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Low Crude Prices - Cold War Flashback?

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ricklakin

Low Crude Prices - Cold War Flashback?

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Posts: 428

Sep 16 08 6:07 PM

Tags : crude

Warning: This post contains a proposed conspiracy theory.

Do you remember back in the 80s when President Ronald Reagan talked the Saudis into opening up the spigot full-blast, crashing the price of oil and bankrupting the Soviet Union? Many say that was the root cause of the end of the cold war.

Flash forward to the Summer of 2008. The Russians are again acting like the Evil Empire of old. They are threatening their neighbors with a renewed military. They are threatening Europe with Oil Hegemony. And then they invade one of their old satellites.

What is the United States doing? The standard cold-war stuff. We threaten with diplomacy. We play wargames and place our carriers off the coast of Russia's neighbors. Is that all we are doing? Maybe not.

Maybe we are using our last gasp of economic superpower to use the monetary system to again crash the price of oil and bankrupt the Russian economy and put them in their place. On Tuesday, the Russian stock market dropped 17% as oil dropped almost $10 in two days. This would not be a solo act. Almost everyone in the world hates the power the United States wields but they know that our power plays are a whole lot more benign than those of an emboldened, enrichened and empowered Russian Empire. So, my guess is that the Europeans, the Japanese and probably OPEC are in on it as well. Perhaps, even the Chinese are putting the weight of their 1.2 trillion in dollar denominated securities behind this effort.

The final question is, How low do we have to push oil to topple Putin and restore Russia on the path to democratic reform? And the one after that is how badly will we screw up our own economies in order to destroy Russia's?

Just a few thoughts after ingesting the news of the day.

Enjoy,
Rick

Has anyone seen Hari Seldon?

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DeRonin

A cold war flashback with us on the wrong side of the energy equation

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Sep 16 08 6:26 PM

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I'm totally on board with this theory. W is a Ron Reagan wannabe. He's revived star wars via the whacky idea that we're gonna missle shield protect Europe. Hes tried to emulate Reagan's covert foreign policy. Supply side tax cuts. And the coup de gras would be hammering Russia and their economy the same way Ron did with a strategy to pound oil and energy prices lower. Thats a double payback. We'll pound Russia AND get a typical Bush family election year Fall oil price drubbing.

They're massively manipulating oil markets in a gasoline shortage hurricane environment and they've been so successful at it the last few hurricanes, why not try some market manipulating shenanigans in the Russian equity market as well.

The problem is were not in the same spot we were in the prepeak 80s. We'll have too many oil producers colluding against us. And the Ruskies won't take this lying down. One could consider this an act of war and they know we can't handle another one. Nor can our post-Lehman and post-sub prime economy.

Our pending energy supply contraction= no economic growth= insufficient debt service= chaos + oilwars.

vainamoinen

Iraq

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Posts: 328

Sep 16 08 10:39 PM

As I recall wasn't Kuwait's driving down the price of oil (at the probable behest of the USA) to squeeze Iraq financially after the Iraq/Iran war the reason for Saddam's invasion of Kuwait?

And did not the US emmisary to Iraq lead Saddam to believe the US would have a hands off policy if Saddam did invade.

Good analysis ricklakin - Ever thought about writing for the NY Times - their columnists haven't got a clue.

ricklakin

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Posts: 428

Sep 16 08 10:45 PM

retracted by author.

Last Edited By: ricklakin Sep 16 08 11:17 PM. Edited 2 times.

sczech

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Sep 16 08 10:49 PM

Trying to collapse the Russian economy via financial manipulation of the oil price is very dangerous. Russia is a creditor nation - it does not need Dollars in order to pay Dollar denominated debts. In fact, Russia could afford to stop oil exports for a couple of days. Losing 10 million barrels of oil per day would reverse the oil price decline dramatically. In fact, I would not be surprised if Putin decides to go this route. That would make the present efforts of Paulson to save the US financial system much more difficult if not impossible.

