Why Oil Prices Will Be "Lower For Longer" In 3 Simple Charts

Tyler Durden's picture

History may not repeat... but it does rhyme!

 

A pattern emerges - from investment to exploitation...

 

It's deja vu all over again...

 

And it's different this time...

 

Source: Goldman Sachs

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SickDollar's picture

by trying to hold on to the market share they might just shoot themselves in the foot, GREED IS POWERFUL

 

NihilistZero's picture

If QE was about creating serious consumer price inflation we could have had 6 years of a negative income tax rebate that would have spurred consumption.  The reason inflation has been mostly confined to food and energy is that is where the speculators, the real targets of QE benefits, have been playing.  That has reached it's natural end as without wage inflation demand at those speculator driven prices peaked last year and will continue dropping.  Prices are now adjusting accordingly.  This was and is the only possible outcome of QE as it was done.

Unless the FED starts doing helicopter drops, and they won't deflation will continue.  This is by design.  2008 happened so fast that the oligarchy was ill prepared to take advantage of the deflationary cycle.  The banks were under capitalized and so was the oligarchy, at least in terms of being able to swoop in and take over assets en mass,  The echo bubble blown by QE has recapitalized the banks, moved their bad assets in to specuvestor hands and further enriched the oligarchy.  Now they arer pulling the plug so that the .01% can feast on the deflationary carcass of our economy.  In the words of Will Graham "This was their design."

Steroid's picture

Exactly!

They will own everything like the Bourbones.

NihilistZero's picture

Truthfully they already own everything!  Bank+Government = Interest+Taxes ON EVERYTHING!  This is why the REO rental model was bullshit and the REITs cashed out last year.  Why own a property and be responsible for dealing with tenants, maintenance, etc when your REIT can buy low, roll into a rental backed security, liquidate your position in the REIT, and then buy the properties AGAIN after the crash to flip to the lowly home buyers who just wanna live there?  Then our lovely banking industry gets 30 years of interest payments and .gov, as always gets their property taxes.  And the happy homeowner after 15 plus years of RE insanity is happy to be a debt slave and HELOC every other Christmas to keep the economy bustling.

They own the only thing they ever needed to, and that is the money supply.

Steroid's picture

Correct. The futer tense is just to show that they can still fuck it up like the Bourbones did.

They were close in 2008.

0b1knob's picture

The bottom in oil prices will be easy to spot.    When Exxon make a major acquistion at one times cash flow that will be the bottom.

Exxon has been around through several cycles.   Watch what they do.

847328_3527's picture
BP to freeze pay worldwide in 2015

 

Bob Dudley, CEO of the London-based company, announced the freeze in a message to employees Jan. 26. BP would not comment to Reuters, but a spokesman confirmed the freeze.

 

http://www.bizjournals.com/houston/news/2015/01/26/bp-to-freeze-pay-worl...

 

willwork4food's picture

Yes, I have to agree with Nil. If I was one of the NWO powerbrokers nearing the end game, I would want deflation. Scoop up the assests cheap, give a few bill to the millitary police and wait for it to end with a NWO cyber currency. No secrets, no IRS problems. Total control.

me again's picture

Very interesting analysis. Are you going to post your observation of this event and a link when you see it  / ?

pugsnotdrugs's picture

Agreed! Sell any rallies in WTI for now..

LawsofPhysics's picture

Let's see what happens when the majority of the "tenants" of the corporation of the united states of america start starving. 

The former soviets have been through this before.

same as it ever was, until it isn't.

 

They own the money supply you say?  what would that be exactly?   FIAT comes and goes...

NihilistZero's picture

Yet the owners of the fiat stay the same and continue to run the game.  I wonder why that is...

LawsofPhysics's picture

Bullshit, on what timeline? I think the asians may disagree.

Please, many people come and go in the club. With great chaos will come great opportunity.  Don't be such a pessimist and pussy.  No risk, no reward right?

interesting times.

NihilistZero's picture

I'm in the "Meet the new boss, same as the old boss" crowd. Ethnicity is immaterial. The power is always in the hands of the "Big Club". If you aren't born into the oligarchy, your chances of joining the club are infinitesimal. Sure tomorrow's money masters may be Chinese, but it will surely be the Chinese that were already in power for generations. We are less than nothing to the lot of them.

rogerrabbithole's picture

Exactly. Wann know who the oligarchs of capitalist russia are? The same mother duckers who ran the USSR, or their children. 

The experiment of America is over until Americans have a revolution of thought and all take the red pill, which simply will not happen. Our society is too drunk on comfort to see what's going on. We're doomed to serfdom (well, not me cause I been stacking).  

TruthInSunshine's picture

China is in the process of being permanently locked into place as a 2nd rate economic power.

