Stuff to Ponder on International Events
As I drove to work today, I saw that the gas price at station I pass is now $2.13 per gallon. Yesterday, it was $2.15, the day before, it was $2.17 and $2.19 the day before that. We have all watched with some relief as gas has slipped and tumbled down to prices that we haven't seen in a few years. And while it all seems good from a consumer standpoint, I still reflect on what it all means geo-politically.
Things don't happen for the simplistic and filtered reasons that make it into the evening news...nor do they happen through conspiracy and Bildeberger type groups. No, things happen because of economic forces, pressures and consequences and powers that be react to these forces...sometimes wisely and with a long view but most invariably often stupidly and with the shortest and most idiotic of views rooted in human frailty and imprudence and self-interest unchecked by the free will of others in the socio-economic marketplace of the world.
Now we all know that most of our oil comes from not-so-free-will-driven places in the world....places like the Middle East, Venezuela and Russia to name a few. These corrupt and often despotic (like Saudi Arabia) or faintly token-democratic oligarchic (Russia or Venezuela) states depend on oil export profits to mask the incompatibilities with their regimes in a free-moving marketplace. The lollipops and crumbs they throw to their people come from their heaps of oil money. So what happens when that cash cow weakens? What happens when the facade becomes exposed? What happens the difficulties it poses raise tensions and cause anger and resentment? Interesting questions to ponder.
If a events unfold that lead to events that lead to events that eventually stoke tension and hostilities between national factions or neighboring countries, you can be certain that we are seeing the initial dominoes that chain of events being tipped over by dropping oil prices...and not some jumbled explanation that has nothing to do with these factors. Most importantly what will be our role...if any? These are unpleasant questions to hash out.
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Comments :
A propos...
I see Richard Rahn
is thinking a long the same lines that I am.
His focus is on Africa and places like the Congo and Sudan.
Good read.
Looks like an overcorrection to me
Not sure exactly why oil dropped so low (maybe demand fell due to a delayed reaction to high prices?) but just very roughly projecting forward the rising growth and ignoring the recent spike and fall suggests oil should be around $80/barrel.
Of course your main point holds but hopefully we won't get to serious instability soon. It would be nice if the volatility died down.
Come, my friends. 'Tis not too late to seek a newer world -- Tennyson
I also worry about an overcorrection
It's so hard to tell really.
We're not just dealing with simple supply and demand. Yes, that's the guiding principle to general rises and falls but the exact number has so many other variables built into it.
Of course, I would love it if the current prices were correct and perhaps even due to fall a bit more. But I think, without any real proof or serious data behind my opinion, that global demand has dropped while supplies have stabilized or look bullish. Whether the dropped demand is overrated or supply futures overrated remains to be seen.
Oil may keep the Westen World humming along but it's the lifeblood to the stabilitiy and treasure of the states of the nations it comes from. I fear conflict when the numbers start being reflected in the affairs of these state dictatorships.
How long can they last?
I expect that prices will shoot up again as soon as the industrial economy gets itself straightend out and continues the unquenchable demand for more energy.
So, the question is how long the petro-states can survive with prices around the current level. First, today's prices aren't that low. As I understand the market, Saudi Arabia will still be pulling in tons of money (low production costs) whereas Venezuela might feel the pinch. I don't know about Russia or Iran.
I think Saudi Arabia could probably last awhile--unless they have raised expectations so high that even their substantial revenues won't cover their costs.
Venezuela could be in trouble because Chavez was relying on oil to fund a lot of his programs. If they turn out to be self-sufficient now, then his system will have proven itself. If Chavez's system falls apart, I think they still have enough of a democracy to replace his regime.
I don't see Iran or Russia being too fragile internally...but their international influence will surely be weakened by reduced revenues.
In my expert opinion, you should do what I tell you to do.
Pirates!
Here is one specific example
of what can happen -- and is happening, in response to the Somali piracy:
All of this will of course be reflected in the price of goods we all pay. Or, should increased naval patrols be deemed to be the solution to this specific problem, it will be included in our currently outrageous levels of deficit spending.
This is, of course, all due to ...
our efforts to curb global warming.
As we know from a reliable scientific source
, the number of pirates is inversely correlated with the global temperature.
So the more we drive the global temperature down the more this type of thing will happen. This is just another example of the unforeseen economic impacts of global warming. :)
I'm the Bugs Bunny of Swords Crossed!
-4 Strongly Disagree - 0 Meh - Strongly Agree +4Craziness
absolute craziness.
I hope they figure something out.