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What Saudi Arabia Told The Bank Of England About Why Oil Crashed And Where It Is Headed Next
Prepared remarks as delivered Dr Ibrahim Al-Muhanna, Advisor to the Minister of Petroleum and Mineral Resources for Saudi Arabia, at the March 15 Institute of International Finance Spring Membership Meeting.
The Global Energy Outlook
Ladies and gentlemen.
It is good to be back with you in Doha. Thank you for inviting me to speak about the international oil market. As you all know, the oil market keeps changing, the price fluctuates and supply and demand are constantly shifting. Most of the time, the change in the oil price is small, other times it is large. During the past 40 years, the oil price has sharply risen or fallen at least 12 times, half of which was due to reasons such as politics, war, natural disasters or sanctions. The other half were due to market forces, which includes oil producer policy, such as production cuts or increases, strong economic growth or slowdown, or due to various financial crises.
In June 2014, just nine months ago, the oil price stood at around $115 a barrel. It then fell to just over $45 last January. Nobody anticipated this price fall, or the speed at which it fell. And despite an army of experts and analysts who would like you to think otherwise, no one can accurately predict what the future holds. We all have expectations – but the chance of being wrong is the same as being proved correct. One thing is certain: rapid price movements are not healthy for producers or consumers, or the oil industry, or indeed the banks.
Ladies and gentlemen. A few weeks ago, in Riyadh, I was at a small, private function along with the British central bank governor, Mark Carney. Mr Carney asked me two questions. First, why did the oil price drop? And the second, where is the price heading?
I will tell you today what I said to him then.
I do not believe the fundamentals of supply and demand justified the sudden and rapid price fall during the second half of last year. The market was balanced, and commercial stocks were within their normal range. Yes, supply was starting to increase, but demand remained strong and there was not a very sudden rise in commercial stocks.
I believe the price fall can be put down to expectation and speculation. It was not about fundamentals. It reminded us of 2008, when all the speculation was that we were running out of oil resources and limited production capacity. The recent price fall was due largely to expectation and perception about future supply and demand. Also similar is the wrong assumptions of changing Saudi oil policy, and the ever-present – and incorrect – belief in conspiracy theories.
So let me set out some of the events that had an impact. By late-June, 2014, some forecasts talked of over-supply by the end of the year, and into 2015. The price started to go down slowly to $100, and then to $90 during the following month. In October 2014, a senior OPEC official was asked, at a private dinner in New York, if he thought prices would drop to $80. He said anything is possible but, if it happened, many oil producing countries could handle it. During the same week, in London, another official was asked the same question and he gave a similar answer. Then rumors began to circulate that Saudi Arabia, and perhaps some OPEC producers, wanted lower prices. People started to speculate as to why this may be. And strange and wrong assumptions started to go around. Many analysts started to focus on political reasons, instead of economic ones, such as planning to harm other nations for political goals.
In the same month, there was another incorrect assumption. Saudi Aramco changed its price formula for Asia. A leading US newspaper report specifically used the phrase “price war”, saying Gulf producers were at war on prices. These Aramco prices, by the way, rise and fall, month by month, and are driven purely by business imperatives. Saudi Aramco has never been in a price war with anyone. Then an article by Thomas Friedman suggested Saudi Arabia’s policy – in coordination with the Obama administration - was aimed at hurting Russia by lowering the oil price. This idea was a rehash of assumptions that first reasoned the oil fall of the 1980s. All complete fantasy.
As often happens, many commentators confused cause and effect. Are lower prices bad news for Russia? Yes. Is it bad for Saudi Arabia? Yes. Is it bad for the industry? Yes. Does Saudi Arabia set the oil price? No.
Did it cause the lower price for political or economic goals? No. Claims to the contrary are untrue, full stop. Yet rumors and conspiracy theories grew bigger and bigger, and the oil price was going down. We tried to stress the facts on the grounds but it wasn’t easy to convince people. A herd mentality took over.
In early November, Minister Naimi visited Venezuela for a climate meeting, and also met with the Venezuelan foreign minister, Mr Ramirez. He was keen for concerted action in terms of production and was soon on a globe-trotting mission to attempts to convince other OPEC and non-OPEC producers that this was the way forward. He had our support.
On November 25, 2014, one day ahead of the OPEC meeting in Vienna, Saudi Arabia, Venezuela, Mexico and Russia had a private meeting to discuss possible joint production cuts. Neither non-OPEC producer was prepared to cut. They have their own reasons. So OPEC took a bold decision. In the current circumstances, it could not act alone. It agreed to keep the same production level and to let the market balance itself.
Soon after the OPEC meeting, various theories were put forward about OPEC’s and Saudi Arabia’s intentions. The conspiracy theory shifted completely. From being against Russia and/or Iran, to being all about hurting US shale oil production. And others said OPEC was dead! It was like staring into a mirage. It was all nonsense but it does have an impact on the direction of the oil price, at least for a couple of weeks.
Ladies and gentlemen. I will now talk about the second question put to me by Governor Mark Carney: where’s the oil price heading? Minister Naimi is often asked this question and he replies: if he knew the answer, he’d be in Las Vegas. None of us know the future.
Once the conspiracy theories lost their allure, serious commentators got back to the fundamentals, and the price started to stabilize around $60 during the past few weeks. With this in mind, I have reasons to be optimistic. It’s my view that optimistic and positive people are more right than wrong. I’m confident that demand is, and will be, stronger. I’m also confident that supplies will be just sufficient to meet demand and that prices will firm up.
Why am I confident in both the short and long term? First, I believe the global economy will continue to grow, especially in emerging and developing countries. Second, the global population will continue to increase and third, day after day thousands of people enter the middle classes and this will further increase demand for energy. Europe may be the exception, but overall the global picture remains positive.
The problem, as I stated at the outset, is wild price swings, up or down. These are no good for producers, consumers or investors. Oil is a long-term business, requiring long-term plans and long-term investor confidence.
As I said, I do not believe the recent huge price drop is justified only by a change in fundamentals. As with all markets, there is an element of herd mentality that can often take over. One thing that will never be in short supply is analysts predicting the worst. Some want to take extreme views for their work to be read, noticed, and get quoted.
