Oil Price
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US shale won't be going anywhere. if the price goes so low that it becomes uneconomic to produce they will just stop pumping until the price rises then start selling again. every country does the same. every well the world over has its own brake even point and companies will just close the well until the price recovers.
Last edited by highflyer40; 16th Dec 2014 at 20:57.
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For those who think the Russian economy is in good shape.
Courtesy of The Telegraph.
Russia has lost control of its economy and may be forced to impose Soviet-style exchange controls after "shock and awe" action by the central bank failed to stem the collapse of the rouble. “The situation is critical,” said the central bank’s vice-chairman, Sergei Shvetsov. “What is happening is a nightmare that we could not even have imagined a year ago."
The currency crashed to 100 against the euro in the biggest one-day drop since the default crisis in 1998 as capital flight gathered pace, despite a drastic rise in interest rates to 17pc intended to crush speculators and show resolve. Yields on two-year Russian bonds spiralled to 15.36pc, while credit default swaps are pricing in a one-third chance of a sovereign default. The shares of Russia’s biggest lender, Sberbank, fell 18pc.
Neil Shearing, from Capital Economics, said the spectacular failure of the rate shock may bring matters to a head. “If a rise of 650 basis points won’t do the job, we are near the end. That means stringent capital controls,” he said. Michal Dybula, from BNP Paribas, said the rouble's plunge risks setting off a systemic bank run. “A large-scale run on deposits, once under way, would make capital controls pretty much unavoidable,” he said, adding that the authorities may start by forcing state-controlled companies to sell foreign assets and repatriate funds.
In Washington, the White House said it had no intention of easing pressure on Russia to halt the freefall. "It is president Vladimir Putin's decision to make. The aim is to sharpen the choice that he faces," it said. President Barack Obama will not veto a law passed by Congress imposing a raft of new sanctions against Russia, even though he warned previously that it goes too far for European leaders and risks splitting the trans-Atlantic front. The measures include $350m of military assistance to Ukraine, and authorize Mr Obama to impose curbs on energy companies investing in Russia, as well as to prohibit credit to Gazprom.
Sergei Lavrov, Russia's foreign minister, said it is now clear that the US aim is to topple Mr Putin through "regime change" but vowed that the Russian people would rise in defiance. “We have been in much worse situations in our history, and every time we have got out of our fix much stronger,” he said.
After years of bluster and suggestions by Mr Putin that the US is a paper tiger, the Kremlin is now coming face to face with the cataclysmic consequences of what it has done by invading Ukraine and changing Europe's borders by force. By the same token, Washington needs to move with care since it would be a geostrategic miscalculation of the first order to push a nuclear-armed Russia too far into a corner, or to perpetuatue a cycle of grievance.
Anthony Peters, from SwissInvest, said Russia's leaders had misled their own people and have until now been in denial about the crisis engulfing them. "Not since Soviet times have we seen such steadfast refusal by the Kremlin to acknowledge the presence of severe political and economic problems while sacrificing the people in the name of orthodoxy. The Russian people are legendarily stoic in the face of hardships but beware if, and when, their patience runs out,” he said.
The rouble crash has doubled the cost of servicing nearly $700bn of external debt owed by Russian banks, companies and state bodies, mostly in dollars. They must repay $30bn this month and a further $100bn next year. Oil giant Rosneft has requested $49bn of state aid to weather the crisis. Traders in Moscow expressed fury at the central bank’s refusal to deploy its $416bn of foreign reserves to “turbo-charge” the defence of the rouble, though the authorities may have intervened in late trading. The currency clawed back some ground - to 69 against the dollar - after one of the wildest days of the modern era. Eugene Kogan, from Moscow Partners, said the Russian stock market faces “slow death” over the next six months as liquidity vanishes.
It is clear that the authorities are guarding their reserves jealously after burning through $100bn this year to little avail. BNP’s Tatiana Tchembarova said what remains no longer covers external debt, unlike 2008 when there was still ample cover. “In addition to being twice as levered, Russia is entering this crisis with lower reserves,” she said. The government has already committed $143bn in foreign reserve spending for next year. “We think that more will be required to support Russia’s banking system,” she said. The Kremlin had to spend $170bn rescuing the banks in the 2008-2009 crisis.
Lubomir Mitov, from the Institute of International Finance, said any fall in reserves below $330bn could prove dangerous, given the scale of foreign debt and a confluence of pressures. “It is a perfect storm. Each $10 fall in the price of oil reduces export revenues by some 2pc of GDP. A decline of this magnitude could shift the current account to a 3.5pc deficit,” he said. The total “financing gap” could soon reach 10pc of GDP due to the combined effects of capital flight and sanctions.
The central bank knows that Russia’s seemingly large reserves are a Maginot Line. Yet its attempt to defend the rouble only by raising rates is itself lethal. Even before the latest move it warned that the economy could contract by 4.7pc next year in a scenario of $60 oil prices.
The slump may now be far worse as a violent monetary squeeze sends tremors through the banking system and sets off a wave of corporate bankruptcies. BNP Paribas said each 100-basis point rise in rates cuts 0.8pc off GDP a year later. Rates have risen 750 points in a week.
Lars Christensen, from Danske Bank, said the Kremlin’s actions have led to the “absolutely worst possible outcome” since the botched move is enough to do grave damage, without solving anything. “They should have let the currency go rather than killing the economy. Investment is in freefall, and I fear this shock is going to be even bigger than in 2008-2009. Nothing suggests that oil is going to rebound quickly this time,” he said. Growth has held up over recent months but this may be an illusion of the crisis itself as people scramble to rid themselves of roubles to buy homes, cars, washing machines or anything that keeps its value. Ikea has seen a surge of orders for new kitchens. This is a one-off effect, and creates a cliff-edge from the economy next year.
The rouble trauma came as premier Dmitry Medvedev held an emergency meeting with economic planners, and rumours swirled of a sweeping purge at the top of Kremlin. Officials denied there were any plans for capital controls after the meeting.
There is no sign yet of relief from the oil markets. Brent crude fell below $59 a barrel on Tuesday for the first time since the depths of the Great Recession in 2009. The fallout from the crisis is already hitting banks linked to Russia and Ukraine. The share price of Austria’s Raiffeisen fell 8pc in Vienna. More than 240pc of its tangible equity is exposed to the region. The biggest external lender is France’s Societe Generale, with €25bn of exposure, or 62pc of tangible equity.
Contagion is spreading across the emerging market nexus, hitting countries such as Turkey and India that should be beneficiaries of lower oil prices. “There is absolutely no liquidity anywhere. The system is stressed and we have a crunch all over the place,” said one hedge fund trader.
There are signs that the sell-off is becoming self-feeding as investors withdraw money from emerging market bond funds, forcing the funds to liquidate holdings into the downturn. In some cases managers are acting tactically, selling “proxies” such as Turkish debt given the difficulty of exiting Russian positions.
The rouble has now fallen 56pc against the dollar over the past year. Russian GDP has shrunk to $1.1 trillion, smaller than the economy of Texas, and half the size of Italy’s. The effect has been to double Russia’s external debt to at least 70pc of GDP, a high-risk level for rating agencies.
“A Russian downgrade to junk is only a matter or time,” said Tim Ash, from Standard Bank.
Courtesy of The Telegraph.
Russia has lost control of its economy and may be forced to impose Soviet-style exchange controls after "shock and awe" action by the central bank failed to stem the collapse of the rouble. “The situation is critical,” said the central bank’s vice-chairman, Sergei Shvetsov. “What is happening is a nightmare that we could not even have imagined a year ago."
The currency crashed to 100 against the euro in the biggest one-day drop since the default crisis in 1998 as capital flight gathered pace, despite a drastic rise in interest rates to 17pc intended to crush speculators and show resolve. Yields on two-year Russian bonds spiralled to 15.36pc, while credit default swaps are pricing in a one-third chance of a sovereign default. The shares of Russia’s biggest lender, Sberbank, fell 18pc.
Neil Shearing, from Capital Economics, said the spectacular failure of the rate shock may bring matters to a head. “If a rise of 650 basis points won’t do the job, we are near the end. That means stringent capital controls,” he said. Michal Dybula, from BNP Paribas, said the rouble's plunge risks setting off a systemic bank run. “A large-scale run on deposits, once under way, would make capital controls pretty much unavoidable,” he said, adding that the authorities may start by forcing state-controlled companies to sell foreign assets and repatriate funds.
