Its the Saudis not OPEC creating a crisis. They have little debt, 900 billion in foreign reserves and 750 billion in domestic reserves. They know they cant control the price so they will let the market do that. Iran and Russia are their main targets. It has also nailed Nigeria, Venezuela and other oil producing states with high debt and struggling economies. Europe and others are reaping the benefits of low gas prices as is the US. The unintended consequence is US investors will leave the oil in the ground rather than have their profit margins cut. They can invest in other areas and maintain their profit margins. Companies with high debt to equity ratios will pay the price in the US. Goodrich is a prime example. Their stock has plummeted. If you work for Companies with low debt and are frugal you will have a better chance of employment. These Companies will start buying Companies in trouble. Its a geopolitical battle and could lead to open rebellion in Iran; especially. It will also severely impact Putins influence as the price drop can not support the programs he has in place for Russia. Oil has been long over priced and now the correction is being forced. The Saudis showed their hand when they had the chance to stabilize the price last Thanksgiving. Either the shits really going to hit the fan with Iran attacking the Saudis or Iran will end in a revolt against their current regime. This one could take 3 to 5 years to straighten out. Natural Gas could take much longer to get back to the $5 to $7 range.
Posted on: Tue, 16 Dec 2014 19:45:36 +0000