While keeping optimistic about the future oil market, we have to keep in mind that oil prices, and supply and demand, are ever changing. The best way to minimize their negative impact is to resist the conspiracy theories and correct the misinformation.
Saudi Arabia is, and remains, committed to stable oil prices that are fair for producers and consumers, and fair for the global industry and global economy. We want a transparent and balanced oil market. We seek to meet the demands of our customers. We have a long-term view, and we do not make knee-jerk reactions to headlines.
Thank you for listening.
* * *
And now a special challenge for Zero Hedge readers: spot the number of lies uttered by the advisor in the text above. We exclude his repeat denials of the "conspiracy theories" - those don't count.
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Move the death star above SA.
Fire when ready.
We are the key producer of oil in the world and have been for decades. Nonetheless, we have NO IDEA why the price of oil dropped in half withing a few months time. Yes, we know the causes of the last 25 large price movements to a fine decimal point, but in this case we're as clueless as everyone else is. Must be speculators or something.
This is the kind of story I get from one of my kids when they forget their jacket on the school bus.
"Thank you for listening."
Fuck you very much, too.
WHile this article is a couple months old, it has a pretty good run of the history of the price movement (and lots of charts) ...
http://www.vox.com/2014/12/16/7401705/oil-prices-falling
SA didn't give a shit that prices were falling. Almost all producers needed higher prices, but none were willing to cut because they need the cash flows.
Prices are down because for most of 2014 demand lagged supply. There is probably a financial aspect once prices moved by a large enough percentage.
Prices will go back up when demand goes back up ... or enough supply goes offline.
The fix for low prices is low prices. The fix for high prices is high prices.
Regards,
Cooter
... spot the number of lies uttered by the advisor
Word count – 1,383
Number of lies – 1,383
Looney
P.S. Should I seasonably-adjust the numbers? ;-)
"On November 25, 2014, one day ahead of the OPEC meeting in Vienna, Saudi Arabia, Venezuela, Mexico and Russia had a private meeting to discuss possible joint production cuts. Neither non-OPEC producer was prepared to cut. They have their own reasons. So OPEC took a bold decision. In the current circumstances, it could not act alone. It agreed to keep the same production level and to let the market balance itself."
This is all you need to know. If Mexico, Venezuela and Russia agree to play, there will be production cuts andthe price will rise. If not, the price will stay low...until Mexico, Venezuela and Russia agree to play...
Wouldn't it make complete sense that if Country A was global reserve currency, to get its way or to inflict pain, financial instruments / commodities / flow of funds / forex / treasury rates would all be used as acts of war?
Price fell because of speculation? Bullshit. US is engaged in war, period. Survival depends on it. Supply demand mean NOTHING when you control all the purse strings.
When it becomes serious, you have to lie.
Jean-Claude Juncker.. Straight from the horses orifice
"Ladies and gentlemen"
Well..., I think I spotted the first lie...
First, I believe the global economy will continue to grow, especially in emerging and developing countries. Second, the global population will continue to increase and third, day after day thousands of people enter the middle classes and this will further increase demand for energy.
All 3 are poor assumptions
I am deeply offended by your downvote, please explain yourself.
I quit reading when he started talking to me personally about being a Conspiracy Theorist.
Fuckin A-Rabs. Whatchu think they're wearing under those dishcloths? Fuckin' Gold-Foil Hats is What. Gold-Foil.
Rich Pricks.
I quit reading when he started talking to me personally about being a Conspiracy Theorist.
Isn't that a prerequisite for joining this site? If I can't blame the NWO, Obama, the Fed, or at least Putin for my problems, I might have to start taking responsibility for my own life.
Bottom line - as long as we need it we'll keep buying it until we can't afford to do so. So, put a tiger in your tank.
Actually here are the conclusions one can draw:
1.) Thomas Friedman is an asshat. (I'd say that irrespective of this article.)
2.) The House of Saud will say anything to keep them clear of "conspiracy theories"/truths.
3.) The House of Saud wants you to believe that there are no winners or loser in oil price fluctuations.
~"The problem, as I stated at the outset, is wild price swings, up or down. These are no good for producers, consumers or investors. Oil is a long-term business, requiring long-term plans and long-term investor confidence."~
Horseshit. Go fuck a camel.
Don't bother me now effendi.
We've got the Hadj coming up and have to figure out this African jihadi Ebola thingy.
---Prince Yuwannanycondo
damn saudi evil shits. they use their money to support insane schools all over the world, and their graduates cause death and destruction. What is the holdup with the israellis nukeing the neighborhood? Oh, thats right, sept. I would not short the market in sept.
You mean Carney & Co. didn't know and had to be told?
Only ZH knew, no!
You knew, didn't you?
ah the old no conspiracy theory conspiracy, I am not sure if the auther is allowed to say that I believe the FBI have it copyrighted (CIA Document 1035-960).
http://www.foreignpolicyjournal.com/2013/12/09/the-no-conspiracy-theory-...
First he is lying. If SA wants a higher price, they can certainly slow production or manipulate futures. They want to hurt Russia specifically to advance Natural Gas sales and control Europe's supply.
Hurt Russia or bankrupt it. Get Russia in bad stead with Europe over phoney Ukraine issue. Meanwhile create ISIS with CIA to weedwack a pipeline from Quatar through Iraq. Overthrow Syria's Iran friendly government and run pipeline through Syria. Install puppet regime in Ukraine and put Joe Biden's son on a Ukrainian energy board. Eventually run Nat Gas through ISIS controlled sectors through Turkey into Europe. Steal all business from.Russia.
There's conspiracy theory right there. Follow the money and let's reconvene in decade to find out its truth
First, it it is good that you repeat the headline; That means we got you.
Second, you cannot reconize fluff and feathers when you see it.
Third, whats on 'Dancing with the Stars' tonight?
And a five and a half year guy too.
Recycling much?
conspiracy theory conspiracy is a conspiracy fact.
I think this sentence should have been more focused on...
" Europe may be the exception, but overall the global picture remains positive."
I quit reading when he started talking to me personally about being a Conspiracy Theorist.
Zerohedge published this BECAUSE it is a lie. Your loss Knucks.
Here is the last line of the article...
And now a special challenge for Zero Hedge readers: spot the number of lies uttered by the advisor in the text above. We exclude his repeat denials of the "conspiracy theories" - those don't count.