In Washington, the White House said it had no intention of easing pressure on Russia to halt the freefall. "It is president Vladimir Putin's decision to make. The aim is to sharpen the choice that he faces," it said. President Barack Obama will not veto a law passed by Congress imposing a raft of new sanctions against Russia, even though he warned previously that it goes too far for European leaders and risks splitting the trans-Atlantic front. The measures include $350m of military assistance to Ukraine, and authorize Mr Obama to impose curbs on energy companies investing in Russia, as well as to prohibit credit to Gazprom.
Sergei Lavrov, Russia's foreign minister, said it is now clear that the US aim is to topple Mr Putin through "regime change" but vowed that the Russian people would rise in defiance. “We have been in much worse situations in our history, and every time we have got out of our fix much stronger,” he said.
After years of bluster and suggestions by Mr Putin that the US is a paper tiger, the Kremlin is now coming face to face with the cataclysmic consequences of what it has done by invading Ukraine and changing Europe's borders by force. By the same token, Washington needs to move with care since it would be a geostrategic miscalculation of the first order to push a nuclear-armed Russia too far into a corner, or to perpetuatue a cycle of grievance.
Anthony Peters, from SwissInvest, said Russia's leaders had misled their own people and have until now been in denial about the crisis engulfing them. "Not since Soviet times have we seen such steadfast refusal by the Kremlin to acknowledge the presence of severe political and economic problems while sacrificing the people in the name of orthodoxy. The Russian people are legendarily stoic in the face of hardships but beware if, and when, their patience runs out,” he said.
The rouble crash has doubled the cost of servicing nearly $700bn of external debt owed by Russian banks, companies and state bodies, mostly in dollars. They must repay $30bn this month and a further $100bn next year. Oil giant Rosneft has requested $49bn of state aid to weather the crisis. Traders in Moscow expressed fury at the central bank’s refusal to deploy its $416bn of foreign reserves to “turbo-charge” the defence of the rouble, though the authorities may have intervened in late trading. The currency clawed back some ground - to 69 against the dollar - after one of the wildest days of the modern era. Eugene Kogan, from Moscow Partners, said the Russian stock market faces “slow death” over the next six months as liquidity vanishes.
It is clear that the authorities are guarding their reserves jealously after burning through $100bn this year to little avail. BNP’s Tatiana Tchembarova said what remains no longer covers external debt, unlike 2008 when there was still ample cover. “In addition to being twice as levered, Russia is entering this crisis with lower reserves,” she said. The government has already committed $143bn in foreign reserve spending for next year. “We think that more will be required to support Russia’s banking system,” she said. The Kremlin had to spend $170bn rescuing the banks in the 2008-2009 crisis.
Lubomir Mitov, from the Institute of International Finance, said any fall in reserves below $330bn could prove dangerous, given the scale of foreign debt and a confluence of pressures. “It is a perfect storm. Each $10 fall in the price of oil reduces export revenues by some 2pc of GDP. A decline of this magnitude could shift the current account to a 3.5pc deficit,” he said. The total “financing gap” could soon reach 10pc of GDP due to the combined effects of capital flight and sanctions.
The central bank knows that Russia’s seemingly large reserves are a Maginot Line. Yet its attempt to defend the rouble only by raising rates is itself lethal. Even before the latest move it warned that the economy could contract by 4.7pc next year in a scenario of $60 oil prices.
The slump may now be far worse as a violent monetary squeeze sends tremors through the banking system and sets off a wave of corporate bankruptcies. BNP Paribas said each 100-basis point rise in rates cuts 0.8pc off GDP a year later. Rates have risen 750 points in a week.
Lars Christensen, from Danske Bank, said the Kremlin’s actions have led to the “absolutely worst possible outcome” since the botched move is enough to do grave damage, without solving anything. “They should have let the currency go rather than killing the economy. Investment is in freefall, and I fear this shock is going to be even bigger than in 2008-2009. Nothing suggests that oil is going to rebound quickly this time,” he said. Growth has held up over recent months but this may be an illusion of the crisis itself as people scramble to rid themselves of roubles to buy homes, cars, washing machines or anything that keeps its value. Ikea has seen a surge of orders for new kitchens. This is a one-off effect, and creates a cliff-edge from the economy next year.
The rouble trauma came as premier Dmitry Medvedev held an emergency meeting with economic planners, and rumours swirled of a sweeping purge at the top of Kremlin. Officials denied there were any plans for capital controls after the meeting.
There is no sign yet of relief from the oil markets. Brent crude fell below $59 a barrel on Tuesday for the first time since the depths of the Great Recession in 2009. The fallout from the crisis is already hitting banks linked to Russia and Ukraine. The share price of Austria’s Raiffeisen fell 8pc in Vienna. More than 240pc of its tangible equity is exposed to the region. The biggest external lender is France’s Societe Generale, with €25bn of exposure, or 62pc of tangible equity.
Contagion is spreading across the emerging market nexus, hitting countries such as Turkey and India that should be beneficiaries of lower oil prices. “There is absolutely no liquidity anywhere. The system is stressed and we have a crunch all over the place,” said one hedge fund trader.
There are signs that the sell-off is becoming self-feeding as investors withdraw money from emerging market bond funds, forcing the funds to liquidate holdings into the downturn. In some cases managers are acting tactically, selling “proxies” such as Turkish debt given the difficulty of exiting Russian positions.
The rouble has now fallen 56pc against the dollar over the past year. Russian GDP has shrunk to $1.1 trillion, smaller than the economy of Texas, and half the size of Italy’s. The effect has been to double Russia’s external debt to at least 70pc of GDP, a high-risk level for rating agencies.
“A Russian downgrade to junk is only a matter or time,” said Tim Ash, from Standard Bank.
Man Bilong Balus long PNG
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But how good is it to be able to fill up my 25 year old Toyota Corolla with E10 at $1-19 per litre? I haven't done that for a rather long while...
What happened to the Celica? And the Supra?
You can absolutely bet that within a very feW short weeks the price will come back with a vengeance. ANYBODY WHO THINKS THIS IS GOING TO LAST IS DREAMING. 
Last edited by Arnold E; 20th Dec 2014 at 11:11.
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Well we haven't seen any change in the jet or avgas fuel prices at the pump.
These prices are set at the end of month and stand fixed for the coming month. Ie 4 weeks. It may be different for the majors who have a rise and fall clause in the fuel supply contract.
So if the oil price is still down at say 30 December then the fuel price for January will be set on that figure.
Theoretically the industry should at least get 4 weeks of lower fuel prices through Jan. Time will tell.
These prices are set at the end of month and stand fixed for the coming month. Ie 4 weeks. It may be different for the majors who have a rise and fall clause in the fuel supply contract.
So if the oil price is still down at say 30 December then the fuel price for January will be set on that figure.
Theoretically the industry should at least get 4 weeks of lower fuel prices through Jan. Time will tell.
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Bankster Propaganda
porch monkey
Why thank you for recognizing my ability to see the future Porch Monkey, maybe finally people are starting to wake up?
PLovett
You have posted this article in support of your arguments without conducting any critical examination of its sources or the purported facts that are contained within it. Like most bankster propaganda it contains a mix of lies, some truths, and is sprinkled with some quotes from credible sources that were never originally associated with this particular article but are general responses at press conferences or similar that have been cut and pasted in. The article is designed to create a false mass reality within its target audience, and its tone is shrill with a hint of desperation. Its the kind of article that a competent and moral first year cadet journalist would see straight through.
The gullibility of the Judaeo Christian proletariat never ceases to amaze me and it is why they have been slaves for millennia and will continue to be so.
Let us consider the primary source of the article The Telegraph, a well known outlet for bankster propaganda and social engineering. Like any other major western media outlet it parrots the entrenched lies, trying to convince the masses that the middle class being on dependant on welfare is normal and that both partners working while the kids are at the child care factory being desensitized is desirable.
The article is in trouble from the very first line,
Who says the Russians have lost control of the economy? A second rate journo from the Telegraph? Certainly not Sergei Shvetsov, no doubt under enormous pressure and who's words reflect the gravity of the threats of an enemy addicted to the speed of printed money with a history of violence against any state or individual that opposes it. He does not say that the state has lost control, as implied by the preceding sentence.
