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Energy Markets Are On The Brink Of Crisis

Tyler Durden's picture


Submitted by Brandon Smith of,

The multitudes of people, especially Americans, who view U.S. government activity in a negative light often make the mistake of attributing all corruption to some covert battle for global oil fields. In fact, the average leftist seems to believe that everything the establishment does somehow revolves around oil. This is a very simplistic and naïve view.

Modern wars are rarely, if ever, fought over resources, despite what the mainstream gatekeepers might tell you. If a powerful nation wants oil, for instance, it lines the right pocketbooks, intimidates the right individuals, blackmails the right officials or swindles the right politicians. It has no need to go to war when politicians and nations are so easily bought. Modern wars, rather, are fought in order to affect psychological change within a particular country or population. Wars today are fought to cover up corrupt deals and create desperation. Oil is used as an all-encompassing excuse for war, but it is never the true cause of war.

In reality, oil demand has become static and is even falling in many parts of the world, while new oil and gas-producing fields are discovered on a yearly basis. Petroleum is not a rare resource — at least, not at the present. And the propaganda surrounding the “peak oil” Armageddon scenario is pure nonsense. Oil prices, unfortunately, do not rise and fall according to supply - instead they rise and fall according to market tensions and, most importantly, the value and perceived safety of the U.S. dollar. Supply and demand have little to do with commodity values in our age of fiat manipulation and false investor perception.

That said, certain political and regional events are currently in motion that could, in fact, change investor perception to the negative, and convince the world of a false fear of reduced supply. While supply is more than ample, the expectation of continued supply can be jilted, shocking commodities markets into running for the hills or rushing into mass speculation, generally resulting in a sharp spike in prices.

A very real danger within energy markets is the undeniable threat that the U.S. dollar may soon lose its petrodollar status and, thus, Americans may lose the advantage of relatively low gas prices they have come to expect.  That is to say, the coming market crisis will have far more to do with the health of the dollar than the readiness of supply.

In the span of only a few years, as the derivatives crisis took hold and the fed began its relentless bailout regime, petroleum costs have doubled. It wasn’t that long ago that someone could fill his vehicle's tank with a $20 bill. Those days are long gone, and they are not coming back. The expectation has always been that prices would recede as the overall economy began to heal. Of course, our economy will not be healed until it is allowed to crash, as it naturally should crash. And as it crashes, because of our currency's unique place in history, the price of oil will continue to climb.

The petrodollar has always been seen as invincible — a common denominator, a mathematical constant. This is a delusion propagated by a lack of knowledge and common sense amongst establishment economists.

As I have covered in great detail in numerous articles, the U.S. dollar’s world reserve status is nearing extinction. Multiple major economies now trade bilaterally without the use of the dollar; and with foreign conflicts on the rise, this trend is going to become the norm.

In the past week alone, Putin adviser Sergey Glazyev recommended to the Kremlin that a coalition of nations be formed to end the dollar's reserve status and initiate a form of economic warfare to stop "U.S. aggression".  Of course, anyone familiar with the escapades of international banking cartels knows that it is the money elite that dictate U.S. aggression, just as they dictate the policy initiatives of Russia.  I would note that there is only ONE currency exchange structure that could be used at this time to shift global forex reserves away from the dollar system, and that is the IMF's Special Drawing Rights.

The argument has always been that the IMF is a U.S. controlled institution, however, this is a faulty assumption.  The IMF is a GLOBAL BANKER controlled institution, a front organization for the Bank of International Settlements, which is why the recent refusal by the U.S. Congress to vote on new capital allocations for the IMF has resulted in the world's central bank threatening to remove U.S. veto power. Globalists have no loyalty to any single nation, and the reality is, the fall of the dollar actually benefits these financiers in the long term.

Russia’s historic oil and gas deal with China, just signed weeks ago, removes the dollar as the petroleum reserve currency.

Russia’s largest gas company, Gazprom, has all but excluded the dollar in all transactions with foreign nations. In fact, nine out of 10 of Gazprom’s foreign clients were more than happy to buy their products without using dollars.  This fact cripples the arguments of dollar cheerleaders who have always claimed that even if Russia broke from the dollar, no one else would go along.

Gazprom and the Russian government have followed through with their threats to cut off gas pipelines to Ukraine, and now, some analysts fear this strategy may extend to the EU, in which many countries are still 30% dependent on Russian energy.

China is currently striking oil deals not only with Russia but also with Iran. New oil deals are being signed even after a $2 billion agreement fell through this spring.  And, despite common misinformation, it was actually China that was reaping the greatest rewards through the reopening of Iraqi oil fields, not the U.S., all while U.S. military assets were essentially wasted in the region.

Now, any U.S. benefits are coming into question as Iraq disintegrates into chaos yet again. With the speed of the new Islamic State of Iraq and Syria (ISIS) insurgency growing, it is unclear whether America will have ANY access to Iraqi oil in the near future.  If ISIS is successful in overrunning Iraq, it is unlikely that Iraqi oil will ever be traded for dollars again. Unrest in Iraq has already caused substantial market spikes in oil prices, and I can say with considerable confidence that this trend is going to continue through the rest of the year.

Interestingly, mainstream news sources suggest that Saudi Arabia has been a primary funding source for the ISIS movement.  It is true that the Saudis have warned for years that they would fund and arm Sunni insurgents if America ever pulled out of the country.  But, I would point out that the U.S. has also been covertly supporting such extremist groups in the Mideast for quite some time, and this is not discussed at all in the MSM storyline. The mainstream narrative is painting a picture of betrayal by the Saudis against the U.S. through subversive groups designed to break the foundations of nations opposed to its policy views.  When, in fact, the destabilization of Iraq has been nurtured by money and weapons from both America and Saudi Arabia.

It was the CIA which trained ISIS insurgents secretly in Jordan in preparation for their subversive war in Syria.  It was an agreement signed by George W. Bush and delegated under Obama's watch that allowed ISIS leader, Abu Bakr al-Baghdadi, to be set free in 2009.  Saudi Arabia has been openly arming the Sunni's for years with the full knowledge of the U.S. government.  So then, why is the narrative being created that America and Saudi Arabia are at odds over ISIS?