What is funny is that the largest lie is that Saudi Arabia does ot set the price.
Europe is supposed to be exceptional because its Middle Class is shrinking is another bullshit statement. (So has the USA's Middle Class been in decline.
The propaganda written within this article is preposterous. In fact since you are reading Zerohedge you may not be as open to accepting it as most. Ideally because you are here you are interested in critical analysis.
Yet, there are many more uneducated and less skeptical that will buy this bullshit and take this bait...hook, line, sinker, and bobber. They are not into critical analysis but desire to be told what to think so that they do not sound stupid to the rest of the herd.
But refusing to read it because you disagree with it is not the mark of a skeptical mind, Knucks. Is indicates that you just want to read ideas that will confirm your own biases.
There may be a diametrical difference in Herd Mentality here and the Herd Mentality in the Main Stream.
But Herd Mentality is ridiculous regardless where it is applied. Herd Mentality is still Herd Mentality.
(IT is like those who claimed not to read my musings yesterday. They demonstrated their own lack of mentality. Good. And I still teach homeless how to construct BOMBS.. It does not change anything...regardless if they want to read that...or not.)
And it is your loss if you want an Echo Box.
thus my call for the establishment of OFEC - the Organization of Food Exporting Countries. our goal is to maximize food prices, use food as a weapon, politicize food, and create new levels of dictatorial plunder. more oligarchies too!
Interesting, will the OFEC members be driving tractors powered by diesel or the sun?
you see my point then - not.
peanut oil - we can make perfectly good diesel engines that will run on a very sustainable supply of diesel oil and say Fuck You to at least one faction of the NWO
How fast can that peanut oil be produced, because we will burn through it quickly. The spice must flow...
the spice cannot flow without OFEC's say so...
'Bout the same cycle as corn.
(snigger)
i run on seal oil ...
...... I like a tight seal.....
https://www.youtube.com/watch?v=zSi-yCV-gQ4
couldn't help it :)
Money has to flow too. Thats why its called CURRENCY. Big part of the economic shitstorm we find ourselves in is because the BIG BOYS have gotten too big. And they want more (of course). So you have money not being spent, the same as it would be, in the hands of peasants, I mean working class adults. Instead the price of yachts and marble counter tops has gone up, and Dollar Store sales have also gone up.
So have the Dolla Sto's cost 'ev gone up.
http://www.fivebelow.com/
By a mucho higher percentage.
Give 'em a choice, no oil = no food or oil = food. One would be food will win.
ALL Diesel Engines can run on vegetable oil...NOW!
Ever stop to think that "vegetable oil" is current solar energy. "oil oil" is...well millions of years of compressed stored, hyper energized solar energy. Just because an internal combustion engine can run on it doesn't mean it can replace oil. HOw much land would it take to porduce the same enrgy we consume now. HOw much land would be left to grow unimportant things like...food. How much energy does it take to produce this energy compared with traditional oil?
Big problems. Little time left
If you have ever been near enough to a tractor burning food oil as a fuel to smell it you will know one of the best side benefits of this technology- they smell like donuts cooking. Ummm!
mmmmmmmmm donuts........
OMFG!!! Millions of years prior to tractors, however did plants grow? Brawndo?
Ever look at a cornfield from above? There are no rows to walk down, for people or animals. Before diesel tractors, every row or two of plants had enough space for a person to walk between the plants so they could be tended one by one. With modern farming, there is almost no space between plants. Same with tomatoes and several other foods. You'd have to decrease your output by 75% or so.
The tractors will be powered by human shit. They will have shit powered engines.
does not make a difference why it went dow nor when and by how much it reverses. There are a lot of speculators/traders leveraged to oil and if long they had to close positions.
Just thinking, oil here is stil down and gasoline up--is aviation fuel up and if it is, if airlines hedged oil but not aviation fuel the hedge was meaningless.
but the key is stil whether in prec metals or oil there are too many contracts open for eh real stuff to be traded--that means speculation and none of us really know who the plalyers are. .
Just when I'm getting ready for work I have to count the lies and now my shoes have to come off, sheesh!
So if he lies to Carney then repeats what he said is that one lie or two? Arrgh this one is tricky!
I would suspect carney knows exactly what is going on, and wouldn't bother to ask dumb questions like that. That would be like Jamie dimon discussing a lunch he had with Ben bernanke and saying he asked bernanke what's been causing stocks to rise or why the housing market collapsed.
"Prices will go back up when demand goes back up ... or enough supply goes offline."
Demand can't recover to early 2000s levels, it can only grow (rebound) at the expense of (other) discretionary spending. This is what "limits" look like. But as we are endlessly told, discretionary spending is down. This is consumer margin compression. It is also mean-reversion - back to the days when a household might spend 3/4 of its wages (or labor, interchangeably) on energy (mostly food). Needless to say, that is the death of consumerism. But what enabled people to drastically reduce their energy expenses while vastly increasing their energy consumption? The very thing increased demand "should" get rid of - cheap energy. Oil prices would go back up when oil demand goes back up but oil demand will only go up when oil prices remain low. [It should be obvious by now, but if not, just think of a person's wages as barrels of oil rather than dollars or euros. To increase that amount, people either have to work more, or the labor-to-oil ratio must fall. The only thing that made the labor-to-oil ratio so low was the cheapness of oil 'recovery' relative to the amount of labor it required. History will record that oil was never in fact cheap, because it was nearly always and everywhere purchased on credit, that is, with interest-bearing debt instruments - everyone here knows exactly what I'm refering to, and hopefully also knows that metallism's death neatly coincides with the start of the oil age, but that's another topic.] Cutting supply to balance with demand cannot solve the lack of demand problem, not when there's a hard floor (rising, too) beneath production costs. You can shut down all the shale, tar sands, natgas, and offshore production, it won't make the all-time best and cheapest fields any more or less past-peak.
That said, lack of demand is only a problem if you're an energy rentier or an energy producer. Fortunately this only includes about 90% of commercial entities and countries in existence today.
Me thinks he doth protest too much
Looks like something Martin Armstrong would pen but with spell check.
Had the same thought but couldn't remember the blowhard's name. Thanks ;]
We printed alot of paper money, We f-cked our petroldollar vendors, Our turn to get f-cked.