Now let us consider the secondary sources within the story and the common trait they share, that is they are all dependant on the purveyance of printed money. They all make a living from usury, money printing, leverage and predatory lending. They will not hesitate to parrot the lies of the status quo, and are hand picked for the task. Remember these are the people who didn't see the GFC coming, well publicly anyway.
Who are these non de-script spokespeople anyway,
Neil Shearing, from Capital Economics.
Michal Dybula, from BNP Paribas,
Anthony Peters, from SwissInvest
Eugene Kogan, from Moscow Partners,
BNP’s Tatiana Tchembarova
Lubomir Mitov, from the Institute of International Finance
Lars Christensen, from Danske Bank
“A Russian downgrade to junk is only a matter or time,” said Tim Ash, from Standard Bank.
All of them make their living from money lending.
Last time I looked that was a problem that was afflicting western economies and was controlled only by turning off the ATM's and peoples bank accounts were being robbed by subservient governments who simply confiscated a percentage, effectively a transfer of private debt to the taxpayer.
No liquidity? The US$ and its subsidiaries are the currency's that have a history of liquidity problems, only solved by the confidence trick of printing money and misuse of state power by confiscating or removing access to savings. Stay tuned for massive liquidity problems throughout the west.
What Invasion? What border change? The only place within Ukraine that the Russian Army has a presence is a long term leasehold which includes Sevastopol which is leased by Russia from Ukraine as part of a standing military agreement. Russia will fight a war over the deep water port of Sevastopol.
Refer to my earlier posts regarding Russian History that you dismissed as irrelevant PLovett. Russia has threatened the petrodollar making it a target for regime change.
Indeed! America has reached the point of delusional overreach and everyone around them is frightened by the possibility of a nuclear war. This in itself is a major cause for the drop in oil price as instability lessens demand. The drop in demand is also being fed by the fact that the western economies are stone motherless broke after paying for a succession of failed American wars, primarily in the Middle East. OPEC is also sinking the boot in by increasing supply as revenge for support of Israel. Russia is not some third world Arab country with a rag tag army, it is a long established European Power.
Possible, improbable and pure wishful thinking by those sponsored to agitate against Russia.
Really? The Russian economy has shrunk by half from 2.1 trillion to 1.1 trillion. Consider the practical reality of trying to shrink an economy on this scale in such a short period? Given the chaos and the fact the Russians themselves wouldn't be entirely sure what is going on I call bull**** on 90% of the figures in the article. Texas is also finding its economy in trouble as what little recovery and jobs growth that was occurring there was funded by shale oil.
Forget about the banksters dropping interest rates to stop deleveraging and therefore currency collapse and start thinking about the US dollar being routed by falling oil prices. At the very least the consequences of all this instability will be a deep economic downturn. The Great Recession is a really cute term very PC.
As always plenty of US$ money for war, but no money for the poor in America who were swindled by predatory lending and lost their homes.
IT IS THE US WHO IS SAILING INTO THE PERFECT STORM AS THE REST OF THE WORLD TAKES STEPS TO ELIMINATE THE AMERICAN THREAT TO EVERY NATIONS SOVEREIGNTY
How will all these major factors involving Russia affect the oil price, the question raised by the OP?
Enjoy the low prices while you can because the long term trend will be upward, driven by increased tension over access to energy. In terms of AVGAS, which is a low volume boutique fuel, there will be very little downward movement, if any.
It's all US bull****. The oracle said so.
PLovett
You have posted this article in support of your arguments without conducting any critical examination of its sources or the purported facts that are contained within it. Like most bankster propaganda it contains a mix of lies, some truths, and is sprinkled with some quotes from credible sources that were never originally associated with this particular article but are general responses at press conferences or similar that have been cut and pasted in. The article is designed to create a false mass reality within its target audience, and its tone is shrill with a hint of desperation. Its the kind of article that a competent and moral first year cadet journalist would see straight through.
The gullibility of the Judaeo Christian proletariat never ceases to amaze me and it is why they have been slaves for millennia and will continue to be so.
Let us consider the primary source of the article The Telegraph, a well known outlet for bankster propaganda and social engineering. Like any other major western media outlet it parrots the entrenched lies, trying to convince the masses that the middle class being on dependant on welfare is normal and that both partners working while the kids are at the child care factory being desensitized is desirable.
The article is in trouble from the very first line,
Russia has lost control of its economy and may be forced to impose Soviet-style exchange controls after "shock and awe" action by the central bank failed to stem the collapse of the rouble.
Now let us consider the secondary sources within the story and the common trait they share, that is they are all dependant on the purveyance of printed money. They all make a living from usury, money printing, leverage and predatory lending. They will not hesitate to parrot the lies of the status quo, and are hand picked for the task. Remember these are the people who didn't see the GFC coming, well publicly anyway.
Who are these non de-script spokespeople anyway,
Neil Shearing, from Capital Economics.
Michal Dybula, from BNP Paribas,
Anthony Peters, from SwissInvest
Eugene Kogan, from Moscow Partners,
BNP’s Tatiana Tchembarova
Lubomir Mitov, from the Institute of International Finance
Lars Christensen, from Danske Bank
“A Russian downgrade to junk is only a matter or time,” said Tim Ash, from Standard Bank.
All of them make their living from money lending.
Michal Dybula, from BNP Paribas, said the rouble's plunge risks setting off a systemic bank run. “A large-scale run on deposits, once under way, would make capital controls pretty much unavoidable,”
Contagion is spreading across the emerging market nexus, hitting countries such as Turkey and India that should be beneficiaries of lower oil prices. “There is absolutely no liquidity anywhere. The system is stressed and we have a crunch all over the place,” said one hedge fund trader
After years of bluster and suggestions by Mr Putin that the US is a paper tiger, the Kremlin is now coming face to face with the cataclysmic consequences of what it has done by invading Ukraine and changing Europe's borders by force.
Sergei Lavrov, Russia's foreign minister, said it is now clear that the US aim is to topple Mr Putin through "regime change" but vowed that the Russian people would rise in defiance. “We have been in much worse situations in our history, and every time we have got out of our fix much stronger,” he said.
By the same token, Washington needs to move with care since it would be a geostrategic miscalculation of the first order to push a nuclear-armed Russia too far into a corner,
Dmitry Medvedev held an emergency meeting with economic planners, and rumours swirled of a sweeping purge at the top of Kremlin
Russian GDP has shrunk to $1.1 trillion, smaller than the economy of Texas, and half the size of Italy’s
Brent crude fell below $59 a barrel on Tuesday for the first time since the depths of the Great Recession in 2009.
The measures include $350m of military assistance to Ukraine
IT IS THE US WHO IS SAILING INTO THE PERFECT STORM AS THE REST OF THE WORLD TAKES STEPS TO ELIMINATE THE AMERICAN THREAT TO EVERY NATIONS SOVEREIGNTY
How will all these major factors involving Russia affect the oil price, the question raised by the OP?
Enjoy the low prices while you can because the long term trend will be upward, driven by increased tension over access to energy. In terms of AVGAS, which is a low volume boutique fuel, there will be very little downward movement, if any.
Last edited by Oracle1; 21st Dec 2014 at 16:46.
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The Effect of Oil Prices on the US
I had the pleasure recently of having lunch with longtime Maine fishing buddy Harvey Rosenblum, the long-serving but recently retired chief economist of the Dallas Federal Reserve. Like me, he has lived through multiple oil cycles here in Texas. He really understands the impact of oil on the Texas and U.S. economies. He pointed me to two important sources of data.
The first is a research report published earlier this year by the Manhattan Institute, titled “The Power and Growth Initiative Report.” Let me highlight a few of the key findings:
1. In recent years, America’s oil and gas boom has added $300–$400 billion annually to the economy – without this contribution, GDP growth would have been negative and the nation would have continued to be in recession.
2. America’s hydrocarbon revolution and its associated job creation are almost entirely the result of drilling and production by more than 20,000 small and midsize businesses, not a handful of “Big Oil” companies. In fact, the typical firm in the oil and gas industry employs fewer than 15 people. [We typically don’t think of the oil business as the place where small businesses are created, but for those of us who have been around the oil patch, we all know that it is. That tendency is becoming even more pronounced as the drilling process becomes more complicated and the need for specialists keeps rising. – John]
3. The shale oil and gas revolution has been the nation’s biggest single creator of solid, middle-class jobs – throughout the economy, from construction to services to information technology.
