Time For Some Crude Talk.

“Fight Against Stupidity And Bureaucracy”

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It’s not so long ago that I was getting bombarded with emails about how great an investment oil would be.

At that time the predictions by those in the ‘know’, who really know nothing, was that oil would hit $200 per barrel – maybe much, much more!

Well, they almost got the number correct, except that oil actually hit $20 per barrel, not $200. As these things go it was a pretty good guess!!!

So why has the oil price declined and, although it has recovered a bit, why are the predictions for today’s low prices to hold long term?

The simple layman’s answer of course is that the oil price has declined because supply is greater than demand. When there is a surplus of a commodity the price falls and when it is scarce the price rises.

The supply of oil has increased relative to demand for a number of reasons.

The most obvious one is the vast reserves of oil found and now being recovered in the massive shale-oil fields in the United States of America and the tar-sands in Canada that have added more than 5 million barrels per day to domestic oil production since 2008. Able to produce more at home, North America has been able to reduce its demand for imported oil.

The effect of this, of course, is that the OPEC countries have seen their annual revenues fall sharply during the same period. To try to rectify this fall in income, which they need to provide for their own citizens, they have been trying to replace lost revenue from North America by increasing production of their own oil supplies.

In other words, they have created even more over supply in the market, which helps to keep the oil price down.

Then there was the ISIS or ISIL terrorists in Iraq who had taken control of most of the oil fields and were dumping oil on the black market as fast as they could to help finance their war. Recently they’ve lost control of a lot of those oil fields so that part of the equation may no longer be in play to the same extent.

However, if there is a deal ever done with the Iranians and they are able to trade without restriction again, no doubt they will be adding their oil to the market glut which will also help to keep the market over-supplied and the price suppressed.

Then there is the increasing use of compressed natural gas or CNG. This is the natural gas that used to be burned off at the oil wells, but that is now collected, compressed into tanks and used to power vehicles and in drilling equipment, meaning less diesel is purchased.

Despite all these over-supply pressures, the thing that is keeping the oil price from collapsing completely is the continued demand from China. This is a good thing because a long-term collapse in the oil price, whilst it may make life a bit easier financially for many with decreased heating and fuel bills, also has detrimental secondary effects on some parts of the country where the oil industry provides a living for a great many people.

I haven’t had an email about investing in oil for a long time and I don’t expect them to start again soon. Now you know why.

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Whatever Happened To Right And Wrong?

 “Fight Against Stupidity And Bureaucracy”

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A bit of politics today.

The Iran deal – if there in fact is one, nobody seems certain – is causing a lot of angst within the Republican Party. Maybe they know the reason for their concern, but somehow I doubt it.

Don’t worry I’m not going to go into a big analysis of the deal, not yet anyway. As I said, no one is sure that anything has really been agreed.

But the details of the deal aside, what this and many other happenings over the past few years has clearly highlighted is that political parties – and not only in America – have become obsessed with the “if he’s fer it, I’m agin it” mentality.

The facts don’t count.

The reasons don’t matter.

The benefits are never logically weighed up.

Nor are the faults.

It is always just a knee-jerk reaction with no analysis whatsoever. You could write the headlines even before the event it is all so depressingly predictable.

And these pompous parties and politicians have the gall to call it ‘democracy’ and to try to foist it on other parts of the world that don’t want it and haven’t asked for it.

Somehow we have deteriorated to the point where a country full of politicians who don’t know what’s best for their own people, now think they know what is best for everyone else. Self-delusion, arrogance, call it what you like, there are many words that could be applied to describe it, none of them very complimentary.

An example is Republican Senator Tom Cotton, who has clearly learned nothing from what happened in Iraq and Afghanistan, because he now boasts that a U.S. military campaign against Iran’s nuclear facilities would only take “several days” of bombing.

Apparently in his head there would be no consequences. The Iranians will just sit back and take their medicine then wise up and never do it again.

On the other hand, of course, if Obama was against a deal with Iran I bet you Sen Cotton would be all for it.

That’s the real depth of his analysis, and there are (too) many others like him.

Whatever happened to right and wrong?

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