Once upon a time I told a lie in a private...
Total Bull SHIT stating no price variations.......this gent is lying out his ass.....Oblama gets to crush the shale industry and hammer Russia in on big swoop. Thats what's for dinner.......now eat your peas.
Want proof, read below from WSJ.
"Saudis Increase Oil Price in U.S., Cut It for Asia
U.S. Price to Go Up 15 Cents a Barrel, Asian Buyers to Pay 90 Cents Less, Saudi Aramco Says"
http://www.wsj.com/articles/saudis-increase-oil-price-in-u-s-cut-it-for-...
"Oblama gets to crush the shale industry and hammer Russia in on big swoop."
Maybe O'bomber and the lying fucktard should get on the same page.
"In an interview on Monday, US President Barack Obama admitted that falling international oil prices are part of a strategy aimed at weakening the Russian economy. In an interview with National Public Radio Obama said sanctions on Moscow and the cut in oil prices are designed to pressure Russia to change its policies on Ukraine"
Obama admits falling oil prices aimed at weakening Russian economySo Russia does not sell any oil in USD?
"So Russia does not sell any oil in USD?"
Russia is the number 2 oil exporter in the world @ 7.2 bbl/day. Number three isn't even close (1.8 bbl/day). I'm sure its just a coincidence that the House of Saud is number 1 @ 8.865 bbl/day. - all numbers 2012
That is just Obama trying to take credit for something he has no power over. Makes him look capable when he has done nothing. Maybe intentional to drive Puutie a little more nutty, but probably not considered as a strategy by incompetent Obama. Only strategizing he does is to figure out where the Chuum Wagon should park on the golf course.
Destroying Saudi Arabia would raise oil prices! Nooooooooo
ST pain/LT gain.
China, Gold, SDRs And The Future Of The International Monetary System https://www.bullionstar.com/blogs/koos-jansen/china-gold-sdrs-and-the-fu...
my roomate's step-mother makes $79 hourly on the laptop . She has been fired for 10 months but last month her pay was $18694 just working on the laptop for a few hours. see here... www.globe-report.com
SA, the new Alderon!!
"I believe the price fall can be put down to expectation and speculation. It was not about fundamentals"
Speculation? You don't say....
Keep in mind that "speculation/speculators" are the boogeyman that politicians love to jump on to excuse market fundamentals. They are an intangible force of nature that politicians would have you believe are constantly out to destabilize and ruin the world for everyone.
Speculation is a zero-sum game. You have speculators on both sides of a trade (often including governments), the side that wins when the market moves steals the gains and the other side loses.
In other words, speculators are the go to scapegoat for any kind of bad political or economic event, when often it is .gov acting like tards.
such an "irresponsible" use of the dreaded word "speculation" by a Saudi Petrolium Ministry strategist as such is an interesting fact
your "speculation is a zero-sum game", though, is not enough, for me. it implies that "the boyz should be free to bet on whatever they choose to bet on"
speculation on wheat, rice and other food commodities, for example, already caused famines and food riots, worldwide
your logic and moral high ground on this - if taken to it's logical extremes - is that if all the warehouses full of wheat belong to you, thanks to peaceful exchange, then you have the moral right to burn half of them down and make a huge profit out of the squeezed market, then it's not your fault that the harbour of your medieval city is currently frozen and shut. A logic that has been applied to some Hanse Cities, in the past, with the result that Some People Get Strung Up
financialization has led to moar speculation. credit expansion has led to moar speculation. QEs have led to moar speculation
this does not make the moral aspect of the markets less important. speculation is benign when it leads to... more stable prices. not when it makes wild swings to cater for vol "riders" and speculator's profits only
Simply pointing out that in 99.9% of the uses of "speculators are doing X, or Y" it is a cop-out, a way for politicians to shift the blame from their own mismanagement of various economic instruments onto the markets.
"speculation on wheat, rice and other food commodities, for example, already caused famines and food riots, worldwide"
I shall retort to your favorite saying here. Any evidence for this? I'd have to see irrefutably that someone's speculation CAUSED (not correlated with) such events. More likely I would say that famine, food riots etc. are caused by poorly construed political initiatives, inefficient economies, or genuine supply/demand characteristics. Could speculation make said factors worse? Possibly, but that doesn't absolve people of the underlying fundamentals.
"your logic and moral high ground on this - if taken to its logical extremes - is that if all of the warehouses full of wheat belong to you, thanks to peaceful exchange, then you have the moral right to burn half of them down and make a huge profit out of the squeezed market, then its your fault that the harbour of your medieval city is currently frozen shut. A logic that has been applied to some Hanse Cities, in the past, with the result that Some People Get Strung Up"
You're confusing market power with speculation here. Being a monopolist (having market power) is nothing to do with speculation. I agree that, on the whole, monopolies are very bad. Adam Smith would also be inclined to agree. Monopolies in food do tend to get people hung, yes. Because you are starving your neighbors to line your pockets.
"financialization has led to moar speculation. credit expansion has led to moar speculation. QEs have led to moar speculation"
Again, a lot of assumptions and not backed up with evidence. I will mention some more on QE and credit expansion below...
"this does not make the moral aspect of the markets less important. speculation is benign when it leads to... more stable prices. not when it makes wild swings to cater for vol 'riders' and speculator's profits only"
Firstly, markets are not moral. They just are. They exist based on supply/demand characteristics and the actions of the market participants. Morality is a sociological, or ethical issue.
As for "more stable prices" governments often enforce price stability in markets, or at least suppress volatility. Unfortunately this makes:
- Volatility more likely (in probabilistic terms) to occur the longer it continues.
- The degree of volatility much greater when the suppression actually cannot be continued. See: The Swiss Franc debacle.
This can be modelled with many phenomenon such as landslides in nature, or price shocks in markets. See: QE, "macro prudential" policy, ZIRP, NIRP etc. All examples of governments suppressing shorter term shocks over a period of time. When the dam breaks it is going to be an epic dislocation. It will affect everyone, and speculators may profit, but they will NOT be to blame. It will be governments.
If I choose to profit off of something stupid that a government has done, don't make me out to be a bad guy. Your issue is with the government for their moronic policy in the first place. The government will try to demonize me as a "speculator" of course, as they always do, but in entering the markets themselves, they are in fact speculators too. They are taking a contrarian position to mine.