DeRonin

Markets Post Record Single-Day Losses

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Sep 17 08 6:53 AM

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Markets Post Record Single-Day Losses

http://www.themoscowtimes...article/600/42/370983.htm
17 September 2008By Tim Wall, Tai Adelaja / Staff WritersThe ruble-denominated MICEX Index fell by 17.5 percent Tuesday, a single-day record, as the country's oil-driven stock market was severely battered by the global economic hurricane spreading from the United States.

The dollar-denominated RTS fell by 11.5 percent to 1131.1 points, wiping nearly $80 billion from the market value of the country's leading companies in just one trading session. More than $750 billion has been lost since May.

Trade on both exchanges had to be temporarily suspended late Tuesday afternoon as shares appeared to be going into free fall. When trading resumed briefly on the MICEX, it slumped still further to 865.16 points before closing at 881.17 points, nearly 190 points off its opening level.

Russian state-controlled banks were hit particularly hard by the fallout from the collapse of investment bank Lehman Brothers in the United States, while insurance giant AIG was struggling to find rescue funds Tuesday, as the dollar lending rate doubled overnight in New York.

VTB shares fell an astounding 31.1 percent, bringing the fall in value since its May 2007 initial public offering to 77 percent, while Sberbank shares lost 22.7 percent.

Market Numbers
MICEX Tuesday close 881.17 Tuesday loss 186.28 (-17.5%) RTS Tuesday close 1,131.12 Tuesday loss 146.48 (-11.5%) Jan. 9 MICEX close 1,906.86 May 19 MICEX close 1,956.14 Sept. 1 MICEX close 1,366.24 Sept. 15 MICEX close 1,137.76 Bovespa (Brazil) Monday -7.8% Shanghai Composite Tuesday -4.5% Bombay SENSEX Tuesday -0.1% NYSE Monday -5.1% NIKKEI Tuesday -5.0% DAX Tuesday -1.6% FTSE 100 -3.4% Major Losers: VTB -31.1% Sberbank -22.7% Rosneft -21.8% Polyus Gold -27.5% Transneft -25.6% Aeroflot -21.7% Gazprom -18.5% Surgutneftegaz -18.4% Novatek -15.3%
Source: MT, Bloomberg

The Central Bank and Finance Ministry injected a total of 511 billion rubles ($20 billion) into money markets Tuesday. Prime Minister Vladimir Putin sought to reassure investors, saying in televised comments that the figure would increase Wednesday.

Officials from the Central Bank and the ministry would "discuss further joint actions" to boost liquidity, Putin said at the start of a meeting with visiting Azeri President Ilham Aliyev.

"We have no doubts that the security cushion that was formed in the Russian economy over the past few years will work," Putin said, adding: "We are studying the possibility of using Central Bank instruments with long-term impact. We will act carefully."

Finance Minister Alexei Kudrin declined to comment Tuesday on possible state support for Russia's banks.

As global oil prices fell as low as $91 per barrel, Russian blue chip energy and metal stocks received a battering amid fears that the U.S. financial crisis could cause a weakening in global demand for oil.

State-controlled giants Rosneft and Gazprom fell 21.8 percent and 18.5 percent, respectively, while Surgutneftegaz was down 18.4 percent and LUKoil fell 10.9 percent. Oil pipeline monopoly Transneft's preferred shares fell by 25.6 percent.

Kudrin said the federal budget would break even next year with an average oil price of $70 per barrel and that the government expected an average of $112 this year, RIA-Novosti reported.

Andrey Saiko, a spokesman for Kudrin's ministry, said he could not immediately comment on the market plunge.

Among metals shares, Polyus Gold was down a whopping 27.5 percent, while Norilsk Nickel fell 8.4 percent.