4. Overall, nearly 1 million Americans work directly in the oil and gas industry, and a total of 10 million jobs are associated with that industry.
Oil and gas jobs are widely geographically dispersed and have already had a significant impact in more than a dozen states: 16 states have more than 150,000 jobs directly in the oil and gas sector and hundreds of thousands more jobs due to growth in that sector.
Author Mark Mills highlighted the importance of oil in employment growth:
The important takeaway is that, without new energy production, post-recession U.S. growth would have looked more like Europe’s – tepid, to say the least. Job growth would have barely budged over the last five years.
Further, it is not just a Texas and North Dakota play. The benefits have been widespread throughout the country. “For every person working directly in the oil and gas ecosystem, three are employed in related businesses,” says the report. (I should note that the Manhattan Institute is a conservative think tank, so the report is pro-energy production; but for our purposes, the important thing is the impact of energy production on recent U.S. economic growth.)
The next chart Harvey directed me to was one that’s on the Dallas Federal Reserve website, and it’s fascinating. It shows total payroll employment in each of the 12 Federal Reserve districts. No surprise. Texas (the Dallas Fed district) shows the largest growth (there are around 1.8 million oil-related jobs in Texas, according to the Manhattan Institute). Next largest is the Minneapolis Fed district, which includes North Dakota and the Bakken oil play. Note in the chart below that four districts have not gotten back to where they were in 2007, and another four have seen very little growth even after eight years. “It is no wonder,” said Harvey, “that so many people feel like we’re still in a recession; for where they live, it still is.”
To get the total picture, let’s go to the St. Louis Federal Reserve FRED database and look at the same employment numbers – but for the whole country. Notice that we’re up fewer than two million jobs since the beginning of the Great Recession. That’s a growth of fewer than two million jobs in eight years when the population was growing at multiples of that amount.
To put an exclamation point on that, Zero Hedge offers this thought:
Houston, we have a problem. With a third of S&P 500 capital expenditure due from the imploding energy sector (and with over 20% of the high-yield market dominated by these names), paying attention to any inflection point in the U.S. oil producers is critical as they have been gung-ho “unequivocally good” expanders even as oil prices began to fall. So, when Reuters reports a drop of almost 40 percent in new well permits issued across the United States in November, even the Fed's Stan Fischer might start to question [whether] his [belief that] lower oil prices are "a phenomenon that’s making everybody better off" may warrant a rethink.
Consider: lower oil prices unequivocally “make everyone better off.” Right? Wrong. First: new oil well permits collapse 40% in November; why is this an issue? Because since December 2007, or roughly the start of the global depression, shale oil states have added 1.36 million jobs while non-shale states have lost 424,000 jobs.
continue reading: Oil, Employment, and Growth | Thoughts from the Frontline Investment Newsletter | Mauldin Economics
The first is a research report published earlier this year by the Manhattan Institute, titled “The Power and Growth Initiative Report.” Let me highlight a few of the key findings:
1. In recent years, America’s oil and gas boom has added $300–$400 billion annually to the economy – without this contribution, GDP growth would have been negative and the nation would have continued to be in recession.
2. America’s hydrocarbon revolution and its associated job creation are almost entirely the result of drilling and production by more than 20,000 small and midsize businesses, not a handful of “Big Oil” companies. In fact, the typical firm in the oil and gas industry employs fewer than 15 people. [We typically don’t think of the oil business as the place where small businesses are created, but for those of us who have been around the oil patch, we all know that it is. That tendency is becoming even more pronounced as the drilling process becomes more complicated and the need for specialists keeps rising. – John]
3. The shale oil and gas revolution has been the nation’s biggest single creator of solid, middle-class jobs – throughout the economy, from construction to services to information technology.
4. Overall, nearly 1 million Americans work directly in the oil and gas industry, and a total of 10 million jobs are associated with that industry.
Oil and gas jobs are widely geographically dispersed and have already had a significant impact in more than a dozen states: 16 states have more than 150,000 jobs directly in the oil and gas sector and hundreds of thousands more jobs due to growth in that sector.
Author Mark Mills highlighted the importance of oil in employment growth:
The important takeaway is that, without new energy production, post-recession U.S. growth would have looked more like Europe’s – tepid, to say the least. Job growth would have barely budged over the last five years.
Further, it is not just a Texas and North Dakota play. The benefits have been widespread throughout the country. “For every person working directly in the oil and gas ecosystem, three are employed in related businesses,” says the report. (I should note that the Manhattan Institute is a conservative think tank, so the report is pro-energy production; but for our purposes, the important thing is the impact of energy production on recent U.S. economic growth.)
The next chart Harvey directed me to was one that’s on the Dallas Federal Reserve website, and it’s fascinating. It shows total payroll employment in each of the 12 Federal Reserve districts. No surprise. Texas (the Dallas Fed district) shows the largest growth (there are around 1.8 million oil-related jobs in Texas, according to the Manhattan Institute). Next largest is the Minneapolis Fed district, which includes North Dakota and the Bakken oil play. Note in the chart below that four districts have not gotten back to where they were in 2007, and another four have seen very little growth even after eight years. “It is no wonder,” said Harvey, “that so many people feel like we’re still in a recession; for where they live, it still is.”
To get the total picture, let’s go to the St. Louis Federal Reserve FRED database and look at the same employment numbers – but for the whole country. Notice that we’re up fewer than two million jobs since the beginning of the Great Recession. That’s a growth of fewer than two million jobs in eight years when the population was growing at multiples of that amount.
To put an exclamation point on that, Zero Hedge offers this thought:
Houston, we have a problem. With a third of S&P 500 capital expenditure due from the imploding energy sector (and with over 20% of the high-yield market dominated by these names), paying attention to any inflection point in the U.S. oil producers is critical as they have been gung-ho “unequivocally good” expanders even as oil prices began to fall. So, when Reuters reports a drop of almost 40 percent in new well permits issued across the United States in November, even the Fed's Stan Fischer might start to question [whether] his [belief that] lower oil prices are "a phenomenon that’s making everybody better off" may warrant a rethink.
Consider: lower oil prices unequivocally “make everyone better off.” Right? Wrong. First: new oil well permits collapse 40% in November; why is this an issue? Because since December 2007, or roughly the start of the global depression, shale oil states have added 1.36 million jobs while non-shale states have lost 424,000 jobs.
continue reading: Oil, Employment, and Growth | Thoughts from the Frontline Investment Newsletter | Mauldin Economics
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How the US is rigging Markets
Rigging the Market
by PAUL CRAIG ROBERTS
A dangerous new trend is the successful manipulation of the financial markets by the Federal Reserve, other central banks, private banks, and the US Treasury. The Federal Reserve reduced real interest rates on US government debt obligations first to zero and then pushed real interest rates into negative territory. Today the government charges you for the privilege of purchasing its bonds.
People pay to park their money in the Treasury debt obligations, because they do not trust the banks and they know that the government can print the money to pay off the bonds. Today Treasury bond investors pay a fee in order to guarantee that they will receive the nominal face value of their investment in government bonds.
Think about this for a minute. Allegedly the US is experiencing economic recovery. Normally with rising economic activity interest rates rise as consumers and investors bid for credit. But not in this “recovery.”
Normally an economic recovery produces rising consumer spending, rising profits, and more investment. But what we experience is flat and declining consumer spending as jobs are offshored and retail stores close. Profits result from labor cost savings from employee layoffs.
The stock market is high because corporations are the biggest purchases of stock. Buying back their own stock supports or raises the share price, enabling executives and boards to sell their shares or cash in their options at a profitable price. The cash that Quantitative Easing has given to the mega-banks leaves ample room for speculating in stocks, thus pushing up the price despite the absence of fundamentals that would support a rising stock market.
In other words, in America today there are no free financial markets. The markets are rigged by the Federal Reserve’s Quantitative Easing, by gold price manipulation, by the Treasury’s Plunge Protection Team and Exchange Stabilization Fund, and by the big private banks.