Who are you going to hang? The intelligent investor who is trying to claw out a living for himself? Or the morons who suppressed price volatility in the first place and caused even greater volatility when it could not be maintained?
My final point: as long as you continue to demonize speculators.. I would posit that you are doing HUMANITY a disservice. There are always going to be people seeking out opportunities in places where they exist. Always. But until people actually begin to hold governments accountable for their reckless actions, we will see increased volatility, increased speculation, a lack of prosperity etc. As long as you (and others like you) are shifting blame from bureaucrats to investors, that will not be addressed.
bro, excellent points. I, btw, am not on the side of those that demonize speculators (and damn why so many assume I'm a bureaucrat. I'm a small entrepreneur)
I am just pointing out that wild swings aren't what makes the markets the darling of the masses
as I pointed out elsewhere, the first speculators in a market are benign: their net effect is to smooth prices, in collaboration with the warehousers
but claiming that markets and morals have to be separated... is bad rationalization, imho. one ultra-liberal bridge too far
modern markets aren't the theoretical fiction of Adam Smith, and they don't police or clean themselves up, that should be clear by now
Markets do more-or-less self-regulate. Yes, I know I've studied the "imperfect market" theories which are so popular and are rife in academic circles these days. Some do hold weight, such as public good provision. Unfortunately government is rather ineffective and also often tends to create even bigger volatility shocks. See: the subprime crisis. Student loan bubbles. Sovereign Debt bubbles. All due to chasing favors from the voting public, and short-term policy making.
I'm not claiming that markets and morals have to be separated. I'm claiming that the market mechanism makes no such distinction between moral and immoral. If the participants choose to price morality into it (as they may well do) it is still just the market mechanism.
On Adam Smith: Adam Smith talks of perfectly competitive markets, which is kind of the Unicorn of economics. In theory it is what you want. In practice it is hard, if not impossible to obtain. Markets do self-regulate I'd wager, but just over longer time periods than most people care to consider. And either way, i'd still sooner vote in favor of the market mechanism, over a group of 60 year old bureaucrats in a dingy room.
much, much better. in such a perfect market theory world, several existing stock exchanges would have rivals, by now
but again, in other words: markets are often barely tolerated... because they claim to be more efficient
if they produce too much turbolences and damages... then their claim is taken with a huge mountain of salt
well, then voices against the evil speculators come back, in force
Definition of zero sum game - for every winner there's a loser,...
only the definition presumes that it's a fair game is also implicit.
What herd mentality? How many "speculators" get to play indefinitely at the no limit table with trillion dollar chips?
The mythology of the markets.
Nobody said the game was fair. The game is just the game. Of course there are matters like concentrated market power, barriers to market entry, informational asymmetries etc.
But how does that excuse policy makers from making very poor policies? In fact, I posit that if you removed all regulations and subsidies for corporate entities, you would see most of them go bankrupt overnight. The system props up corporates, banks etc. and also enforces regulations, administrative quagmires, taxes etc. which put the little guy out of business.
Edit: And yes, it is a zero sum game. It might be 1 (big) winner, and 3 million (small) losers. It does not have to be a one-for-one winner:loser relationship.
Just give everybody a trophy for participation and be done with it.
Nobody said the game was fair? Guess you've never heard of CNBC, Bloomberg, the WSJ?
Oh I have. I use them as one of many early warning signals of market crashes. Typically whenever they start raving about something, it is time to sell.
It may be fair or not. But it is definitely UNJUST---much more important than 'fair'....
Ghordius, you sound like a true centrally-planned market supporter. Don't let anyone speculate and let the market forces be damned, we're going to plan this out for everyone.
How well has that worked out for you in the past? I'm guessing many millions of people who were killed as the result of central market planning in the past century would probably disagree with central planning... Just sayin'
For real man. I've been arguing with communists and interventionists all day. I'm starting to truly believe that Europe's biggest problem is the attitudes of its people, and their inability to just accept that things are bad and try to make their own opportunities.
Might have to learn Mandarin, or Cantonese and move east at this rate.
Ya, central planning fans always love to promote moar central planning to correct the problems caused by their initial attempts at central planning. The very definition of stupidity and insanity is expecting moar govt intervention to solve the problems caused by govt intervention. Round and round we go.
Yup. I have an avid Krugman reader (and a follower in his footsteps) on social media. He posted a blog entry in the NY Times (I think?) from Krugman, basically stating just that..
"People are scared. QE wasn't big enough."
So, at exactly WHAT point does QE become big enough Mr. Krugman? When will you personally accept that consumer confidence was fragmented in the Financial Crisis and there are real world constraints on just how much leverage a household can take. Or how much an individual can consume (not statistically independent, of course.)
For a subject which claims "there is no such thing as a free lunch", Krugman sure makes it sound plausible with all his bullshit. He might want to take a wrench to his Philips Machine, and start reading some F.A. Hayek.
did I? where?
Since when has the US Oligarchy been anything except interventionist by IMPOSING on the world a dollar hegemony, unfettered to gold in 1971 BW revoke, then re-fettered to OIL from 1973 onwards ?
On that footing the WS financial plague started. And "speculating" became for $ holders a game like taking candy from a baby from European countries OBLIGED to buy fiat printed $ to buy imported oil etc. etc. etc.
Their monies were all in disarray compared to king $ who could print from the eurodollar spring of Mrs Stone in London City without the foul breath of regulators breathing down their necks. All hunky dorey as Mrs Thatcher said too !
The world, 30 to 40 years down the road, now has to get out of this $ disease created by PRIVATE enterprise from behind their petrodollar ghetto wall taking pots shots at all and sundry in a FED construct that feeds the world banksta cabal.
The day the $ hegemony falls THEN the speculation will be on a LEVEL table and we can talk about "free markets" between nation states.
Until then, the world has only one objective : kill the financialized beast of US petrodollar oligarchy that is totally incrusted in its monetary hegemony which obliges the world to counter by using EVERY financial/regulatory mean at its disposal.
Reality leads theory, not the other way round. And Markets based on USD monopoly are not free markets; as ZH keeps pointing out by quoting Amer Rothschild's old remark about controlling money line; so oft repeated here by the libertarians, to suit their own tilted view of how private enterprise in a monopoly world is deemed John Galt's paradise.