Such a development would place the U.S. squarely in conflict with the Saudi government, our only remaining toehold in the global oil market. Without Saudi Arabia’s patronage of the dollar, most OPEC nations will follow (including Kuwait), and the dollar WILL lose its petrodollar status. Period.

In the past few days, Saudi Arabia has demanded that the foreign interests refrain from any military intervention in Iraq.  While Barack Obama has repositioned an aircraft carrier, armed troops, and special forces in the area.

Now, my regular readers understand that this was going to happen eventually anyway. The Federal Reserve’s quantitative easing bonanza has destroyed true dollar value and spread unknown trillions of dollars in fiat across the planet. The dollar’s death has been assured. It has been slated for execution. This is why half the world is positioning to dump the currency altogether. My regular readers also know that the destruction of the dollar is not an accident; it is part of a carefully engineered strategy leading to the centralization of all economic power under the umbrella of a new global currency basket system controlled by the International Monetary Fund.

I believe Saudi Arabia may be a near term trigger in the next great shift in petroleum markets away from the dollar. Renewed U.S. involvement in Iraq, diplomatic tensions over ISIS, and more lucrative offers from Eastern partners have been edging Saudi Arabia away from strict petrodollar ties. This shift is also not limited to Saudi Arabia.

“Abu Dhabi, the most influential member of the United Arab Emirates,” has suddenly ended its long-standing exclusive relationship with Western oil companies and has signed a historic deal with China’s state-owned China National Petroleum Corporation (CNPC).

Russia has formed the new Eurasian Economic Union with Belarus and Kazakhstan, two countries with freshly discovered oil fields.

On the surface, it appears as though the world is huddling itself around oil resources in an environment of East versus West conflict. However, these changes are not as much about petroleum as they are about the petrodollar. The reality is the dollar’s reserve-status days are numbered and this is all part of the plan.

What does this mean for us? It means much higher gas prices in the coming months and years. Is $4 to $5 per gallon gasoline a burden on your pocketbook? Try $10 to $11 per gallon, perhaps more. Do you think the economy is straining as it is under the weight of current gas prices? Imagine the earthquake within our freight-based system when the cost of trucking shipments triples. And guess who will end up paying for the increased costs? That’s right: you, the consumer. High energy prices affect everything, including shelf prices of retail goods. This is just the beginning of what I believe will be ever expanding inflation in oil prices, leading to the end of the dollar’s petroleum reserve status, then it's world reserve status by default, and the introduction of a basket currency system that will ultimately benefit a select few global financiers while diminishing the quality of living for millions, if not billions, of people.


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Thu, 06/19/2014 - 21:05 | 4876191 kliguy38
kliguy38's picture

WHY do you think we really are in chaos in the ME and in the Ukraine........? TO HOLD THE PRICE OF OIL UP.....

Thu, 06/19/2014 - 21:08 | 4876203 jbvtme
jbvtme's picture

$10/gal of gas?  Piece of cake. Raise the minimum wage.

Thu, 06/19/2014 - 21:12 | 4876214 linniepar
linniepar's picture

Alt media infiltrated! Will reread now.

Thu, 06/19/2014 - 21:19 | 4876245 Pladizow
Pladizow's picture

It's rare to see bullshit so condensed!

Thu, 06/19/2014 - 21:24 | 4876261 CrashisOptimistic
CrashisOptimistic's picture

"Modern wars are rarely, if ever, fought over resources"

What in the FUCK are you posting, Tyler.  Who is this guy?

What is a modern war.  Does it include World War II in the Pacific?  Because if so this wacko needs to go read up on why the Japanese bombed Pearl Harbor.


Thu, 06/19/2014 - 21:28 | 4876274 29.5 hours
29.5 hours's picture



Yes, hard to swallow, eh? This may not be the very worst ZH article but it surely is a contender.



Thu, 06/19/2014 - 22:25 | 4876548 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Petroleum is not a rare resource — at least, not at the present. 

WTF! It is not that oil is a rare resource is the problem. We have plenty of low grade oil out there. We are running out of easily, accessible high quality that is useful. I agree with comments here. This article stinks!!

Fri, 06/20/2014 - 10:59 | 4877901 Abi Normal
Abi Normal's picture

LOL, you peak oilers are is not rare, you just think so, because you have been brainwashed...there is enough oil in the ground to last a hundred years, until we can come up with a viable alternative(s)...but keep thinking you're right, won't make a bit of difference to you anyway.


Fri, 06/20/2014 - 11:40 | 4878086 Flakmeister
Flakmeister's picture


Sat, 06/21/2014 - 09:14 | 4880303 Abi Normal
Abi Normal's picture


Thu, 06/19/2014 - 21:44 | 4876352 i_call_you_my_base
i_call_you_my_base's picture

You'd also have to contort "modern warfare" to mean that which takes place between first world countries. There are countless examples of smaller countries.

Thu, 06/19/2014 - 23:04 | 4876673 holdbuysell
holdbuysell's picture

"Because if so this wacko needs to go read up on why the Japanese bombed Pearl Harbor."

You mean the Germans, right?



Fri, 06/20/2014 - 08:27 | 4877329 TrumpXVI
TrumpXVI's picture

Yeah, really distorted analysis....and faulty history, too.

His political analysis is dead wrong, too.  The “Left” is just as drunk on the idea that “normal” economic growth (+2% avg.) will return as the people on the right.  The Left’s pet fears are environmental degradation and climate change.  The Left is completely vested in the idea that we will experience perpetual economic growth and a linear progression toward continued environmental degradation; forever.  They don’t get the economic implications of debt implosion due to impaired, resource constrained (oil price constrained) economic growth any better than the Right (or Brandon Smith).

All the Left's fantasies of perpetually expanding government and pension benefits depend entirely upon the "ever expanding economy" meme.