Allegedly, QE is over, but it is not. The Fed intends to roll over the interest and principle from its bloated $4.5 trillion bond portfolio into purchases of more bonds, and the banks intend to fill in the gaps by using the $2.6 trillion in their cash on deposit with the Fed to purchase bonds. QE has morphed, not ended. The money the Fed paid the banks for bonds will now be used by the banks to support the bond price by purchasing bonds.
Normally when massive amounts of debt and money are created the currency collapses, but the dollar has been strengthening. The dollar gains strength from the
rigging of the gold price in the futures market. The Federal Reserve’s agents, the bullion banks, print paper futures contracts representing many tonnes of gold and dump them them into the market during periods of light or nonexistent trading. This drives down the gold price despite rising demand for the physical metal. This manipulation is done in order to counteract the effect of the expansion of money and debt on the dollar’s exchange value. A declining dollar price of gold makes the dollar look strong.
The dollar also gains the appearance of strength from debt monetization by the Bank of Japan and the European Central Bank. The Bank of Japan’s Quantitative Easing program is even larger than the Fed’s. Even Switzerland is rigging the price of the Swiss franc. Since all currencies are inflating, the dollar does not decline in exchange value.
As Japan is Washington’s vassal, it is conceivable that some of the money being printed by the Bank of Japan will be used to purchase US Treasuries, thus taking the place along with purchases by the large US banks of the Fed’s QE.
The large private US and UK banks are also manipulating markets hand over fist. Remember the scandal over the banks fixing the LIBOR rate (the London Interbank Borrowing Rate) and the opening gold price on the London exchange. Now the banks have been caught rigging currency markets with algorithms developed to manipulate foreign exchange markets.
When the banks get caught in felonies, they avoid prosecution by paying a fine. You try doing that.
The government even manipulates economic statistics in order to paint a rosy economic picture that sustains economic howeconconfidence. GDP growth is exaggerated by understating inflation. High unemployment is swept under the table by not counting discouraged workers as unemployed. We are told we are enjoying economic recovery and have an improving housing market. Yet the facts are that almost half of 25 year old Americans have been forced to return to live with their parents, and 30% of 30 year olds are back with their parents. Since 2006 the home ownership rate of 30 year old Americans has collapsed.
The repeal of the Glass-Steagall Act during the Clinton regime allowed the big banks to gamble with their depositors’ money. The Dodd-Frank Act tried to stop some of this by requiring the banks-turned-gambling-casinos to carry on their gambling in subsidiaries with no access to deposits in the depository institution. If the banks gamble with depositors money, the banks’ losses are covered by FDIC, and in the case of bank failure, bail-in provisions could give the banks access to depositors’ funds. With the banks still protected by being “too big to fail,” whether Dodd-Frank would succeed in protecting depositors when a subsidiary’s failure pulls down the entire bank is unclear.
The sharp practices in which banks engage today are risky. Why gamble with their own money if they can gamble with depositors’ money. The banks led by Citigroup have lobbied hard to overturn the provision in Dodd-Frank that puts depositors’ money out of their reach as backup for certain types of troubled financial instruments, with apparently only Senator Elizabeth Warren and a few others opposing them. Senator Warren is outgunned as Citigroup controls the US Treasury and the Federal Reserve.
The falling oil price has brought concern that oil derivatives are in jeopardy. Citigroup has a provision in the omnibus appropriations bill that shifts the liability for Citigroup’s credit default swaps to depositors and taxpayers. It was only six years ago that Citigroup was bailed out to the tune of a half trillion dollars. Already Citigroup is back for more while nothing whatsoever is done to bail the American people out of their hardships caused by Citigroup and the other financial gangsters.
What we are experiencing is not a repeat of the past. The ability or, rather, the audacity of the US government itself to manipulate the major financial markets is new. Can this new trend continue? The government is supposed to be the enforcer of laws against market manipulation but is itself manipulating the markets.
Governments and economists take their hats off to free markets. Yet, the markets are rigged, not free. How long can stocks stay up in a lackluster or declining economy? How long can bonds pay negative real interest rates when debt and money are rising. How long can bullion prices be manipulated down when the world’s demand for gold exceeds the annual production?
For as long as governments and banks can rig the markets.
The manipulations are dangerous. Manipulations blow a bigger bubble economy, and manipulations are now being used by Washington as an act of war by driving down the exchange value of the Russian ruble.
If every time the stock market tries to correct and adjust to the real economic situation, the plunge protection team or some government “stabilization” entity stops the correction by purchasing S&P futures, unrealistic values are perpetuated.
The price of gold is not determined in the physical market but in the futures market where contracts are settled in cash. If every time the demand for gold pushes up the price, the Federal Reserve or its bullion bank agents dump massive amounts of uncovered futures contracts in the futures market and drive down the price of gold,
the result is to subsidize the gold purchases of Russia, China, and India. The artificially low gold price also artificially inflates the value of the US dollar.
The Federal Reserve’s manipulation of the bond market has driven bond prices so high that purchasers receive a zero or negative return on their investment. At the present time fear of the safety of bank deposits makes people willing to pay a fee in order to have the protection of the government’s ability to print money in order to redeem its bonds. A number of events could end the tolerance of zero or negative real interest rates. The Federal Reserve’s policy has the bond market positioned for collapse.
The US government, perhaps surprised at the ease at which all financial markets can be rigged, is now rigging, or permitting large hedge funds and perhaps George Soros, to drive down the exchange value of the Russian ruble by massive short-selling in the currency market. On December 15 the ruble was driven down 19%.
Just as there is no economic reason for the price of gold to decline in the futures market when the demand for physical gold is rising, there is no economic reason for the ruble to suddenly loose much of its exchange value. Unlike the US, which has a massive trade deficit, Russia has a trade surplus. Unlike the US economy, the Russian economy has not been offshored. Russia has just completed large energy and trade deals with China, Turkey, and India.
If economic forces were determining outcomes, it would be the dollar that is losing exchange value, not the ruble.
The illegal economic sanctions that Washington has decreed on Russia appear to be doing more harm to Europe and US energy companies than to Russia. The impact on Russia of the American attack on the ruble is unclear, as the suppression of the ruble’s value is artificial.
There is a difference between economic factors causing foreign investors to withdraw their capital from a country, thereby causing the currency to lose value, and manipulation of a currency’s value by heavy short-selling in the currency market. The latter can cause the former also to occur. But the outcome for Russia can be positive.
No country dependent on foreign capital is sovereign. A country dependent on foreign capital, especially from enemies seeking to subvert the economy, is subject to destabilizing currency and economic swings. Russia should self-finance. If Russia needs foreign capital, Russia should turn to its ally China. China has a stake in Russia’s strength as part of China’s protection from US aggression, whether economic or military.
The American attack on the ruble is also teaching sovereign governments that are not US vassals the extreme cost of allowing their currencies to trade in currency markets dominated by the US. China should think twice before it allows full convertibility of its currency. Of course, the Chinese have a lot of dollar assets with which to defend their currency from attack, and the sale of the assets and use of the dollar proceeds to support the yuan could knock down the dollar’s exchange value and US bond prices and cause US interest rates and inflation to rise. Still, considering the gangster nature of financial markets in which the US is the heavy player, a country that permits free trading of its currency sets itself up for trouble.
The greatest harm that is being done to the Russian economy is not due to sanctions and the US attack on the ruble. The greatest harm is being done by Russia’s neoliberal economists.
Neoliberal economics is not merely incorrect. It is an ideology that fosters US economic imperialism. By following neoliberal prescriptions, Russian economists are helping Washington’s attack on the Russian economy.
Apparently, Putin has been sold, along with his internal enemies the Atlanticist integrationists, on “free trade globalism.” Globalism destroys the sovereignty of every country except the world reserve currency country that controls the system.
As Michael Hudson has shown, neoliberal economics is “junk economics.” But it is also a tool of American financial imperialism, and this makes neoliberal Russian economists tools of American imperialism.
The remaining sovereign countries are slowly learning that Western economic institutions are deceptive and that placing trust in them is a threat to national sovereignty.
Washington intends to subvert Russia and to turn Russia into a vassal state like Germany, France, Japan, Canada, Australia, the UK and Ukraine. If Russia is to survive, Putin must protect Russia from Western economic institutions and Western trained economists.
It is too risky for the US to take on Russia militarily. Instead, Washington is using its unique symbiotic relationship with Western financial institutions to attack an incautious Russia that foolishly opened itself to Western financial predation.
