Friday, August 07, 2015

Trumping Oil

I am hot! I am so hot!! Check me out, I am hot!

You bet, you indeed are the hottest. For billions of years the sun has been burning bright and sustaining life on earth. But machines were less fortunate until late, as they could not enjoy a sun-bath.  In stead, they devoured on organic agents of sun viz wood, coal or hydro-carbons and farted smoky CO2. In bid to humanize machines, man has now electrified them and for icing over the cake, this electricity is being generated using solar energy.

The day is not far when sun will totally eclipse the conventional sources of energy. Seeking solace in this fact and sensing the sinister rise of Russia in Europe (and Republicans in USA), the USA government lifted the economic sanctions on Iran bringing the prices of oil tumbling down. Republicans cried foul, as they have deep rooted interest in Oil and Oil fields. President Obama has made it clear in his speech that he considered Russia as a bigger threat to USA than Iran (...and Republicans to the Democrats!!). To contain Russia, getting hard to handle Saudis and rising Republicans, Pres. Obama has played his trump card by lifting sanctions over Iran and thus flooding the oil market with Persian barrels.

There will be little respite for oil prices till next presidential elections in US in Nov, 2016, when the Republican will finally be able to play their Trump card.


At 5:17 AM, Blogger said...

The price of oil has dropped 18 months before the FUTURE removal of the Iran embargo. And, that drop is related to the discovery of more oil in North America, the exploitation (albeit ecologically damaging) of tar sands and shale, among other changes. Which the Saudis see as a threat, so they keep pumping oil (they are one of the two nations that can afford to do so), despite the drop in oil prices. Which, by the way, is causing Venezuala and Russia great heartache.

So, your concept is a bit off.

At 11:02 PM, Blogger sudkjain said...

Dear Sir, Thanks for your valuable inputs.

I have been observing the oil prices closely for the last 15 years. and with some conviction I can say there is fair amount of politics and manipulation in determining the price of something which makes the world go round. The oil supply tanks started to overflow well before 2013 yet the prices remained resilient till a short while ago.

Seemingly this oil price war is a battle for survival between the conservative producers and the neo unorthodox producers, so we are made to believe. But the naive world must know that Saudis or OPEC has the capacity to lower the prices as long as shale and sand are there. In absence of these new comers, the oldies simply do not have capability or capacity to balance the supply-demand equation hence the oil prices are bound to hit the roof making situation viable for shale and tar once again. By pushing unorthodox to the wall, the orthodox will prompt them to hone their technology and comeout with cheaper processes which may sustain them at even lower prices. Same goes with the renewable power resources viz. solar and wind. The world is changing fast and technology's future is already scripted. If OPEC or some Oil gurus are trying to prove or suggest that a handful of drying wells can erase the script, they are living in a fool's paradise.

If they have some brain, which I think they do have, the best strategy for OPEC is to co-operate with the new world where both could co-exist peacefully else the conservatives may rest in peace in their own wells very soon.

Now coming to Iran deal and recent price crash, if the USA thought the OPEC was hell bent to smother US shale producers, what was the hurry to sign on the Iran deal. Repercussions were rather obvious on the oil prices which are controlled by speculators who are always well ahead of time(futures). Therefore, I smell a political rat in this whole race for presidency.


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