Fri, 06/20/2014 - 01:27 | 4877035 eishund
eishund's picture

This actually isn't bullshit. With a little digging, one can easily verify the assertions made in the article.

The IMF is owned by a cartel of banksters and it is ready to replace the USD with SDRs.

The USD has been engineered for collapse by some of the smartest people on the planet.

Yes they are smart, not morons without common-sense like we like to fantasize them to be.

The only question one should be asking is: why are they doing this?

That's where the rabbit hole begins.

Fri, 06/20/2014 - 06:54 | 4877254 new game
new game's picture

sociopaths-they would fuck your grandma on her dying bed...

all you need to know.

Fri, 06/20/2014 - 07:00 | 4877258 new game
new game's picture

wtf, war is about power and resources.

monetary policy is about power and contol of the majority, therfor

war is the politics of control of the people and the resource they are dependant on!

yes it could spin out of control, but my guess is steady increase with spikes followed by mini depressions with moar abenomics...

Fri, 06/20/2014 - 11:02 | 4877919 Abi Normal
Abi Normal's picture

War, my friend, is about nationality, about land, about control, about money...resources just happen to be a part of it...damn it to hell, we are fast approaching zero hour and we talk about this bullshit?


Fri, 06/20/2014 - 10:36 | 4877808 Panafrican Funk...
Panafrican Funktron Robot's picture

He is correct about de-dollarization, but gets an F minus on the "why".  It's really not that hard to understand, but he seems to want to make it more complicated/obfuscated than it needs to be.  

Thu, 06/19/2014 - 23:11 | 4876706 Drop out
Drop out's picture

Not sure why you have been voted down. I voted you up. I guess I will get voted down too. Oh well, I guess everyone likes the wonderfull plan - print more and give us (us = Me - otherwise known as "the greater good") more...

Fri, 06/20/2014 - 01:52 | 4877060 Buck Johnson
Buck Johnson's picture

Imagine the workers who have to drive to work everyday and if gas was 10 dollar or more a gallon you would need to pay close to 150 to 200 dollars a week to fill your tank.  And if your making 10 bucks an hour you couldn't survive and thats just on the cost of buying fuel and driving to work.

Thu, 06/19/2014 - 21:11 | 4876215 jbvtme
jbvtme's picture

and to defend the dollar

Thu, 06/19/2014 - 21:15 | 4876225 BandGap
BandGap's picture

Consider this - the current situation in the ME facilitates Iran selling to China. China WILL build refineries. Oblaamama has sold out the Saudis again. The fucking Saudis are so Jonesing for the US the fuck with ISIS. Ain't gonna happen.

And I have been drinking. Again.

Fri, 06/20/2014 - 07:29 | 4877286 Jumbotron
Jumbotron's picture

Sigh.....this douche nozzle STILL doesn't get it.

It's NOT about the total amount of oil's about the amount of CHEAP oil that's left.

CHEAP to extract....CHEAP to refine....CHEAP to derive.

CHEAP oil has peaked.  There is a LOT left....not to mention total agregate left in the earth to find.

But the CHEAP stuff has peaked and is in decline.  And it is precisely this CHEAP oil that has fueled our Utopia since the late 1800's.  Our Utopia can not exist in a EXPENSIVE energy regime.  Period.  End of story.

To make up the difference in the lessening of CHEAP energy we have introduced Ponzi Economics.  That can only last so long.  And that is peaking as well.

Thu, 06/19/2014 - 21:05 | 4876196 fonzannoon
fonzannoon's picture

The fuckfaces on CNBC were debating the merits of this

all day today. One of the meathead retards kept claiming that he had a long commute to work there everyday and was afraid a bridge would fall down at some point if they did not fix it. He did not mention specifically what bridge it must not have occurred to him that whatever bridge it was had been paid for 100x over and he was still paying $15 round tripo to cross it and never wondered where that money was going to. But the gas tax rev will certainly go into the right hands and not ket skanked along the way.....

Thu, 06/19/2014 - 21:14 | 4876221 I MISS KUDLOW
I MISS KUDLOW's picture

stay calm and drive on

Thu, 06/19/2014 - 21:18 | 4876240 BandGap
BandGap's picture

You watch CNBC?

Thu, 06/19/2014 - 21:29 | 4876277 rosiescenario
rosiescenario's picture

....and are dumb enough to own up to it here?

Thu, 06/19/2014 - 22:00 | 4876431 I MISS KUDLOW
I MISS KUDLOW's picture

actually if you are smart enough and see thru the bullshit u can still make money by watching maybe one little thing for the week, its better then watching judge judy and for example the other morning they had the nigeria oil minister on claiming that they wouldn't be selling oil to the united states anymore? I questioned why inquiering minds want to know, but they never said, never got that part of it

Thu, 06/19/2014 - 22:01 | 4876441 fonzannoon
fonzannoon's picture

The day someone creates a channel with just tickers streaming across it and hopefully naked chicks washing cars somehow involved I will stop having to keep on such shitty channels just to see updated quotes running across the screen.

Thu, 06/19/2014 - 22:06 | 4876473 BringOnTheAsteroid
BringOnTheAsteroid's picture

I'm not sure bending over while doing chores looks good even on a super model.

Thu, 06/19/2014 - 22:22 | 4876536 Flakmeister
Flakmeister's picture

Cool Hand Luke has a 48 year head start...

Thu, 06/19/2014 - 23:12 | 4876711 thamnosma
thamnosma's picture

well, this isn't a bad take off on it either...

Fri, 06/20/2014 - 04:22 | 4877174 BringOnTheAsteroid
BringOnTheAsteroid's picture

I sir, stand corrected.

Thu, 06/19/2014 - 22:29 | 4876561 JohnG
Thu, 06/19/2014 - 22:19 | 4876523 WillyGroper
WillyGroper's picture

And let's say you work for any of the retail brokerages, think it might be on all day there?

Thu, 06/19/2014 - 21:33 | 4876299 F0ster
F0ster's picture


Thu, 06/19/2014 - 21:05 | 4876197 Wahooo
Wahooo's picture

Always thought it interesting that just two years after Nixon unpegged the dollar from the gold standard and pegged it to oil, OPEC raised oil prices to raise the value of the petro-dollar. That couldn't have been a coincidence.