Paul Craig Roberts is a former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal.
by PAUL CRAIG ROBERTS
A dangerous new trend is the successful manipulation of the financial markets by the Federal Reserve, other central banks, private banks, and the US Treasury. The Federal Reserve reduced real interest rates on US government debt obligations first to zero and then pushed real interest rates into negative territory. Today the government charges you for the privilege of purchasing its bonds.
People pay to park their money in the Treasury debt obligations, because they do not trust the banks and they know that the government can print the money to pay off the bonds. Today Treasury bond investors pay a fee in order to guarantee that they will receive the nominal face value of their investment in government bonds.
Think about this for a minute. Allegedly the US is experiencing economic recovery. Normally with rising economic activity interest rates rise as consumers and investors bid for credit. But not in this “recovery.”
Normally an economic recovery produces rising consumer spending, rising profits, and more investment. But what we experience is flat and declining consumer spending as jobs are offshored and retail stores close. Profits result from labor cost savings from employee layoffs.
The stock market is high because corporations are the biggest purchases of stock. Buying back their own stock supports or raises the share price, enabling executives and boards to sell their shares or cash in their options at a profitable price. The cash that Quantitative Easing has given to the mega-banks leaves ample room for speculating in stocks, thus pushing up the price despite the absence of fundamentals that would support a rising stock market.
In other words, in America today there are no free financial markets. The markets are rigged by the Federal Reserve’s Quantitative Easing, by gold price manipulation, by the Treasury’s Plunge Protection Team and Exchange Stabilization Fund, and by the big private banks.
Allegedly, QE is over, but it is not. The Fed intends to roll over the interest and principle from its bloated $4.5 trillion bond portfolio into purchases of more bonds, and the banks intend to fill in the gaps by using the $2.6 trillion in their cash on deposit with the Fed to purchase bonds. QE has morphed, not ended. The money the Fed paid the banks for bonds will now be used by the banks to support the bond price by purchasing bonds.
Normally when massive amounts of debt and money are created the currency collapses, but the dollar has been strengthening. The dollar gains strength from the
rigging of the gold price in the futures market. The Federal Reserve’s agents, the bullion banks, print paper futures contracts representing many tonnes of gold and dump them them into the market during periods of light or nonexistent trading. This drives down the gold price despite rising demand for the physical metal. This manipulation is done in order to counteract the effect of the expansion of money and debt on the dollar’s exchange value. A declining dollar price of gold makes the dollar look strong.
The dollar also gains the appearance of strength from debt monetization by the Bank of Japan and the European Central Bank. The Bank of Japan’s Quantitative Easing program is even larger than the Fed’s. Even Switzerland is rigging the price of the Swiss franc. Since all currencies are inflating, the dollar does not decline in exchange value.
As Japan is Washington’s vassal, it is conceivable that some of the money being printed by the Bank of Japan will be used to purchase US Treasuries, thus taking the place along with purchases by the large US banks of the Fed’s QE.
The large private US and UK banks are also manipulating markets hand over fist. Remember the scandal over the banks fixing the LIBOR rate (the London Interbank Borrowing Rate) and the opening gold price on the London exchange. Now the banks have been caught rigging currency markets with algorithms developed to manipulate foreign exchange markets.
When the banks get caught in felonies, they avoid prosecution by paying a fine. You try doing that.
The government even manipulates economic statistics in order to paint a rosy economic picture that sustains economic howeconconfidence. GDP growth is exaggerated by understating inflation. High unemployment is swept under the table by not counting discouraged workers as unemployed. We are told we are enjoying economic recovery and have an improving housing market. Yet the facts are that almost half of 25 year old Americans have been forced to return to live with their parents, and 30% of 30 year olds are back with their parents. Since 2006 the home ownership rate of 30 year old Americans has collapsed.
The repeal of the Glass-Steagall Act during the Clinton regime allowed the big banks to gamble with their depositors’ money. The Dodd-Frank Act tried to stop some of this by requiring the banks-turned-gambling-casinos to carry on their gambling in subsidiaries with no access to deposits in the depository institution. If the banks gamble with depositors money, the banks’ losses are covered by FDIC, and in the case of bank failure, bail-in provisions could give the banks access to depositors’ funds. With the banks still protected by being “too big to fail,” whether Dodd-Frank would succeed in protecting depositors when a subsidiary’s failure pulls down the entire bank is unclear.
The sharp practices in which banks engage today are risky. Why gamble with their own money if they can gamble with depositors’ money. The banks led by Citigroup have lobbied hard to overturn the provision in Dodd-Frank that puts depositors’ money out of their reach as backup for certain types of troubled financial instruments, with apparently only Senator Elizabeth Warren and a few others opposing them. Senator Warren is outgunned as Citigroup controls the US Treasury and the Federal Reserve.
The falling oil price has brought concern that oil derivatives are in jeopardy. Citigroup has a provision in the omnibus appropriations bill that shifts the liability for Citigroup’s credit default swaps to depositors and taxpayers. It was only six years ago that Citigroup was bailed out to the tune of a half trillion dollars. Already Citigroup is back for more while nothing whatsoever is done to bail the American people out of their hardships caused by Citigroup and the other financial gangsters.
What we are experiencing is not a repeat of the past. The ability or, rather, the audacity of the US government itself to manipulate the major financial markets is new. Can this new trend continue? The government is supposed to be the enforcer of laws against market manipulation but is itself manipulating the markets.
Governments and economists take their hats off to free markets. Yet, the markets are rigged, not free. How long can stocks stay up in a lackluster or declining economy? How long can bonds pay negative real interest rates when debt and money are rising. How long can bullion prices be manipulated down when the world’s demand for gold exceeds the annual production?
For as long as governments and banks can rig the markets.
The manipulations are dangerous. Manipulations blow a bigger bubble economy, and manipulations are now being used by Washington as an act of war by driving down the exchange value of the Russian ruble.
If every time the stock market tries to correct and adjust to the real economic situation, the plunge protection team or some government “stabilization” entity stops the correction by purchasing S&P futures, unrealistic values are perpetuated.
The price of gold is not determined in the physical market but in the futures market where contracts are settled in cash. If every time the demand for gold pushes up the price, the Federal Reserve or its bullion bank agents dump massive amounts of uncovered futures contracts in the futures market and drive down the price of gold,
the result is to subsidize the gold purchases of Russia, China, and India. The artificially low gold price also artificially inflates the value of the US dollar.
The Federal Reserve’s manipulation of the bond market has driven bond prices so high that purchasers receive a zero or negative return on their investment. At the present time fear of the safety of bank deposits makes people willing to pay a fee in order to have the protection of the government’s ability to print money in order to redeem its bonds. A number of events could end the tolerance of zero or negative real interest rates. The Federal Reserve’s policy has the bond market positioned for collapse.
The US government, perhaps surprised at the ease at which all financial markets can be rigged, is now rigging, or permitting large hedge funds and perhaps George Soros, to drive down the exchange value of the Russian ruble by massive short-selling in the currency market. On December 15 the ruble was driven down 19%.
Just as there is no economic reason for the price of gold to decline in the futures market when the demand for physical gold is rising, there is no economic reason for the ruble to suddenly loose much of its exchange value. Unlike the US, which has a massive trade deficit, Russia has a trade surplus. Unlike the US economy, the Russian economy has not been offshored. Russia has just completed large energy and trade deals with China, Turkey, and India.
If economic forces were determining outcomes, it would be the dollar that is losing exchange value, not the ruble.
The illegal economic sanctions that Washington has decreed on Russia appear to be doing more harm to Europe and US energy companies than to Russia. The impact on Russia of the American attack on the ruble is unclear, as the suppression of the ruble’s value is artificial.
There is a difference between economic factors causing foreign investors to withdraw their capital from a country, thereby causing the currency to lose value, and manipulation of a currency’s value by heavy short-selling in the currency market. The latter can cause the former also to occur. But the outcome for Russia can be positive.
No country dependent on foreign capital is sovereign. A country dependent on foreign capital, especially from enemies seeking to subvert the economy, is subject to destabilizing currency and economic swings. Russia should self-finance. If Russia needs foreign capital, Russia should turn to its ally China. China has a stake in Russia’s strength as part of China’s protection from US aggression, whether economic or military.