Financialization is the operative word... the big casino . place your bets.. it a game . based on assumptions fueled by paper products and central bank and corporate interference ... there is little real value except in the minds of the players who so want the big game to be based on something other than rigged system and fascist interference .. This system is not sustainable... the paper pushing casino began under Paul Volcker and James Earl Carter . got wings under Reagan .. and became a full blown Las Vegas mega casino under Clniton . Bush II and Obama .. talk about voodoo economics... the destruction of the Middle Class and the end of the third pillar of any economic structure ... manufacturing .. everything was for sale . anyone with a price .. a gutted economic model is what you got . and sooner or later the players in the big casino will discover the place has burned down around them. In 1979 Paul Volcker said . the American standard of living would have to decline so the rest of the world could rise.. so much for the notion that capitalism just makes the pie bigger . I guess they never really believed in that quaint 18th century notion anyway. The late Joan Veon pretty much nailed what took place .. http://www.newswithviews.com/Veon/joan49.htm '''''''''The law which Congress passed is called the Depositary Institutions Deregulation and Monetary Control Act (1980 Deregulation Act), which basically lifted all restrictions on U.S. banks as to the amount of interest they could pay or charge investors/creditors. At the time this was heralded as being “good” for America since banks would have to pay market rates on savings, which conveniently rose to 22% for a short period of time. That was not a bad short-term price to pay for banks being able to pay very low rates for savings and charge usurious rates for credit cards from 9 ½% to 35% with home equity lines of credit being tied to prime. The high interest rates were appreciated by the serfs who have ceased to remember their joy.
This globally trumped up liquidity and credit crunch was orchestrated by the key players: the international bankers: Goldman Sachs, Barclays, BNP Paribas, Bear Stearns, Citigroup, JP Morgan Chase, and Bank of America. They would not buy commercial paper from one another or lend to one another.'''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''
Financialization is the operative word... the big casino . place your bets.. it a game . based on assumptions fueled by paper products and central bank and corporate interference ... there is little real value except in the minds of the players who so want the big game to be based on something other than rigged system and fascist interference .. This system is not sustainable... the paper pushing casino began under Paul Volcker and James Earl Carter . got wings under Reagan .. and became a full blown Las Vegas mega casino under Clniton . Bush II and Obama .. talk about voodoo economics... the destruction of the Middle Class and the end of the third pillar of any economic structure ... manufacturing .. everything was for sale . anyone with a price .. a gutted economic model is what you got . and sooner or later the players in the big casino will discover the place has burned down around them. In 1979 Paul Volcker said . the American standard of living would have to decline so the rest of the world could rise.. so much for the notion that capitalism just makes the pie bigger . I guess they never really believed in that quaint 18th century notion anyway. The late Joan Veon pretty much nailed what took place .. http://www.newswithviews.com/Veon/joan49.htm '''''''''The law which Congress passed is called the Depositary Institutions Deregulation and Monetary Control Act (1980 Deregulation Act), which basically lifted all restrictions on U.S. banks as to the amount of interest they could pay or charge investors/creditors. At the time this was heralded as being “good” for America since banks would have to pay market rates on savings, which conveniently rose to 22% for a short period of time. That was not a bad short-term price to pay for banks being able to pay very low rates for savings and charge usurious rates for credit cards from 9 ½% to 35% with home equity lines of credit being tied to prime. The high interest rates were appreciated by the serfs who have ceased to remember their joy.
This globally trumped up liquidity and credit crunch was orchestrated by the key players: the international bankers: Goldman Sachs, Barclays, BNP Paribas, Bear Stearns, Citigroup, JP Morgan Chase, and Bank of America. They would not buy commercial paper from one another or lend to one another.'''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''
"And now a special challenge for Zero Hedge readers: spot the number of lies uttered by the advisor in the text above."
Counting the words "and" and "the"?
Not sure how many lies, but pretty sure it was ALL lies.
Considering the group he was addressing, I ran out of fingers and toes to count on soon after I finished reading "Ladies and gentlemen". I doubt there were many true ladies or gentlemen there.
Their thinking seems to be: "when the lies don't work, take the truth straight on." Bad move. They should take the reporter's question, deny it and move on. You can't explain yourself out of lies. That's called digging your own grave.
Should we cound every Paragraph, Sentence, Word or Sylabe ?
The whole fucking speech was pack of lies period...
Shit begets shit.
One - the whole damned speech was a lie
Count the number of lies? Hell, if this was a drinking game, I'd be under the table after a couple of paragraphs!
HAHAHAHAHA HE SAID FUNDAMENTALS HAHAHAHAH
One lie was the prediction of global growth. next lie growing middle class. another lie Saudi didn't cut oil production because of Unitlateral requirement for all to cut. It was probably a lie that Mark Carney asked the questions, it makes Mark Carney out to be an idiot based on the answers.
It took the goatfuckers 6 months to come up with this lie...
http://www.zerohedge.com/news/2014-10-10/why-oil-plunging-other-part-secret-deal-between-us-and-saudi-arabia
The biggest and most flagrant lie starts with..."I will tell you today, what I said to him (in a private meeting with Mark Carney)"...
So we're to believe that what was said at a high level, private circle jerk affair, will now be revealed to the masses...
I stopped reading at that point...
Do I pass the test, Prof. Tyler?
Never trust men in dresses.
especially when his name ends in Giulliani !!!
...or Cheney
...or nee Robinson.
...or Dolce and Obama.
When he says Las Vegas is he refering to Wall Street ...wait in Wall Street the odds are 100% in favor of the insiders....Las Vegas at least the house gives a couple dollars back!
Too bad I wasted my time superficially glancing over this article.
I stopped reading after his obligatory dismissal of anything 'conspiracy theory'. Everything after that was going to be disingenuous.
I wanna see 99 cent gasoline.
You win the interwebs today. I remember when I was a yungun' it was .29/gal. Sheesh.
. . . . "I will tell you today THE LIES I said to him then."