The trading of several stocks will be suspended on both exchanges for an entire day, to resume only on Thursday. The RTS suspended trading of shares of OGK-5, RBK Information Systems, NizhniKamskNeftekhima and Rostelecom, while TGK-1, TGK-7, RusHydro, Tatneft, Rostelecom and Volgatelecom will be frozen on the MICEX board.

The MICEX last suspended trading in June 2006, while the RTS last called a timeout in November 2000, spokespeople for the indexes said.

"The stock exchange today is a one-way track, with many sellers and no buyers," said Dmitry Parfyonov, a trader with Prospect Investment.

"There's a liquidity crisis, the repo volume is increasing, the Central Bank is offering more short-term credit to cover current expenses," Parfyonov said. "All of this has combined to throw the market into a panic and push down share prices."

"The Russian stock market has become an integral part of the Russian economy as a whole," said Vladimir Matias, managing partner at Asset Capital Partners. "The effect could be devastating to some players, as it could consequently also worsen credit standings and refinancing costs for some listed large and mid-sized companies."

While the news from the U.S. hurt stock indexes worldwide, the Russian markets fell faster and deeper than most, in part because of frayed investor nerves after the recent conflict with Georgia and the economy's heavy reliance on commodities, analysts said.

"Once the RTS crossed the 1,200 level, it triggered a fresh wave of margin calls and, as most investors could not meet the call, it led to forced selling," said Chris Weafer, chief strategist at UralSib.

"There are no, or very few, buyers because of the fear of global markets and the falling oil price. To say that the market is cheap on a rating basis is totally meaningless when the dominant sentiment is fear," he said, adding: "No. Forget that. Scared witless, and the dominant emotion is one of shock."

Apart from injecting liquidity into the banking system, and using some money from the National Welfare Fund, the government can do little in the short-term other than to "pray for a floor in oil," Weafer said.

While the damage from falling stock prices might not be immediate, there is the danger that it could spread like a contagion into the broader economy.

"The $9 per barrel decline in oil prices over the last 24 hours will have an economic effect," said Ronald Smith, chief strategist at Alfa Bank. "It will make it much more difficult for the government to cut oil taxes … as the government's own revenues are being curtailed sharply."

"There is no direct effect on the economy, day to day, but the longer this goes on, the contagion will lead to a loss of confidence, leading to liquidity and insolvency problems," Weafer said.

"This would then start to hit investor confidence and capital inflows, and could lead to a falling off of consumer activity, hitting economic growth."

"These losses are like a virus," he said. "Treat it now, and you can contain it. Leave it, and it will infect the whole system."

Staff Writer Maria Antonova contributed to this report.

Our pending energy supply contraction= no economic growth= insufficient debt service= chaos + oilwars.

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TxElectric

Russian economy solid enough to ride out world crisis - PM Putin

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Posts: 1815

Sep 17 08 3:34 PM

sczech wrote:
Trying to collapse the Russian economy via financial manipulation of the oil price is very dangerous. Russia is a creditor nation - it does not need Dollars in order to pay Dollar denominated debts. In fact, Russia could afford to stop oil exports for a couple of days. Losing 10 million barrels of oil per day would reverse the oil price decline dramatically. In fact, I would not be surprised if Putin decides to go this route. That would make the present efforts of Paulson to save the US financial system much more difficult if not impossible.

http://en.rian.ru/russia/20080916/116854935.html

Russia

Russian economy solid enough to ride out world crisis - PM Putin

20:23

|

16/ 09/ 2008

MOSCOW, September 16 (RIA Novosti) - The Russian economy is strong enough to see out the current global financial crisis, Prime Minister Vladimir Putin said Tuesday.

Markets were unsettled by the fallout from the mortgage crisis in the United States and the collapse of investment bank Lehman Brothers, with Russian stocks plummeting.

"We have no doubt that the safety nets that have been put into place in the Russian economy over the past few years will work to good effect," Putin said during a meeting with the Azerbaijani president.

Earlier Tuesday, Russia's benchmark RTS and MICEX indexes plunged 11.47% and 17.45%, respectively, compounded by the withdrawal of capital from the country.