The American attack on the ruble is also teaching sovereign governments that are not US vassals the extreme cost of allowing their currencies to trade in currency markets dominated by the US. China should think twice before it allows full convertibility of its currency. Of course, the Chinese have a lot of dollar assets with which to defend their currency from attack, and the sale of the assets and use of the dollar proceeds to support the yuan could knock down the dollar’s exchange value and US bond prices and cause US interest rates and inflation to rise. Still, considering the gangster nature of financial markets in which the US is the heavy player, a country that permits free trading of its currency sets itself up for trouble.
The greatest harm that is being done to the Russian economy is not due to sanctions and the US attack on the ruble. The greatest harm is being done by Russia’s neoliberal economists.
Neoliberal economics is not merely incorrect. It is an ideology that fosters US economic imperialism. By following neoliberal prescriptions, Russian economists are helping Washington’s attack on the Russian economy.
Apparently, Putin has been sold, along with his internal enemies the Atlanticist integrationists, on “free trade globalism.” Globalism destroys the sovereignty of every country except the world reserve currency country that controls the system.
As Michael Hudson has shown, neoliberal economics is “junk economics.” But it is also a tool of American financial imperialism, and this makes neoliberal Russian economists tools of American imperialism.
The remaining sovereign countries are slowly learning that Western economic institutions are deceptive and that placing trust in them is a threat to national sovereignty.
Washington intends to subvert Russia and to turn Russia into a vassal state like Germany, France, Japan, Canada, Australia, the UK and Ukraine. If Russia is to survive, Putin must protect Russia from Western economic institutions and Western trained economists.
It is too risky for the US to take on Russia militarily. Instead, Washington is using its unique symbiotic relationship with Western financial institutions to attack an incautious Russia that foolishly opened itself to Western financial predation.
Paul Craig Roberts is a former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal.
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I was always under the impression that probably a third and maybe even one-half of the global oil trading price was related directly to "financial traders".
It was a surprise, even 20 yrs ago, to see the number of totally-oil-unrelated companies investing in oil futures.
The expose usually came when they invested too heavily in oil futures and the market took a sudden tank and the companies went broke due to their futures exposure.
Oil futures is nothing more than sheer speculation and it feeds on itself, just like a sharemarket bull run. There is no place for financial paper wheeling and dealing in such a vital commodity, on which the modern world runs.
I do not see the oil price recovering for at least 12 months, or until the "investors" and "traders" see an opportunity to again climb on the recovering oil price bandwagon, and drive it far higher than it ever would be, if the price was governed solely by physical demand.
It was a surprise, even 20 yrs ago, to see the number of totally-oil-unrelated companies investing in oil futures.
The expose usually came when they invested too heavily in oil futures and the market took a sudden tank and the companies went broke due to their futures exposure.
Oil futures is nothing more than sheer speculation and it feeds on itself, just like a sharemarket bull run. There is no place for financial paper wheeling and dealing in such a vital commodity, on which the modern world runs.
I do not see the oil price recovering for at least 12 months, or until the "investors" and "traders" see an opportunity to again climb on the recovering oil price bandwagon, and drive it far higher than it ever would be, if the price was governed solely by physical demand.
'Cleared for takeoff', Avgas around $1-82 plus GST is still around $2-00.
The cheapest place that I've bought Avgas, over the last year was surprisingly at YTGM. And that's in the middle of nowhere!
On our visit, a Metro with a load of fly in/out gas miners followed us in. They were heading for YBBN but Jet fuel was cheaper at YTGM than there.
Go figure!
Merry Christmas, PPRuNers.
The cheapest place that I've bought Avgas, over the last year was surprisingly at YTGM. And that's in the middle of nowhere!
On our visit, a Metro with a load of fly in/out gas miners followed us in. They were heading for YBBN but Jet fuel was cheaper at YTGM than there.
Go figure!
Merry Christmas, PPRuNers.
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Ok Oracle1, so you don't like the Telegraph, well how about the Independent.
Rouble trouble: Russia forecasts economic slump as bailed-out bank gets more funds - Business News - Business - The Independent
Incidentally, I don't for one minute suggest that all is rosy with the Western economies either and there is much to commend in what you have quoted. I am merely arguing that the Russian economy is more grossly perverted than the West and therefore more vulnerable to the vagaries of the oil market on which they are dependent.
Rouble trouble: Russia forecasts economic slump as bailed-out bank gets more funds - Business News - Business - The Independent
Russia looks set for a steep recession in 2015, its finance minister has admitted, as he stepped up the bailout of the first bank to teeter in the face of the collapsing rouble.
Western sanctions imposed during the Ukraine crisis has caused foreign investors to leave the country in droves, which, together with the current slump in oil prices, has caught the Russian economy in the jaws of a trap that's pummelling the rouble and tanking the economy.
The Russian government is now desperately attempting to sure up its major banks and find a way out of its deepening currency crisis. One such gambit has been a sudden hike in the interest rate, but economists remain doubtful that it will help.
Finance Minister Anton Siluanov predicted that the economy could shrink by as much as four per cent in 2015, which would be Russia's first contraction since 2009, if oil prices maintained their current level of $60 a barrel.
Siluanov also said the country would run a budget deficit of over three per cent next year if the oil price did not rise.
"Next year we will, without doubt, have to bring the Reserve Fund into play," he said, referring to one of Russia's two rainy-day funds intended to support the economy at times of crisis.
Crude prices have almost halved from their June peak amid a global glut and a decision by producer group OPEC not to cut output. Saudi Arabia said on Friday it was prepared to withstand a prolonged period of low prices.
"We need to have our budget break even at $70 per barrel by 2017," said Siluanov.
Russia's government imposed informal capital controls this week, including orders to large oil and gas exporters Gazprom and Rosneft to sell some of their dollar revenues in a bid to shore up the rouble.
Russians have kept a wary eye on the exchange rate since the collapse of the Soviet Union, when hyper-inflation wiped out their savings over several years in the early 1990s.
The rouble's will inevitably lead to higher inflation next year, which after years of stability threatens President Vladimir Putin's reputation for ensuring Russia's prosperity.
Additional reporting by Reuters
Western sanctions imposed during the Ukraine crisis has caused foreign investors to leave the country in droves, which, together with the current slump in oil prices, has caught the Russian economy in the jaws of a trap that's pummelling the rouble and tanking the economy.
The Russian government is now desperately attempting to sure up its major banks and find a way out of its deepening currency crisis. One such gambit has been a sudden hike in the interest rate, but economists remain doubtful that it will help.
Finance Minister Anton Siluanov predicted that the economy could shrink by as much as four per cent in 2015, which would be Russia's first contraction since 2009, if oil prices maintained their current level of $60 a barrel.
Siluanov also said the country would run a budget deficit of over three per cent next year if the oil price did not rise.
"Next year we will, without doubt, have to bring the Reserve Fund into play," he said, referring to one of Russia's two rainy-day funds intended to support the economy at times of crisis.
Crude prices have almost halved from their June peak amid a global glut and a decision by producer group OPEC not to cut output. Saudi Arabia said on Friday it was prepared to withstand a prolonged period of low prices.
"We need to have our budget break even at $70 per barrel by 2017," said Siluanov.
Russia's government imposed informal capital controls this week, including orders to large oil and gas exporters Gazprom and Rosneft to sell some of their dollar revenues in a bid to shore up the rouble.
Russians have kept a wary eye on the exchange rate since the collapse of the Soviet Union, when hyper-inflation wiped out their savings over several years in the early 1990s.
The rouble's will inevitably lead to higher inflation next year, which after years of stability threatens President Vladimir Putin's reputation for ensuring Russia's prosperity.
Additional reporting by Reuters
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Grossly Perverted?
Ok Oracle1, so you don't like the Telegraph, well how about the Independent.
The Internet is filled with high quality analysis from a plethora of sources, untainted by the agenda of the banksters. The Internet is the great leveller, creating a common consciousness, opening access to information, repricing information and data, and now even creating universal, transparent currencies that cannot be falsified such as bit coin. The monopoly of the state and the slavery that it imposes is threatened like never before.
Its OK I understand your confusion, coming to grips with the fact that your reality is a construct and that everything you have been taught is a lie is asphyxiating. Understanding that the state is stealing from you, you have no rights whatsoever, that democracy is simply theatre and that you are a commodity to be exploited is hard to do. Once you accept this and analyse the patterns you will wonder how something so blatant is universally accepted.