They'll never be allowed to obtain the third leg of the stool of 1st Nation economic status. By the time the dust settles, they'll be happy to export goods on the cheap indefinitely for 0% real wage growth and close to MAYBE 1% real GDP growth for each of the next 50 years.

Japan has been neutered, and South Korea is on deck.

The BRIC wall is being taken down, brick by brick, as we speak.

Captain Kink's picture

Well said. Globally, there is nothing but decline.  If the US had its shit together, it could be in a position to maintain dominance for the next several decades...

NoDecaf's picture

I see Ben Bernanke logged in to give you your only down arrow.

LawsofPhysics's picture

As someone who provides REAL products that require REAL inputs (like diesel fuel).  I still see plenty of inflation motherfucker.

6+ fucking years of giving free money (QE and ZIRP - ZIRP HAS NOT STOPPED either) to the fucking bankers and financiers and we wonder why none of it made it to main street, but somehow the political puppets also got a lot richer.

Apparently, people really are ignorant sheep to be slaughered after all.

NihilistZero's picture

As someone who provides REAL products that require REAL inputs (like diesel fuel).  I still see plenty of inflation motherfucker.

What you aren't seeing is the type of broad inflation that should be seen vis-a-vis the liquidity the FED created, motherfucker. 

And has not your diesel price dropped recently?  Proves my point that it was unsustainable...

And nobody is going to be starving in the USA anytime soon.  We're still burning our food as fuel for fucks sake!  Stupidity is everywhere...

And seriously, don't come off as such a butthurt faggot because someone slightly disagrees with you.  Makes you sound like...  Well...

A fucking butthurt fag to be honest.  :-)


LawsofPhysics's picture

Actually I thought we were saying the same thing.  I didn't junk you but don't be giving yourself away now.  And no, diesel has not come down significantly.

 

As far as starving goes, I recommend talking to the soviets about just how fast "low prices" becomes shortages.

Yes, prices were low for a long time, you just couldn't find anyone to actually provide shit.  Go ahead fuck over the farmers, see what happens.

"winning"

lincolnsteffens's picture

That was under price controls. When you set the price well below the cost of production the result is an empty store. At some point if a free market is allowed between a willing seller and a willing buyer, neither being under any duress,  that will determine the price. So while the Soviets produced less and less under forced or controlled labor no outside neighboring states or producers were willing to sell to them below their production costs.

post turtle saver's picture

I've been around a few years on this mudball... I've lost count of the number of "fucked over" farmers I was supposed to feel sorry for... from being at ground zero for Farm Aid to present, I've never seen a bigger group of fucking whiners in my life... agriculture is subsidized up to its eyeballs, if you can't make money farming then you really need to consider another line of work... hell, even the sharecroppers I know live better than I do...

NihilistZero's picture

Sorry if I misread Laws, but it seemed you were calling me a motherfucker for no good reason. If I failed to get you phonetically, I apologize for my acerbic retort :-)

Either way I agree with the exceptionally articulate response below. We are headed for deflation as the FED could have stimulated demand side inflation if they wanted to, but the didn't. They're telling you all you heed to know...

Remember the relatively good retail season around the 2010 tax cuts. That was demand side stimulating QE. At the same time houses bottomed that cycle. Why do you think they stopped? Putting that into overdrive surely would have gotten used higher inflation. Unless that's not what they really wanted...

BigJim's picture

You're correct, both in being acerbic to LoP (who is indubitably a touchy little jackass, even if he's pretty much right most of the time) and also about the money masters' choice of bailouts. They could have bailed out Main Street; this would have caused massive inflation in everything but financial assets... ie, the rich would have become (relatively) less rich.

Can't have that now, can we?

The only way this endless ass-reaming comes to an end is if the people understand the system and rise up.

I don't see that happening any time soon, do you? Though monetary consciousness seems to be on the rise, we're still a tiny percentage of the population.

Get out there and communicate, people. We need to be spending less time here, agreeing with each other, and more time on sites like Huffpo and The Guardian, castles of Statist thought. Lefties won't read Mises.org or ZH; but they will vociferously debate if you enter their castles and challenge their 'ideas' in the comments section.

NihilistZero's picture

Disagree on massive inflation. Helicopter Drop QE more than likely would have just slowed the job losses and maintained consumption levels closer to the peak. Only way you could've got demand driven CPI inflation would have been if QE caused consumption to exceed the 2007 peak. That wasn't happening unless they litterally went batshit crazy and dropped 10K plus in each and every citizens account.  Even then you would have had a lot of people just pay down debt.

BigJim's picture

Well, the Fed added ~$3.3T to their balance sheet. If that had been spread across 330M housholds, that would have been $10,000 each!