Fri, 06/20/2014 - 20:06 | 4879562 lunaticfringe
lunaticfringe's picture

Not to worry. We have the Department of Energy which was created to reduce our reliance on foreign oil. They have been around for 40 years now and I am sure they are close to a solution.

Thu, 06/19/2014 - 21:11 | 4876199 dryam
dryam's picture

Yep, this is where the rubber meets the road.  Rising oil prices are the kryptonite to the western central bankers & their manipulation of the 'markets'. 

This is my personal pick for the one thing that makes the Ponzi crash.  All the other black swan possibilities are fun to ponder, but much less unlikely to be the cause.

Thu, 06/19/2014 - 22:25 | 4876547 WillyGroper
WillyGroper's picture

I wouldn't be so sure.

You can live without oil, NOT water.

With water being monetized the globalists are going to control life itself.

This guy may be right about the SDR among other things, but it sounds to me like he's listening to the "Insider" Rickards. What I don't like about Rickards is the speed in which he talks as though trying like hell to convince you, like any other swindler, I can't say I completely believe him.


Thu, 06/19/2014 - 23:30 | 4876776 dryam
dryam's picture

I agree with you about Rickards.  It's hard for me to put my finger on it, but I get the distinct impression he has an unseen agenda.  I had a favorable opinion of him in the past, but not so much now.

Thu, 06/19/2014 - 21:07 | 4876202 29.5 hours
29.5 hours's picture



" the average leftist seems to believe that everything the establishment does somehow revolves around oil"

Yeah, it's just leftists who have such weird ideas about petrodollar regimes...




Thu, 06/19/2014 - 21:30 | 4876282 Yes_Questions
Yes_Questions's picture



I agree.


as if anyone awakened to the petrodollar regime remained tard'd (left or right) much longer.






Thu, 06/19/2014 - 21:09 | 4876208 greatbeard
greatbeard's picture

>> the average leftist

WTF is that? 

Thu, 06/19/2014 - 21:11 | 4876213 fonzannoon
fonzannoon's picture

the leftist slightly above the below average leftist and slightly below the above average leftist. That is my take anyway.

Thu, 06/19/2014 - 21:41 | 4876334 shovelhead
shovelhead's picture

Trick question.

All leftist are average.

They believe in equal outcomes.

Thu, 06/19/2014 - 21:40 | 4876337 shovelhead
shovelhead's picture

Trick question.

All leftist are average.

They believe in equal outcomes.

Thu, 06/19/2014 - 21:14 | 4876219 29.5 hours
29.5 hours's picture

apparently the original poster thinks a large proportion of ZH are average leftists. This is a quaint idea.



Thu, 06/19/2014 - 21:22 | 4876258 therover
therover's picture

A left handed pitcher with a 9-8 record and 3.25 ERA.

Oh sorry, that's an average lefty.

Thu, 06/19/2014 - 21:29 | 4876280 Seasmoke
Seasmoke's picture

That's easily worth $12 million a year for 4 years. 

Thu, 06/19/2014 - 21:59 | 4876427 Flakmeister
Flakmeister's picture


The average lefty is 0-2 with an ERA of 4.75 in 65 games having faced all of 66 left handed hitters...

That's good for 3 years and 2.5 million....

Thu, 06/19/2014 - 22:52 | 4876627 swmnguy
swmnguy's picture

Indeed.  That would be the LOOGY (Left-handed One Out GuY) relief pitcher, for those of you who aren't baseball fans.

Thu, 06/19/2014 - 21:14 | 4876220 pakled
pakled's picture

Hmmm. Weak.

Thu, 06/19/2014 - 21:16 | 4876227 Seize Mars
Seize Mars's picture

Ok fellahs here goes. Pay attention. Oil is dollars. Right? Get it? Petrodollars?

If oil has a high "price," then they can issue more dollars.

If oil "price" is low, they can issue fewer dollars.

Now, let's assume you are in the business of issuing dollars. Would you rather oil is "high," or "low?"

Now let's say we find out that there exists a hell of a lot more oil than was thought previously. Would you, the dollar issuer, rather that people believe oil is scarce?

Now, let's say

- you're a dollar issuer

- you find oil supply is large (it isn't scarce)

- demand is falling

Now what would you do? Would you be OK if some quack wrote a little bell curve on a piece of paper and declared "peak oil?" Would that fit with your agenda? Further, would you be ok if people believed the "environment" will be better off if we centrally manage consumption of oil (and hence tightly control "price?")

Moreover, would you think that the battle to control oil production in the Middle East would be nice so you could better control supply?

Just sayin.'


Thu, 06/19/2014 - 21:27 | 4876271 disabledvet
disabledvet's picture

that's why the key is natural gas...not oil. that's also why this article makes no sense...but would if it tried. namely "it's all about Gazpromia" as indeed "it" is.

Natural gas has displaced the valuable energy substance on earth...that is not oil but coal.
Oil is only of tremendous value because it is easy to transport and can easily be converted into other fuels.

Natural gas however is THE feedstock for the chemical industry...meaning "it's a lot more valuable than either coal or oil."

if the petrodollar continues to collapse (why else would prices keep rising) then obviously the real question becomes "what of natural gas?" and the answer is "the USA is swimming in the stuff." If the President et al were serious about energy policy they would be in North Dakota right now to put an end to flaring of natural gas. That would increase supplies while saving the environment...nay,'s all but a slogan.

If the Federal Government were serious about keeping people warm they would head not to Venezuela but West Virginia. Nay, veerily..."all but slogan."

The fact of the matter is no one has any clue where all this money is going. So they "default" to inflation and blow shit out their ass. Revert to a gold standard and then you'll see how your money is in fact being spent.

Thu, 06/19/2014 - 21:33 | 4876298 dryam
dryam's picture

Seize Mars,

Are your frontal lobes impaired right now?