"We are studying the possibility of using long-term instruments by the Central Bank," Putin said. "We will act carefully and judiciously."

He added that the Finance Ministry had injected 150 billion rubles ($6 billion) into the Russian financial market in liquidity provided to domestic lenders through repo auctions, while the Central Bank contributed 325 billion rubles ($13 billion) to the repurchase auctions.

"Tomorrow the Finance Ministry plans to more than double the figure, offering 350 billion rubles ($14 billion)," the prime minister said.

Putin said the worldwide crisis was certainly affecting the Russian economy because it was a part of the global economy, but stressed that it would have no problem riding out the bumpy patch.

President Dmitry Medvedev said Monday the Russian market was not in danger and ordered the government to boost liquidity.

For more information in Russian

mb73

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Sep 18 08 8:49 AM

Wouldn't know if falling oil prices are an attempt to derail Russia or not; very plausible, but falling oil also benefits the Republicans (theoretically), and we have enough evidence of hedge fund involvement to place blame more prosaically, but I have little doubt that there have been strenuous official efforts to break the commodity bull. Manipulation has been the name of the game for years; we are just now starting to realize it on a broad scale.

But falling oil prices will alarm the OPEC types, who have big spending plans that need high oil prices to support them, so look for more strenuous OPEC efforts to support the oil market. Any reduction in oil output cannot be good for the US.

In the meantime, the current rebound in the dollar is about to soon reverse, I believe, driving costs ever higher in Norlth America. I suspect the US government has its hands full trying to manage the current financial collapse to care too much about Russia's oil driven stock market.

While we are at it, I read this morning that the US has fifty or so ships now in the Black Sea. Turkey controls the Dardenelles, but how tempting would it be to Russia to block them and bottle up a significant portion of the US Navy? Just a thought.

tinnerman

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Posts: 2454

Sep 18 08 9:35 AM

If there is oil market manipulation going on, in a rational world it would most likely be a short term tactic aimed at the November election, rather than a long term neo-con strategy to take down Russia.

Plus or minus one or two years the world is already at peak of oil available on the world trade market. A short recession that dropped world demand by just a couple million barrels per day could very well disguise that peak capacity had been passed. But as soon as a sustained economic recovery got started the tight supply situation would quickly drive up prices. When that happens, Russia would be a big world player both in export revenue, and energy to drive their domestic economy. The US, having taken another nap, would be even more unprepared to face economic or international challenges.

But I wouldn't put anything past the neo-cons either. They might actually be implementing their dreams of taking down Russia using market manipulation. Neo-cons are the group that believes in a historic divine mission for the US, infinite economic growth, and the ability of the invisible hand to supply some other source of cheaper and better energy in the future. The neo-cons take no notice of the peak oil discussion other than to disparage it and write books about abiotic oil. That's why the neo-cons will surely get us all kicked in the butt again if they are behind the strange commodity and monetary conditions that have popped up recently.

Last Edited By: tinnerman Sep 18 08 9:42 AM. Edited 1 times.

mb73

comment

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Posts: 3371

Sep 18 08 10:58 AM

If there is oil market manipulation going on, in a rational world it would most likely be a short term tactic aimed at the November election, rather than a long term neo-con strategy to take down Russia.

Ho! Ho! Ho! That T-man is full of biggies! A rational world? What's that? This world is getting more irrational by the day.

tinnerman

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Posts: 2454

Sep 18 08 12:01 PM

Anybody happen to notice that early today the NYMEX crude price briefly broke $100, but was quickly beaten back? No way TPTB are going to let the nightly news report that crude broke the emotional $100 barrier again if they have the means to prevent it.

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Low Crude Prices - Cold War Flashback?

Low Crude Prices - Cold War Flashback?

Markets Post Record Single-Day Losses

Russian economy solid enough to ride out world crisis - PM Putin