Although he's a Keynesian, I do like Steve Keen's ideas on this subject. The Government just 'gifts' everyone $100,000 but if you're in debt you have to pay it down. This effectively acts as a debt jubilee but doesn't disadvantage savers at the expense of borrowers the way ZIRP does.

me again's picture

Diesel has come down very significantly; as everyone already knows. you really should just stay home in Mom's basement and stop pretending. (for ignorant of the laws of physics and everything else).

Double.Eagle.Gold's picture

I run a small trucking company, see the monthly bills for Diesel.

 

Where are you buying your Diesel?

 

lakecity55's picture

Wait, serfs, you thought QE was an attempt to fix the 'markets?'

Hahahha, it was to make US filthy rich while everyone else loses their ass, hahha!

Pareto's picture

Laws.  I have to agree with Nihlist.  Commodity retreat (just obseve the CRB), is symbolic ofnorhting short of delfation - price deflation that is.  This should come as no surprise.  It didn't work for FDR.  Nor Nixon, or any other Keynsian monetarist.  And the reason why you won't see price inflation is because debt is thwarting demand.  the credit cycle bid up asset prices - as you would agree - and at the same time shouldered both HH and government with huge debt.  QE fuels expenditures that are not backed by anyting durable or real.  And now, as we've already contended on this site by many that therre simply isn't enough collateral to cover all the borrowed shorts that went long long.  Its done.  Its over.  Stick a fork in it.  I think where you have something that will remotely reflect price inflation will be hyper inflation which results in a loss of confidence in the currency - Ruble, Swissie, $Euro,$CDN to name a few.  But that too is another matter.

Fact is, Lucas (1976) demonstrated that at the end of the day people's expectations (including firms), recognizing that increases in price are arriving not as a result of demand (volume), rather it is because of prices of assets being bid up as a result of QE.  People and firms do not suffer from money illusion.  In the case of consumers they will spend less to pay down debt, but, also to accommodate for future increases in taxes that they know is going to happen as a result of fical stimulus.  Firms, recognizing that the demand pressure is not a result of volume (real demand), but as a result of price (which is a monetary phenomenon) will actually hire less, and not more people in an effort to preserve their income statement.  There is a great piece done by Adrian Ravier showing an upward sloping Phillips curve where both inflation and unemployment rise after the initial  short term party that ensues from QE.  All that to say - a bet on inflation on is only a sure bet if unemployment is low to begin with and there is no debt.

Salah's picture

Then maybe Putin's econ-intelligence on the West is much better than assumed, because the guys I know in the UAE believe it was the Russian invasion of Georgia that triggered the 2008 debacle less than a month later.

hedgeless_horseman's picture

 

 

I do wonder if our government isn't selling oil into the open market, from the SPR, at a low price, and buying from domestic producers to refill the very same SPR at a higher price, off the market, with The Fed making up the difference in freshly printed USD, because that would be stealth QE for the US economy and an attack on our Russian enemies all in one swell foop.

hedgeless_horseman's picture

 

 

What is even better than Ben's Helicopter Money?

Mr. Yellen's Stealth QE!

winchester's picture

all BS, it is stable for weeks now...

blindman's picture

Frank Zappa - Trouble Every Day
https://www.youtube.com/watch?v=girnJH7tvpM
.
.. no way to delay ..." f.z.

Pareto's picture

+1  he he heee.  Mr. Yellen.  sorry, but, i laugh every time.  i know.....i'm already going to hell.

Romney Wordsworth's picture

 "if our government isn't selling oil into the open market, from the SPR, at a low price, and buying from domestic producers to refill the very same SPR at a higher price"

 

I doubt it would even occur to anyone when you plug that into 'Russians'.

 

Now ~ if the same ploy were used to smash oil so that Goldman Sachs could fill up some SuperMax tankers & screw the muppets in a few years, then I'd believe it.

Soul Glow's picture

Demand to drive in the US is low and has been declining for years.

Back then the manufacturing sector hadn't been moved abroad yet.  While oil prices were high the oil sector was one of the last proitable production businesses.

I woke up's picture

With a third of the country not working why would they have to drive?

SelfGov's picture

Peak oil never looks so apparent.

Sophist Economicus's picture

These guys don't read Peak Prosperity with its deep bench of analysts like Mattheson, CHS, Taggert, et al.    Cause if they did, they'd know we're all screwed and we would have locked in our oil supply at $100/barrel instead of....oh wait.....

disabledvet's picture

"Everyday is exploitation day.". That's why they call it a resource!

 

Everyone knows why prices rise.

When prices fall however they start grabbing their computer screens and shaking the holy heck outta 'em!

GIABO's picture

As soon as NWO removes PUTIN, MADURO AND ROUHANI from power gas will go back up. What NWO is doing to the price of gas is an act of war.

falak pema's picture

lol, big if, do the NWO residual elements have the power to pull the rug?

They can't even win the war in Syrac! 

Rainman's picture

Fear not , citizens , you energy junk bonds gots em right where you wants em.