Thu, 06/19/2014 - 21:40 | 4876328 Seize Mars
Seize Mars's picture

Take a deep breath.

Now, do you understand what the word "Petrodollar" means?

Take another deep breath.

There, there you go...

Thu, 06/19/2014 - 21:34 | 4876291 CrashisOptimistic
CrashisOptimistic's picture

I sense the ZH meme to focus on "petrodollar" this and petrodollar that derives from . . . yes, financial mindset, but also from a disinclination to think about joules.

If one currency changes to another according to the ratio of the day, I suspect the "priced in dollars" issue is probably a lot less important than widely thought.

What is important is this:   use the dropdown lists to find China and look at their black line of oil consumption.

Do the same for India.

There are no dollars on those graphs.

There is a quote being recycled today:

"Chinese don't want to ride bicycles anymore.  This is the most important development in the history of humankind."

Thu, 06/19/2014 - 21:39 | 4876323 Seize Mars
Seize Mars's picture

Ok, go back and re-read my post. This time, take "dollars" and just substitute "pieces of paper with occult symbols on them." The idea is identical, no matter which little pieces of paper we're talking about.

Thu, 06/19/2014 - 21:40 | 4876329 CrashisOptimistic
CrashisOptimistic's picture

Not relevant to the issue of volumetric scarcity.

Thu, 06/19/2014 - 21:42 | 4876343 Seize Mars
Seize Mars's picture

It's like Stockholm Syndrome.

Ok, look. Is oil scarce? Or abundant?

If, by hypothesis, it were abundant, wouldn't the creators of paper money want - really, really badly - for it to appear scarce?

Thu, 06/19/2014 - 21:47 | 4876360 CrashisOptimistic
CrashisOptimistic's picture

So you think they got to BP, the creators of the data from which that graph was drawn?

How many BP analysts preparing that data were killed to keep them quiet?  Do you have their names?

Thu, 06/19/2014 - 21:51 | 4876387 Seize Mars
Seize Mars's picture

Sorry bro your link doesn't seem to be working.

Don't hyperventilate. I respect you, you're a smart guy. All I am saying is try to think about the fact that oil can best be understood by the way money works, not the other way 'round.

Thu, 06/19/2014 - 22:04 | 4876456 Flakmeister
Thu, 06/19/2014 - 22:07 | 4876474 Seize Mars
Seize Mars's picture


Ok I got it. Thanks, it's great data. But all I am asking is for you to challenge your understanding for a moment.

Again, imagine that you're in the business to print money. Wouldn't you really, really want oil to appear scarce? What other paradigms would you rig in order to support that?

Thu, 06/19/2014 - 22:26 | 4876539 HardlyZero
HardlyZero's picture

Fiat currency value requires 'control' of fiat value by the printer.

If Oil was very scarce that would not help your fiat, unless you also were 'in control' of the Oil or scarcity.

Rising Oil prices helps those that control the Oil supply, those now in control.

If you control the valued commodity then your fiat is highly valued.


If you are "out-of-control"  (e.g. Zimbabwe ) then the lack of leverage means high commodity prices only damage the population and their fiat currency.

Thu, 06/19/2014 - 22:29 | 4876566 Seize Mars
Seize Mars's picture


Excellent. You've got it.

Thu, 06/19/2014 - 22:27 | 4876553 CrashisOptimistic
CrashisOptimistic's picture

If I was in business to print money, I'd have done my dissertation on currency stresses throughout history.  And long before that in undergraduate school, the econ 101 prof would have taught their golden rule:

Nothing stays scarce if its price rises.  Production rises with price.

This is why I would not need to be conspiratorial.  If the price gets high enough, I will presume volumetric scarcity will fade.  Not because anyone is faking anything.  But because it was Econ 101.

Raise the price, the factory makes more. 

Suppose it doesn't.  I'll actually say, it does.  Econ 101 is right.  If the price of oil was high enough, you could go get Titan's methane and make oil from it. 

But Econ 101 didn't look at harmonics generated from step functions.  Suppose the production is not linear with price?  Suppose you get 75 million bpd at $90/barrel, but you don't get another upward increment of production until price triples.  Ya, $250/barrel and still 75 mbpd.  You gotta get to $270 to get another 5 mbpd (to 80).

THAT is the problem of the Chinese consumption graph.  And btw, they buy a shitload of cars Every Single Year.

Thu, 06/19/2014 - 22:36 | 4876586 Seize Mars
Seize Mars's picture


I hear you. Supply and demand. Got it.

But supply is (let's say) abundant. So let's control the shit out of supply. In fact let's stage invasion after invasion to control supply. Then, let's jack prices. Cool? Now, would that benefit an issuer of paper money?

(By the way, how did all those hydrocarbons get on Titan? Did Titan have ancient forests and dinosaurs that "turned into" hydrocarbons?)

Thu, 06/19/2014 - 22:54 | 4876640 StychoKiller
StychoKiller's picture

It's a little known fact that Sauropods were a space-faring species! :>D

Thu, 06/19/2014 - 22:02 | 4876444 shovelhead
shovelhead's picture

Where did you get the idea that printing dollars were tied to oil.

If that were true we'd be swimming in oil.

What he's talking about is the end of other countries having to use dollars to buy energy.

We'll be swimming in devalued dollars...for a while until a new reserve currency regieme takes over.


Thu, 06/19/2014 - 22:11 | 4876491 Seize Mars
Seize Mars's picture

I do what I can to help.

But when someone says

Where did you get the idea that printing dollars were tied to oil...

then I just have to say, "ah, well."

Thu, 06/19/2014 - 22:19 | 4876524 shovelhead
shovelhead's picture

I'm not suprised in the least that's all you would have to say.

Thu, 06/19/2014 - 22:23 | 4876537 Seize Mars
Seize Mars's picture

Ok let's not devolve into ad hominem bullshit.

Oil is related to money production. I think that should be pretty apparent.


Thu, 06/19/2014 - 22:35 | 4876574 shovelhead
shovelhead's picture


Nothing there that ties money printing to oil. Absolutely no correlation proved.