There, fixed.
https://www.youtube.com/watch?v=6K5M0xtxQVQ
LOW OIL PRICE MAY LEAD TO FRENCH FRIES BEING COOKED IN BRENT
Soy, corn and canola oils are all more expensive than Brent right now, poor families seasoning salads with gasoline. Homeless gourmets flock to petrol stations.
Source: www.financialpaparazzi.com
The only one dumb enough to publicly state that the oil price collapse was engineered to put the screws to Russia was insane John Nutjob McCain:
"We give thanks to Saudi Arabia for allowing the price of the barrel of oil to fall to a point, gravely affecting Russian economy." - John McCain ZNN interview
“Thank God for the Saudis and Prince Bandar” - John McCain
Ibrahim Al-Muhanna: the John Nadler (ex-Kitco gold denegrating BS artist) equivalent for OPEC.
Arabs - like the Tribe and the Chinese, are an ancient civil (?)-ization. Thus, being around awhile sorta hones your abilities to 'skirt', 'dance-around', or otherwise 'fabricate' a story to fit your ends. It's just part of what comes with understanding the human animal over thousands of years. Also, no one is more acutely aware than Arabs, the source of their global position - both its beginnings (the Brits/oil exploration/production) and its fragility for their sustained existence in its current form - i.e., the ultra rich, and those who get the scimitar...
So hurting Russia via low Oil prices backfired .. time to move to Plan B .. open war(?)
CIA Admitted to Staging Fake Jihadist Videos in 2010 Questions arise after experts say Foley ISIS beheading video likely "staged"
A 2010 Washington Post article authored by former Army Intelligence Officer Jeff Stein features a detailed account of how the CIA admittedly filmed a fake Bin Laden video during the run up to the 2003 Iraq war.
http://www.globalresearch.ca/isis-beheadings-of-journalists-cia-admitted...
My father, Geppetto, knows I can never lie...
Saudi's always do this during times of price shocks (up or down)....they blame it on the traders. They want their cartel to dominate the market, and they want to be able to fix global prices through it. Any oil market they don't control absolutely is bad, and those that participate in moving price against their wishes are also bad (release the jihadists!).
Feed for sheeple!
fuck ya.
I don't believe any of this bullshit for 1 second.
I see he gets very defensive when talking about oil prices. None of these players would admit to conspiracy to manipulate the price of oil. None of them talk about how the prices are manipulated. If speculation is bad for consumers, producers, and banks, as he says, how about coming out and saying we need some better regulation of the commoditiy markets? It's entirely possible these insiders agreed to take the price down, then shorted the market through front companies to collect on the ride down. And let's get something straight. Lower gasoline prices are great for me. Fuck the whiny ass producers and banks, if they really are indeed whining.
Watch crude futures make a 6 year low here, probably w/i minutes. See the monthly chart:
http://www.investing.com/commodities/crude-oil-advanced-chart
He sounds like a guy who is trying to talk his head off the chopping block.
Where is all your rigged markets headed? Depends on your definition of what is is, Bitch is.
A great, big, steaming pile of Hanky Head Bullshit!
If anything, speculators are responsible for keeping the price higher longer than it has any right to be. The world in a RECESSION. There is no demand. The US will be drilling off the continental shelf soon. PEMEX will be back online soon. Iran will be back soon too.
Let's see...no demand, lots of production, theiving, lying, dirty-bastard middle-eastern producers who are unable/unwilling to cut production, the Fed has (temporarily) stopped devaluing the dollar...
What do these things do to oil prices?
It's those dirty, evil speculators!
I guess that's the excuse you go with since the weather never changes in the Arabian Peninsula.
"I do not believe the fundamentals of supply and demand justified the sudden and rapid price fall during the second half of last year." but "The recent price fall was due largely to expectation and perception about future supply and demand"
of course we trust you
"Why am I confident in both the short and long term? First, I believe the global economy will continue to grow, especially in emerging and developing countries. Second, the global population will continue to increase and third, day after day thousands of people enter the middle classes and this will further increase demand for energy. Europe may be the exception, but overall the global picture remains positive."
I maybe coulda bought some of his crap...until I got to the above statement. Clearly, it's still all talk. Same as it ever was.
Could it be the price of oil is bouncing like an over inflated balloon because the value of the petrodollar is now unstable as a world currency reflecting an uncertain economic future ? One pin prick of numerous bubble balloons will result in economic chaos------just count the bubbles and negative impact on oil consumption-----derivatives, college loans, sub prime auto loans, Japan, RE in China etc. Seems like only war and further ominous printing will drive oil price up.
Hurt the Russians? I think not for the Russians are not mindless nor helpless. If there is a problem, Russians will find a solution, just ask Hitler....
Russians would have lost to Hitler if not for the Massive Air-Drops from the good'ol Uncle Sam and the invasion of Normandy(the last nail in the coffin).
Russians where losing 2-3 men(at a minimum) for every German KIA and the Russian population is only 1.5 the size of the German, if it was Russia vs. Germany alone Germany would win hands down.
Never believe a camel or his rider when they are trading black silk for blacker petrodollars. It a fool's paradise.
This is black dwarf telling black knight to go fight Monty Python ! Hilarious !
We've seen that movie and black knight disappears like shale's future overnight; hacked to pieces !
Their life-line as the breed of black dwarfs of Saud depends on black gold price being as unpredictable as black magic's hold on those who play the three card ponzi.
As this is the age of the three card ponzi it stays on the page of fossil plays to beggar thy neighbour in obscurantist rage. Where the "print to infinity" and "debt equals asset" money line stinks to hell, along with the black gold of oversold, fracked product of "drill baby drill" rage; all part of the huge Galtian Caymanista domain built by pumping US oligarchy's stock to a steroid injected pinnacle on the crazy "free money" speculative carry trade roller coaster.
The Oligarchy is a trans-national beast without frontiers, but it breeds its own enemies like any incestuous cabal, all the while it gets richer and the people get poorer.
Conspiracies are the daily bread and butter of all deals in a harem cultured, despotic, princely kingdom.
Market mechanisms are as strange to the Oil oligarchy of petromonarchies as open system games are to the NSA type MIIC Janissaries who run Pax Americana.
Saddam's tomb now looks like Nimrod's battered palace. So much for Arab spring fever.
Falak, brilliant...
Janisseries, that was an interesting dive...
lol, I've just finished a book on that subject; after the Crusades trilogy, the Renaissance...some awesome repeat performances now in the tube.
