Friday, October 24, 2014
Something to Pay Attention to
Something very interesting has been developing around the globe the last couple of weeks. I have been watching it closely because depending on who is right or who is wrong we maybe setting ourselves up once again for a perfect economic storm of epic proportions.
The price of oil has been steadily dropping for weeks. Sure it goes down and then back up again but overall it has dropped some $20.00 or more per barrel in slightly over a month. Despite the fact that the lower gas prices are making more low information sheeple very happy this is not necessarily a good sign.
Basically I have read two schools of thought on the issue. The folks over at Zero hedge seem to be more of the opinion that Obummer, Kerry and company have made a deal with the Saudi's to lower the overall oil prices and put the economic squeeze on Russia. Ignoring the fact that it also puts current tight oil plays into the red since it is estimated those plays require a minimum of $85.00 a barrel oil just to break even.
The general theory is that Saudi Arabia and the US feel they have enough wealth to play this loss game for up to a few years which the Russian's do not. This move will severely cripple the Russian economy and may in fact lead to greater level of hostility between the US and Russia.
Another downside if this theory is correct is that while Saudi output is generally so intertwined with it's government it will not effect their short or long term production as it is all taken in stride but N. American tight oil plays become problematic. The US government can give em more tax breaks or whatever and no currently producing plays will close but if a loss goes on too long it will stop new wells from coming on line until the price goes up once again.
The second major theory I been seeing is that the Saudi's are doing it on their own in an attempt to kill off N. American tight oil production and send a message to Russia at the same time. If this theory is true than things may play out much like the first scenario except perhaps there won't be any increase in US Russian hostility. As with the first scenario however N. American tight oil plays take it in the shorts.
I am inclined to go along with the first scenario as ringing more true myself. Especially with Putin's recent rant against the US and Dollar hegemony.
How this effects us as Homesteaders/Preppers/Sustainers is that now maybe the time to seriously think about stocking up on some deep fuel storage. Treat it and hold it in reserve because the end result in either scenario is a quick snap back in prices to possibly much higher levels.
My guess is that regardless of the particulars of the end result we are nearing the edge of another step down soon and I suggest we plan accordingly.
Keep Prepping Everyone!!!!