BTW: I believe it was you that started with the snarky.

Ah well.

Thu, 06/19/2014 - 22:39 | 4876594 Seize Mars
Seize Mars's picture

Ok, mea cupla. Sorry for snark. Here is a quote from the wikipedia article.

The brilliance of the petrodollar deal was that it mandated that all transactions actually be settled in U.S. dollars creating a world-wide demand for dollars that previously didn't exist. The petrodollar system also meant that the U.S., the largest consumer of oil in the world, gained the power to buy oil with a currency it can print at will.

Ok not that wikipedia is golden, I'm just saying that one must look at oil as a financial asset.

Thu, 06/19/2014 - 22:00 | 4876429 Flakmeister
Flakmeister's picture

That is not how it works...

Not even close...

Thu, 06/19/2014 - 21:17 | 4876234 Yes_Questions
Yes_Questions's picture





Thu, 06/19/2014 - 21:17 | 4876238 First There Is ...
First There Is A Mountain's picture

Wait just a minute. Some guy on the fracking thread said everything was going to be alright cuz like the Bakken is producing 500,000,000.000 barrels of oil a day....and it's totally safe!! 

Thu, 06/19/2014 - 21:40 | 4876333 CrashisOptimistic
CrashisOptimistic's picture

It's about 1 million bpd.  The US burns 17ish mbpd.

Thu, 06/19/2014 - 21:18 | 4876242 Yen Cross
Yen Cross's picture

  Has anyone noticed how tight the spread between Brent and WTI is?



Thu, 06/19/2014 - 22:00 | 4876434 Flakmeister
Flakmeister's picture

It has been widening of late...

Thu, 06/19/2014 - 21:25 | 4876264 The Duke of New...
Thu, 06/19/2014 - 21:30 | 4876283 Seize Mars
Seize Mars's picture

Sorry, OT but important:

As it turns out the Las Vegas killers were indeed police informants.

Funny how that keeps happening! And this time with a gadsden flag plus a Nazi thing! Who could have known.


Thu, 06/19/2014 - 23:58 | 4876865 Radical Marijuana
Radical Marijuana's picture

Yeah, Seize Mars, it is important to remind us of how totally screwed up everything is, so that even those who try to keep up with the layers of possible conspiracies fail to do so.

Hence, the most pithy statements tend to be made by comedians with a macabre sense of humour:

No matter how cynical you become, it's never enough to keep up.

I tend to believe it is an objective fact that the strip-mining of the planet's natural resources is reaching the point point of diminishing returns. However, since civilization is actually controlled by systems of legalized lies, backed by legalized violence, which have become entangled into hyper-complexities, it is no longer possible to have enough reliable data to figure our how bad things really may be.

In that context, articles by Brandon Smith tend to strike me as a more and more bizarre mixture of truth and lies, which is kind of "natural" inside of a world where the runaway systems of lies backed by violence have become so criminally insane that anyone attempting to be able to present those as if they make sense is merely indulging in their own versions of personal insanity.

Hey, do not get me wrong, I am am not excluding myself from those meta-communications about the nature of our problems. As far as I can tell, every important "terrorist" event that I have ever bothered to investigate has turned out to very probably have been some kind of inside job, false flag attack. Inside of that context, how the hell is one supposed to figure out anything relatively more objective, such as how much natural resources there actually are! The "real" world is so totally dominated by triumphant systems of legalized lies, backed by legalized violence, that I NO LONGER BELIEVE THAT ANYONE KNOWS WHAT IS TRULY HAPPENING.

Fri, 06/20/2014 - 00:34 | 4876943 Seize Mars
Seize Mars's picture


Yeah, I see what you're saying.

Fri, 06/20/2014 - 12:03 | 4878161 Panafrican Funk...
Panafrican Funktron Robot's picture


This is a very lucid thought, but now consider the onion analogy.  What we basically have is a big, rotten onion.  The two unknowns are:

1.  How big

2.  How rotten

Instead of spending time trying to assess either 1 or 2, we could simply assess the situation as "it's a big, rotten onion, lets throw it out".  This I think is the genesis of the "reset" ethos.  

Thu, 06/19/2014 - 21:30 | 4876284 rosiescenario
rosiescenario's picture

China aint going to be selling many widgets to the U.S. if the price of oil goes up a lot....they might wish to rethink their whole deal with Russia on currencies.

Fri, 06/20/2014 - 12:09 | 4878176 Panafrican Funk...
Panafrican Funktron Robot's picture

You may want to reconsider your thought based on a multi-currency view of the price of oil.  The price in USD may go up significantly.  That does not necessary have the same meaning for the price of oil in yuan.  Consider a scenario in which Chinese products become significantly more price competitive via a petroyaun system; while the total customer spend pool would be smaller in the US, it would win a greater share of that pool, and you would additionally see much more robust Chinese domestic demand. 

Thu, 06/19/2014 - 21:30 | 4876288 yogibear
yogibear's picture

Killing up the petro-dollar should the target for all countries outside the US.

The Federal Reserve and corrupt politicians have abused their printing power for decades.

The Federal Reserve has export massive inflation outside the US. Now it's time for the US to see massively destructive inflation levels.

Thu, 06/19/2014 - 21:33 | 4876295 kchrisc
kchrisc's picture

Going to be singing "When It's Over" soon.

Thu, 06/19/2014 - 21:35 | 4876307 F0ster
F0ster's picture

Gold will keep up with oil, like today

Thu, 06/19/2014 - 21:38 | 4876319 Duc888
Duc888's picture



"A very real danger within energy markets is the undeniable threat that the U.S. dollar may soon lose its petrodollar status..."


Little late in the game to actually start to fret about that.  It's a done deal.

It's all over but the cryin'

Thu, 06/19/2014 - 22:02 | 4876445 Flakmeister
Flakmeister's picture

It ain't over until the House of Saud sings....

