killed 21,000 Americans since last October, and often kills twice that many in a year.
What you may not know is that one of the major factors behind the big drop in the market was something that can't be tied to Trump--which means the Mainstream Media will try to ignore it. And that factor was...a dispute between Russia and Saudi Arabia over producing too much oil.
Whoa! Say what?? How can producing too much oil be a problem? Doesn't the world use a huge amount of oil every day? So...how could producing too much oil be a problem?
Fair question. And it offers a very useful lesson in how supply-and-demand curves set market prices--something communists and socialists don't believe, and probably don't understand. Here's how it happened:
The world consumes about 92 million barrels of oil every day, and world-wide production is amazingly well-matched to this demand. When the corona virus hit, world-wide demand for oil dropped just a percent or two. If every oil-exporting nation continued to try to export the same amount as before, the iron-clad laws of supply and demand predicted that the "small" excess of supply over demand (if 1.1% it would be a million barrels per DAY) would cause prices to fall.
The U.S, Russia and Saudi Arabia are the world's top oil producing nations. So in an effort to keep the price of oil from collapsing, the Saudis proposed to the Russian government that both nations cut production by a couple of percent. Seems reasonable.
Russian president Putin rejected the Saudi proposal. Some sources report that Putin wanted the price of oil to fall because that would hurt the U.S, which has higher production costs due to our use of high-tech production techniques (fracking).
Putin may now be regretting that decision. Since Saudi Arabia is the world's largest exporter of oil, for decades the Saudis have viewed their nation as being able to maintain market discipline, so they were angry that Russia wouldn't agree to what the Saudis thought was a reasonable proposal. So they responded by vowing to increase their own production, which they knew would crash world oil prices.
Before last week Saudi Arabia was producing about 9.7 million barrels of oil per day--over ten percent of world consumption. But they also have what's called "shut-in capacity"--wells that are throttled back to produce less than their maximum potential. So with a single message, the Saudis can increase production substantially. And they've vowed to increase production to over 12 million barrels per day.
If that holds up, the one-million-barrel-per-day excess production would more than triple. And the price crashed, from about $50 per barrel to about $31--a drop of 38 percent. The price has recovered slightly from its low, but is still $34 per barrel for the main U.S. benchmark crude.
Wow, so instead of taking a two- or three-percent production cut to keep the price stable, Putin's decision to tell the Saudis to pound sand is now dropped the value of Russia's oil exports by almost 35 percent! And yes, U.S. producers will take the same hit, but our net exports are almost zero, so the drop doesn't affect us nearly as seriously.
So did Putin learn anything about supply and demand from rejecting the Saudi proposal? Doubtful. But the U.S. Mainstream Media is happy, cuz they can blame the market crash on Trump.
Meanwhile, here in flyover country regular gas is selling for $1.79 a gallon, thanks to innovation and risk-taking by companies--and in large part by small, independent oil explorers.
And if you like inexpensive gasoline, don't forget to thank another key player: Vladimir Putin.
Source: https://www.dailywire.com/news/saudi-arabia-throws-down-gauntlet-to-russia-raises-crude-oil-supply-to-record-high
What you may not know is that one of the major factors behind the big drop in the market was something that can't be tied to Trump--which means the Mainstream Media will try to ignore it. And that factor was...a dispute between Russia and Saudi Arabia over producing too much oil.
Whoa! Say what?? How can producing too much oil be a problem? Doesn't the world use a huge amount of oil every day? So...how could producing too much oil be a problem?
Fair question. And it offers a very useful lesson in how supply-and-demand curves set market prices--something communists and socialists don't believe, and probably don't understand. Here's how it happened:
The world consumes about 92 million barrels of oil every day, and world-wide production is amazingly well-matched to this demand. When the corona virus hit, world-wide demand for oil dropped just a percent or two. If every oil-exporting nation continued to try to export the same amount as before, the iron-clad laws of supply and demand predicted that the "small" excess of supply over demand (if 1.1% it would be a million barrels per DAY) would cause prices to fall.
The U.S, Russia and Saudi Arabia are the world's top oil producing nations. So in an effort to keep the price of oil from collapsing, the Saudis proposed to the Russian government that both nations cut production by a couple of percent. Seems reasonable.
Russian president Putin rejected the Saudi proposal. Some sources report that Putin wanted the price of oil to fall because that would hurt the U.S, which has higher production costs due to our use of high-tech production techniques (fracking).
Before last week Saudi Arabia was producing about 9.7 million barrels of oil per day--over ten percent of world consumption. But they also have what's called "shut-in capacity"--wells that are throttled back to produce less than their maximum potential. So with a single message, the Saudis can increase production substantially. And they've vowed to increase production to over 12 million barrels per day.
If that holds up, the one-million-barrel-per-day excess production would more than triple. And the price crashed, from about $50 per barrel to about $31--a drop of 38 percent. The price has recovered slightly from its low, but is still $34 per barrel for the main U.S. benchmark crude.
| Source: U.S. Energy Information Administration |
So did Putin learn anything about supply and demand from rejecting the Saudi proposal? Doubtful. But the U.S. Mainstream Media is happy, cuz they can blame the market crash on Trump.
Meanwhile, here in flyover country regular gas is selling for $1.79 a gallon, thanks to innovation and risk-taking by companies--and in large part by small, independent oil explorers.
And if you like inexpensive gasoline, don't forget to thank another key player: Vladimir Putin.
Source: https://www.dailywire.com/news/saudi-arabia-throws-down-gauntlet-to-russia-raises-crude-oil-supply-to-record-high
posted by SF at
1:59 PM
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