I find it both depressing and enraging that I am forced to borrow money from a bank, that they simply pluck out of thin air, that I have to pay back with blood sweat and tears plus exorbitant interest.
Let us revisit the Russian situation because it will have a profound effect on the price and availability of energy for centuries to come. Make no mistake, the corrupt little coup in Ukraine, so blithely organised by Nuland, is going to cause a Russian pivot to Asia. The chaos in Russia will be short term and the Chinese have already indicated publicly that they will back Russia financially. The European economies are the ones that will suffer most. Putin was reaching out to the West, hoping to be accepted into the fold and it didn't have to be this way.
I am merely arguing that the Russian economy is more grossly perverted than the West and therefore more vulnerable to the vagaries of the oil market
"Next year we will, without doubt, have to bring the Reserve Fund into play," he said, referring to one of Russia's two rainy-day funds intended to support the economy at times of crisis.
The rouble's will inevitably lead to higher inflation next year, which after years of stability threatens President Vladimir Putin's reputation for ensuring Russia's prosperity.
the Russian economy is more grossly perverted than the West and therefore more vulnerable to the vagaries of the oil market on which they are dependent.
Russia's government imposed informal capital controls this week, including orders to large oil and gas exporters Gazprom and Rosneft to sell some of their dollar revenues in a bid to shore up the rouble
I just cant wait till Putin calls the bluff, tells the banksters to F@$K OFF, refuses to pay back any debt and nationalises western assets.
THE RUSSIAN ECONOMY HAS PROBLEMS BECAUSE IT IS UNDER ATTACK NOT BECAUSE IT IS FUNDAMENTALLY FLAWED.
Watch what happens to the availability of oil then!
Last edited by Oracle1; 28th Dec 2014 at 14:08. Reason: Spelling and Grammer
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Current January Fuel Price Update as follows are now;
Jet A1 down 11 cents to 1.49 plus GST, 7% drop
Avgas down 6 cents to 1.76 plus GST, 3.5% drop
Some way to go yet, we will see what February brings.
Jet A1 down 11 cents to 1.49 plus GST, 7% drop
Avgas down 6 cents to 1.76 plus GST, 3.5% drop
Some way to go yet, we will see what February brings.
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United Dumps Losing Fuel Hedges
January 11, 2015
United Airlines has paid a premium to dump old losing bets on higher oil prices, and is reviewing its strategy for insulating itself from oil market volatility, in a sign of how some airlines' efforts to hedge their fuel costs have backfired.
United reported that it has shrunk its hedge position to cover 22 percent of the fuel it consumes in 2015, down from the 24 percent it had anticipated when oil prices were higher.
The airline said it did so at a cost, raising its average fuel expenses last quarter to USD$2.83 per gallon from up to UD$2.76 per gallon, the price it had estimated on December 8.
This move represents just one step of a broader effort parent company United Continental has taken to evaluate its fuel hedges, a United spokesman said.
At stake for United and its rivals are potentially billions of dollars in gains or losses that could flow from what amount to sophisticated bets on the future of oil and jet fuel prices. Guessing wrong could hurt profits and leave an airline vulnerable to competitive pressure from rivals.
Oil is the largest variable cost for airlines, often representing a third or more of their operating costs. Falling oil prices, down more than 55 percent since June, have buoyed airline profits and sent their shares up.
But the oil price drop caught many carriers off guard, as they had purchased financial instruments that protected against rising prices and that required them to pay hundreds of millions of dollars in collateral when prices fell.
United now must decide whether the cost of closing more of its existing hedges outweighs the risk of posting more collateral if prices continue to fall.
NEW HEDGES
Company officials have met to discuss whether United should unwind its hedges more than it announced on Friday.
They have also discussed whether prices have bottomed out enough for them to make new hedges that could cover multiple years of fuel consumption, although they have yet to make any decisions and are keeping all options on the table.
A multi-year bet by Southwest Airlines more than a decade ago protected the airline while oil costs for the industry soared.
"Southwest looked clairvoyant when they hedged at USD$30 (per barrel), and then the price shot up to USD$70 or USD$80," United's Chief Financial Officer John Rainey said in a recent memo to the carrier's pilots.
"We're mindful of this possibility and are closely evaluating our options."
Yet locking in prices long-term comes at a premium, with USD$50 call options nearly twice as expensive when they expire in December 2017 than those that last until December 2015, for example.
And losses from a bad bet would be significant, as a USD$1 change in the price of oil amounts to USD$100 million for United, according to the memo.
"It's prudent to be a little bit cautious here, and we'd like to see if there's a new trading band that forms," Rainey said.
January 11, 2015
United Airlines has paid a premium to dump old losing bets on higher oil prices, and is reviewing its strategy for insulating itself from oil market volatility, in a sign of how some airlines' efforts to hedge their fuel costs have backfired.
United reported that it has shrunk its hedge position to cover 22 percent of the fuel it consumes in 2015, down from the 24 percent it had anticipated when oil prices were higher.
The airline said it did so at a cost, raising its average fuel expenses last quarter to USD$2.83 per gallon from up to UD$2.76 per gallon, the price it had estimated on December 8.
This move represents just one step of a broader effort parent company United Continental has taken to evaluate its fuel hedges, a United spokesman said.
At stake for United and its rivals are potentially billions of dollars in gains or losses that could flow from what amount to sophisticated bets on the future of oil and jet fuel prices. Guessing wrong could hurt profits and leave an airline vulnerable to competitive pressure from rivals.
Oil is the largest variable cost for airlines, often representing a third or more of their operating costs. Falling oil prices, down more than 55 percent since June, have buoyed airline profits and sent their shares up.
But the oil price drop caught many carriers off guard, as they had purchased financial instruments that protected against rising prices and that required them to pay hundreds of millions of dollars in collateral when prices fell.
United now must decide whether the cost of closing more of its existing hedges outweighs the risk of posting more collateral if prices continue to fall.
NEW HEDGES
Company officials have met to discuss whether United should unwind its hedges more than it announced on Friday.
They have also discussed whether prices have bottomed out enough for them to make new hedges that could cover multiple years of fuel consumption, although they have yet to make any decisions and are keeping all options on the table.
A multi-year bet by Southwest Airlines more than a decade ago protected the airline while oil costs for the industry soared.
"Southwest looked clairvoyant when they hedged at USD$30 (per barrel), and then the price shot up to USD$70 or USD$80," United's Chief Financial Officer John Rainey said in a recent memo to the carrier's pilots.
"We're mindful of this possibility and are closely evaluating our options."
Yet locking in prices long-term comes at a premium, with USD$50 call options nearly twice as expensive when they expire in December 2017 than those that last until December 2015, for example.
And losses from a bad bet would be significant, as a USD$1 change in the price of oil amounts to USD$100 million for United, according to the memo.
"It's prudent to be a little bit cautious here, and we'd like to see if there's a new trading band that forms," Rainey said.
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Professor, agree with a lot of what you say, only would not agree that western middle class is declining. There is an increase of the underclass, but I don't think at the expense of middle class.
I was also of the understanding that airlines speculate on the futures market for their fuel prices and are one of the driving forces behind higher price of jetfuel in the longer term.
Edited: I see Capetonian has already posted the hedging of fuel prices
I was also of the understanding that airlines speculate on the futures market for their fuel prices and are one of the driving forces behind higher price of jetfuel in the longer term.
Edited: I see Capetonian has already posted the hedging of fuel prices
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Capetonian - See my post at #33. There's the likelihood of a lot of other airline losses coming soon, as they also unwind their oil hedge positions.
It's also likely a lot of companies seemingly unrelated to high oil products use, will also be taking some severe financial pain due to oil hedging losses, in the very near future.
I wouldn't be in the least surprised to find, that part of the Saudi strategy is attempting to shake the speculators out of the oil markets, and find the true oil price, as governed by physical supply and physical demand.
It's also likely a lot of companies seemingly unrelated to high oil products use, will also be taking some severe financial pain due to oil hedging losses, in the very near future.
I wouldn't be in the least surprised to find, that part of the Saudi strategy is attempting to shake the speculators out of the oil markets, and find the true oil price, as governed by physical supply and physical demand.