Fri, 06/20/2014 - 00:24 | 4876924 TruthTalker
TruthTalker's picture

They are singing - just in the shower - they will sing in public soon enough

Thu, 06/19/2014 - 21:48 | 4876370 kchrisc
kchrisc's picture

"Modern wars are rarely, if ever, fought over resources, despite what the mainstream gatekeepers might tell you. If a powerful nation wants oil, for instance, it lines the right pocketbooks, intimidates the right individuals, blackmails the right officials or swindles the right politicians. It has no need to go to war when politicians and nations are so easily bought."


I do not believe this to be true. It is not specifically about the resources themselves, but is definitely about the profit to be made from said resources. Profiteers and rent-seekers employ the violence of government to gain control of various points of resource extraction and refinement. Like a vertically integrated company, these criminal entities wish to gain access to a resource higher up the chain and then squeeze more profit out of it.

Remember, the tanks of the DC US drove straight to the Iraqi Oil Ministry in 2003, and not to the cultural centers. The reason was to enable the quick repudiation of Husein's oil extraction and refinement contracts with Russia, France and China that he made in anticipation of the sanctions failing/ending.

Fri, 06/20/2014 - 12:14 | 4878201 Panafrican Funk...
Panafrican Funktron Robot's picture

Yeah, but Afghanistan doesn't really have a lot of oil.  Why did we go there?


Thu, 06/19/2014 - 22:12 | 4876409 HardlyZero
HardlyZero's picture

Tangible worthy things always need to back fiat currency in a controlled manner.

Gold, Oil, Land, commodities; all back(ed) fiats.


As control of Oil resources falls away so does control of fiat value.


4 major out-of-control rolling stones are changing many fiat currencies:

1. Oil and Natgas resources.

2. Chinese commodity collapse...which may lead to out-of-control futures and commodity markets (re-hypothocated and leveraged over the last decades).

3. Real estate bubble.

4. Credit and finance expansion collapse, which was also funding 1,2, and 3.


Many bankrupt countries (e.g. Argentina) are leading the way.

There are two ways to control these things: politics, wars. 

Thu, 06/19/2014 - 22:01 | 4876436 KansasCrude
KansasCrude's picture

Is this some kind of joke....."Peak Oil is nonsense".  No doubt the Petrodollar is in danger and that is bad for US gas guzzlers....but I call that a double whammy Peak Oil and the demise of the petrodollar.  Major adjustments coming SOON!

Thu, 06/19/2014 - 22:15 | 4876509 shovelhead
shovelhead's picture

I'd like to say that you're wrong but those wiggly lines on those graphy things seem to all have a general downly pointing aspect.

Thu, 06/19/2014 - 22:06 | 4876442 Flakmeister
Flakmeister's picture

This article is a certifiable POS....

Thu, 06/19/2014 - 22:09 | 4876484 shovelhead
shovelhead's picture

Fiat = Backed by nothing but a declaration.

Like your post.

Fri, 06/20/2014 - 00:56 | 4876549 Flakmeister
Flakmeister's picture

How about factually challenged...

The Russo-Sino deal was NG with nary a drop of oil mentioned...

Thu, 06/19/2014 - 22:15 | 4876505 surf0766
surf0766's picture

o' and his crew want $10 gas and the lose of the petro dollar


Thu, 06/19/2014 - 22:17 | 4876516 lakecity55
lakecity55's picture

The article did not make a lot of sense.

Somebody posted this while the Tylers were at lunch?

Thu, 06/19/2014 - 22:29 | 4876565 FrankIvy
FrankIvy's picture



WTI has been going up linearly since about 2000, with the exception of the 08 spike and fall.  In the last 4-8 years, U.S. gasoline use has declined and U.S. oil production has risen.

Oil production around the world has been relatively flat.

Conclusion - easy to get to, cheap oil is gone, we're now spending more money to get to the oil and get it out, and so cost is rising.

Not difficult to understand.

And, contrary to the article, this all happened while the dollar was still the petrodollar.

Thu, 06/19/2014 - 23:35 | 4876794 Magooo
Magooo's picture

Uh hum... BP begs to differ with you:


“World oil production increased by just 560,000 b/d in 2013, less than half the growth of global consumption”

Thu, 06/19/2014 - 23:35 | 4876796 Magooo
Magooo's picture
David Frum, the Iraq war and oil The former Bush speechwriter confirms what has long been the most ridiculed claim about a key reason the US attacked Iraq
Thu, 06/19/2014 - 23:36 | 4876797 Magooo
Magooo's picture
Iraq invasion was about oil Maximising Persian Gulf oil flows to avert a potential global energy crisis motivated Iraq War planners - not WMD or democracy
Thu, 06/19/2014 - 23:36 | 4876802 Magooo
Magooo's picture



Why the Oil Industry is Running Into Major Trouble







Thu, 06/19/2014 - 23:40 | 4876815 Magooo
Magooo's picture

In reality, oil demand has become static and is even falling in many parts of the world, while new oil and gas-producing fields are discovered on a yearly basis. Petroleum is not a rare resource — at least, not at the present. And the propaganda surrounding the “peak oil” Armageddon scenario is pure nonsense. Oil prices, unfortunately, do not rise and fall according to supply - instead they rise and fall according to market tensions and, most importantly, the value and perceived safety of the U.S. dollar. Supply and demand have little to do with commodity values in our age of fiat manipulation and false investor perception.



Duh - of course if we have peaked half the oil remains ---  so there is a lot left --- you are such a fucking genius!!!


BUT - there is a problem:



According to the OECD Economics Department and the International Monetary Fund Research Department, a sustained $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second years of higher prices.


since you are operating on an sub 80 IQ I will spell this out for you ... if 10 bucks does that to growth --- then what might 110 oil do to growth


How about 147 buck oil --- which hit a couple of months prior to the near collapse of the economy?


Connect the dots you fucking bumpkin idiot


And ZH -- why are you publishing this total horse shit?

Fri, 06/20/2014 - 00:22 | 4876909 Radical Marijuana
Radical Marijuana's picture

Magoo, I like Gail Tverberg's take on this problem, regarding how the issue of diminishing returns initially shows up as the inability of enough people to be able to afford more expensive resources, which then can become an automatic downward vicious spiral.