Remarkababble.
I dunno. He sounds so earnest. And yet, if this is just the market balancing itself, *something* has to have changed somewhere, and in a more or less unexpected direction. Markets don't collapse by 2/3 for no reason. Just "shrug" is still not an explanation.
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Al-Muhanna is a liar and a mouthpiece for the filthy arabs, nothing more.
He is deflecting blame and responsibility for the increase in production by the Saudis. The rest of the OPECerheads are furious, and the psychopathic administration is simply telling everyone what they think they want to hear, to calm them down.
An old trick.
http://www.indexmundi.com/energy.aspx?country=sa&product=oil&graph=produ...
http://www.bloomberg.com/news/articles/2015-02-19/saudi-arabia-oil-produ...
The Saudis want Iran stopped, Russian stopped, the electric car stopped, alternative energy stopped, shale oil stopped, et cetera, et cetera.
And when that’s accomplished, you will see those ßå$†å??$ reduce production and prices rise again. Way up.
Not that that has ever happened before…
•?•
V-V
How many times you have to say "conspiracy theory" for it to make it sound untrue ?!!
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How many times do you have to say 'conspiracy theory' to make it sound true?
Anyone know why the DOW is up +200 this morning?
Headlines are one miss after another and there's a fucking panic buying spree going on... WTF
Yes, because the $$$ pushing the buying is greater than the $$$ pushing the selling. That was easy..next.
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Just kidding around...this is jockeying in light of the FOMC meeting this week; bad news is good news because the market is hooked on ZIRP & QE. SO when bad news arrives, the chances of the FEDS raising interest rates becomes smaller, which is what the market is hoping for...they won't anyway and really can't unless they want to implode everything, which they may. For if they do not, then Russia, China, and the BRIICS will do it for them. If the market closes above a 1% gain, then it WILL fall on Tuesday by at last a .5%; so at the end of the day I'll be looking for opportunity in obtaining SPY-PUTS or VXX-Calls or to be safer, TVIX between $1.96-2.04..that was NOT financial advise!!
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For those who say they will rise rates; I ask "is raising rates by .25%" really count?
Funny thing about the Saudis is that they've always blamed speculators.It's like the little guy sitting at home behind his screen trading - "It's all his goddamn fault!"Does anybody even remotely believe the bullshit coming from these Arabs?
What is this "fundimentals" thing he was refering to?
If anyone of importance in Riyadh believes a word of this himself, he's either shockingly ill-informed or has taken leave of reality. Everyone knows better, including Mark Carney.
I'll give the speaker credit for underlining one thing, if for the wrong reasons. No, long-term fundamentals don't justify oil this cheap. It depends on the Saudi spigot staying on forever. In reality Saudi will run out of oil in fifteen years, tops, and prices will return to levels making production in civilized countries worthwhile.
By then, the plan on Wall Street is to have cornered the market elsewhere. Putin, they hope, will be gone and replaced with someone willing to let the banksters walk off with cheap Russian oil in lieu of Arab oil. That will leave DC free to throw the House of Saud to the wolves, steal the part of the vaunted sovereign wealth fund the sandniggers haven't already squandered, and leave Israel (another proxy that will have outlived its usefulness) to clean up the mess. US shale oil they'll have already picked up for a song.
Unfortunately, removing Putin is the part of the plan proving the most difficult...
Huh? So, they have no idea where prices are going, but, they sure know who to play ball with and lean on to try and get prices up. Why even attend a meeting to discuss production cuts if their view was that supply and demand were already in balance? Were they speculating this might have worked in their favor?
At some point the fine line between lies, contradictions, and semantics is no longer relevant. It’s all just bullshit propaganda to cover the real agenda.
Good point.
"The recent price fall was due largely to expectation and perception about future supply and demand. Also similar is the wrong assumptions of changing Saudi oil policy, and the ever-present – and incorrect – belief in conspiracy theories."
A +50% decline purely based on assumptions, speculation and 'conspiracy theories' ? and you where powerless or unwilling to do anything about it? C'mon you can lie better than that! or are you unwilling or unable to do so?
One little bit of truth there: Does Saudi Arabia set the oil price? No.
According to John Perkins (Confessions of an Economic Hitman), oil prices are set by the IMF and World Bank and dictated to the Saudis. They actually make a very small percentage of the oil profits - the lion's share going to (wait for it.......) international banksters (gasp!).
Also, if I'm not mistaken, Aramco is at least in part a partnership between the Bush and Bin Laden families.
It's just funny how "cozy" the players all seem to be....
Makes no sense to NOT lower production in order to increase price and therefore profits; so we must look at motive and see who gains & loses in the medium and long-term..the only truth I can see in the interview.
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Since Russia, China and the Saudi's were all mentioned "working" together; we have the players & the motive; we can add to the mix the Obama administration working to "free Iran"; he is a Muslim, Dictator and King..make no mistake "folks", therefore his 8 year plan/mandate to destroy the American middle-class and impose a totalitarian state must also be considered.
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Also, note the time-frame as being mid to late 2015; I'll be watching for SPY-PUT opportunities for mid 2016 to be safe. Also, the 1.5 trillion in loan defaults (that doesn't count derivative exposures; adds 2-3 trillion more-oil industry speaking), a number mentioned by BP President on a CNBC interview (day or 2 ago), where he said this was going to be "painful" also gives a clue and credence to the total killing of shale & fracking in order to bring down the financial system & force the selling of said businesses to same "outside" investors (see above) for pennies on the dollar, for "pay-back" is indeed "HELL". US isolation is "at the door".
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The reset is well in motion and we see who is going to suffer the most, the U.S. (most to lose); watch Europeans turn East from the smaller nations, then the larger and see the US in total isolation..all by design. Even Israel is turning EAST, but a 200,000,000 man army will come from the North at some point in the future and surround them.
Yes, Israel is turning east, as well she ought to. She'll need Russia's help to clean up the mess made by Uncle Sugar in the Middle East. The beginning of a beautiful friendship.
Even now Bibi and Putin get on very well, by all accounts. No prizes for guessing why the CIA want Bibi gone and replaced by a victim of a botched circumcision.
I have seldom seen such a unanimity of opinion in ZH.