Natural Gas

• The year of dollar danger for the world (Ambrose Evans-Pritchard)
• Draghi Says ECB Prepares Action as Deflation Risk Non-Negligible (BBG)
• Obama Pivots to Lawmakers: New Plan to Advance Policy Goals by Working With Congress Draws Skeptics (WSJ)
• Affordable Care Act Creates a Trickier Tax Season (WSJ)
• Oil pares early gains, trades near $57 as supply glut prevails (Reuters)
• Iran says Saudi Arabia should move to curb oil price fall (Reuters)
• Pimco Fund Trails Peers in 2014 After Missing Rally (BBG)
• Piketty rejects Légion d’Honneur award (FT)
• UK manufacturing activity hits three-month low (BBC)

The new year has officially started because it wasn't even a day in and Mario Draghi was once again out and about, jawboning the Euro to a lower level than where it was when he said back in 2012 he would do "whatever it takes" to push it higher. The reason, as Reuters reports, why the Euro sank to a nearly 5 year low against the USD, was "clear indications that the European Central Bank will soon embark on outright money-printing." Actually, it was on just more hollow rhetoric by Draghi, who told German Handelsblatt that "the risk that we don’t fulfill our mandate of price stability is higher than it was six months ago." He also added that "it’s difficult to say” how much the institution will have to spend on government-bond purchases.

Dr Marc Faber, respected economic historian and author of the respected monthly newsletter, the ‘Gloom, Boom and Doom Report’, has warned that 2015 is set to be very volatile, urged international diversification and owning “physical precious metals stored outside the U.S.”

• Behind the Scenes at Sony as Hacking Crisis Unfolded (WSJ)
• Oil Set for Biggest Slump Since 2008 as OPEC Battles U.S. Shale (BBG)
• Praet Warning of Oil Effects Signals Higher Chance of ECB QE (BBG)
• U.S. Opening Door to More Oil Exports Seen Foiling OPEC Strategy (BBG)
• Venezuela confirms recession, inflation hits 63.6 percent in Nov (Reuters)
• U.S. to station 150 armored vehicles in Europe (Reuters)
• China Stocks Rise to Finish Off Big Year (WSJ)
• RBS Suspends Bonuses of 18 Traders Amid FX Rigging Fine (BBG)

• U.S. agency gives quiet nod to light oil exports (Reuters)
• China’s Stocks Fall to Pare Biggest Monthly Advance Since 2007 (BBG)
• The Cartel: How BP Used a Secret Chat Room for Insider Tips (BBG)
• BRICs Busted as Stocks Diverge Most on Record on Outlook (BBG)
• Petrobras deadline prompts some bondholders to push for default (Reuters)
• AirAsia Captain at His Happiest When Flying, Family Says (BBG)
• UK housing crisis: brick stocks hit record low (Telegraph)

Greece may be on the verge of a Grexit, crude may be taking out all key technical support levels, and US stocks will still close higher. But let the USDJPY slide and watch as the levitation ends with a bang. And tumble overnight is precisely what the USDJPY did, pushing not only the Nikkei lower by 1.6% but also leading to what is shaping up to be an unrecord, also known as red, open in the S&P - this surely calls for a "Markets in Turmoil" flashing siren on the 9th floor of the New York Fed.

For the past few months, the one silver lining to the energy complex - with crude oil plummeting to levels not seen since 2009 - was nat gas, which soared to the mid-$4s in early November on expectations of a brutal polar vortex for the second year in a row sending heating demand surging. Well, so far the "harsh" weather, which was blamed for the epic collapse in the US economy in Q1 has not materialized, and all those buyers of natgas contracts have been scrambling to sell all of their exposure afraid they may suffer the same fate as their crude trading brethren. End result: as of moments ago, nat gas finally slide under $3, the first time it has done so since 2012!

We live in a new world, and the Saudis are either the only or the first ones to understand that. Because they are so early to notice, and adapt, I would expect them to come out relatively well. But I would fear for many of the others. And that includes a real fear of pretty extreme reactions, and violence, in quite a few oil-producing nations that have kept a lid on their potential domestic unrest to date. It would also include a lot of ugliness in the US shale patch, with a great loss of jobs (something it will have in common with North Sea oil, among others), but perhaps even more with profound mayhem for many investors in US energy. And then we’re right back to your pension plans.

The oil price drop that has dominated the headlines in recent weeks has been framed almost exclusively in terms of oil market economics, with most media outlets blaming Saudi Arabia, through its OPEC Trojan horse, for driving down the price, thus causing serious damage to the world's major oil exporters – most notably Russia. While the market explanation is partially true, it is simplistic, and fails to address key geopolitical pressure points in the Middle East.

The ability of oil exporters to trigger a short-term collapse in price does not automatically translate into an ability to control the financial conflagration such a crash ignites.

• Russia says NATO turning Ukraine into 'frontline of confrontation' (Reuters)
• Oil Drillers Under Pressure to Scrap Rigs to Cope With Downturn (BBG)
• Demonstrators Defy NYC Mayor's Call to Suspend Police Protests (BBG)
• U.S. to send more private contractors to Iraq (Reuters)
• ISIS Shoots Down Jet From U.S.-Led Coalition, Syrian Monitors Say (NYT)
• Russians Race to Secure Mortgages Before Costs Spiral (BBG)
• Abe Brings in Former Soldier Nakatani as Defense Minister (BBG)
• At Coke, Newest Flavor Is Austerity (WSJ)
• Fear and retribution in Xi's corruption purge (Reuters)
• UBS Raises Flag on China’s $1 Trillion Overseas Debt Pile (BBG)

A form of society could undoubtedly exist powered by nuclear, wind and shale gas. But it would be a society supported by the state with far larger numbers working in the energy industries than now, producing lower surpluses, the energy production part perhaps running at a perennial loss. Those losses have to be covered by either higher price or via the taxation system. Either way, the brave new world that awaits us will be characterized as the time of less that will be in stark contrast to the time of plenty many of us enjoyed during the 20th Century.

For all those who think the upcoming carnage to the shale industry will be "contained" we refer to the following research report from the Manhattan Institute for Policy Research. For the impatient ones, here is the punchline: "The $300–$400 billion overall annual economic gain from the oil & gas boom has been greater than the average annual GDP growth of $200–$300 billion in recent years—in other words, the economy would have continued in recession if it were not for the unplanned expansion of the oil & gas sector."

No respite for the American oil patch and its investors.

In the last couple of months, the sharp reversion in oil prices has certainly caught the world’s attention.  While the majority of economists and analysts continue to expect incorrectly that falling oil prices are a positive input to economic growth, the reality is that it is not.  The negative impact to economic growth from the decline in oil prices are quite considerable when you consider that almost 40% of all the jobs created since 2009 have been in energy related industries. While the economists and analysts are hopeful for a sharp recovery in oil prices, the current decline in oil prices is nothing more than a return to historical normalcy.