Demand destruction appears to be the first step towards destruction of the population. At no point in the past several decades has it ever been possible to get enough people to become sane enough to address these issues. My sense is that we have run out of time ... without some series of technological and political miracles, then the collective consequences of the overwhelming attitudes of evil deliberate ignorance towards our problems are going to overtake us!

I do not believe that the established systems of the deceitful ruling classes, and the deceived people they rule over, are able to summarily bootstrap themselves up out of the vicious ruts they have jointly dug themselves deeper and deeper into. Hence, my main objection to Brandon Smith is his residual optimism, which results, in my opinion, in some extremely bizarre mixtures of facts with fond fantasies, which made this article look like the work of an idiot savant, who should be working for Goldman Sachs, rather that publishing in Alt Market, which Web site is such a classic example of controlled opposition, that its ironic achievements are record breaking examples of how the reactionary revolutionaries can present their own bullshit with such confidence.


I WISH that I could present my own bullshit with similar degrees of confidence, however, I can not manage to maintain that, even to myself. I have discovered that I was deceived far too many times in the past to not suspect that I am somehow still be being deceived, although I am not currently aware of how that may be happening, and so, tend to still indulge in the notion that, somehow, NOW I know better, and so, "this time it will be different."

Fri, 06/20/2014 - 00:37 | 4876954 Seize Mars
Seize Mars's picture

The only bumpkin idiots are the ones foolish enough to travail at your shitty vol shop.

Thu, 06/19/2014 - 23:48 | 4876839 luckylogger
luckylogger's picture

This is all fine and dandy until one of the new currencies crashes and big corporations and governments looses billions and it comes to a quick disaterous end..............

Like it or not, non of these countries have a very good track record......

Trade in iran buks......

yeh, get real

maybe venezueala buks.......

That will work if you spend them in 2 minutes..............

All I can say is good luck...

Fri, 06/20/2014 - 01:06 | 4877009 Flakmeister
Flakmeister's picture


Losing Reserve status is not an event, it is a process that takes years. Much the same way Peak Oil is a process...

The dollar is with us for the foreseeable future. In fact I will predict that it will be the last fiat standing...

Now that could take anywhere from 3 years to 50 years, all depends on the flight patterns of large back water fowl....

Fri, 06/20/2014 - 03:54 | 4877157 smacker
smacker's picture

I agree.

Whether it's 3 to 50 years, I dunno. I tend to think of it in terms of a generation.

Similar thing happens with empires...they rarely demise in an overnight event, but over a long period of time. The British Empire was an example.

We should be grateful for this extended period since it reduces the chaos and disruption.

Sat, 06/21/2014 - 14:19 | 4880828 morongobill
morongobill's picture

Unless we go out like the Soviet Union.

Fri, 06/20/2014 - 01:09 | 4877012 Bunga Bunga
Bunga Bunga's picture

OIL 500, you heard it here first!

Fri, 06/20/2014 - 04:11 | 4877168 Thomas the Crane
Thomas the Crane's picture

Thank you for explaining this. Yes, it is obivious that the dollar is being trashed (but of course not before the bankers have exchanged trillions of dollars of fiat paper for hard assetts) which will probably cause tremendous upheaval which will probably be used to justify the "solution" of a new world currency -- The Reset.

However, what I still do not fully understand is the - for lack of a better word - experiment taking place in the USA. If hyper inflation hits and people begin to starve, all hell will break lose, they'll be fighting in the streets. What is the Grand Plan for the USA? 

Fri, 06/20/2014 - 05:33 | 4877211 Winston Churchill
Winston Churchill's picture

Whar is a USA ?

That is the plan.Its disolution into four or five regions is predictable.

Fri, 06/20/2014 - 05:41 | 4877214 tulip_permabull
tulip_permabull's picture

The Grand Plan is for something similar to the Morgenthau Plan with the principle role of the US to be a food producer for China. Going to need a lot of mestizo Indians to work those collectivized farms. 

Fri, 06/20/2014 - 05:45 | 4877218 Ocean22
Ocean22's picture

USA has been targeted for destruction. Agenda 21 et al. Not a pretty picture. We better wake up pronto. ( it's already too late)

Fri, 06/20/2014 - 07:00 | 4877260 vyeung
vyeung's picture

write a whole bunch of boloney when you can summarize by "death of petrodollar, through de-dollarization and house of saud annex". Talk about late to the party. Useless article.

Fri, 06/20/2014 - 07:53 | 4877319 esum
esum's picture

ussa is economically WEAK and hence the dolla is weak..  

Fri, 06/20/2014 - 10:09 | 4877693 falak pema
falak pema's picture

the age of eco disasters; lack of basic resources and polluted eco systems coincides with the age of rarified cheap fossil fuel. The move to coal will be inevitable as there is not enuff liquid of high quality or accessibility.

More coal burning means more CO2 capture and use for enhanced oil recovery or for plankton/photosynthesis type projects.

Its an ugly fifty years ahead when conventional oil becomes illiquid; around 2030. 

We have no anwser from renewables as the storage/flux density, as the EROI generated overall, is still below conventional grid power  cost/loss for it to replace fossil as mega energy generator. A long way to go and the world economic model and consequent population will shrink bigtime in 2050 onwards.

Sounds ominous; Iraq is just the second asymmetric war playground--after Nam--that the Oligarchy will impose on Man. Its back to the dark ages of Vertical societies and sanctuarised castle domains and shrivelled shanty towns existence. Think Favellas of Brazil/Mexico and thats the future of the world.

Sad and dog shit bad and it makes me mad that I'm not Zeus with my thunderbolt. The age of heroes is upon us to get us out of the neo con hell invented in DC/WS of extreme vanities. 

Agamemnon would be proud of his current criminal minded descendants. Its time to launch the war on organised criminality of global proportions. 

Fri, 06/20/2014 - 10:41 | 4877827 SmittyinLA
SmittyinLA's picture

Liberals would rather bomb a 3rd world village or risk nuclear war with Russia than cut spending.

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