The picture above makes things pretty clear; click for the article.
Here's an explanation as to why Indonesia's no longer gonna be in OPEC, and why more dominoes will fall....
If there's any single human-alterable cause of oil prices right now, it's fuel subsidies in many countries that want to hide price-signals from their citizens. These subsidies are a political "third rail", even in tyrannies like China and Saudi Arabia.
8 comments:
Very interesting, but I wonder how long certain tyrannies can afford to keep the subsidies going.
If their internal demand outstrips their ability to export and make profit from countries willing to pay, they lose the ability to have the money on hand to continue those subsidies or their military budgets or public largesse - depending upon which model you have.
I suspect we'll see $5 per gallon before the end of the year in the US, and the subsidies will continue in China and India while beginning to diminish just so slightly in the Arab world. Or so I guess. Russia on the other hand will continue to make money hand over fist as it opens up more of its oil reserves, just enough to keep up with the high prices, but not enough to lower them. I don't think Russia has these types of subsidies, and so it can afford to get really rich off the oil market without civil unrest, making it a more of a power in the years to come.
I dunno, but with fuel at $4.89 where I am, $5 is pretty darn certain.
Oh yes...I forgot how much more expensive it is there. Okay, $5/gallon on average US-wide by the end of the year.
Tyrannies can keep it up forever, b/c they'll simply inflate the currency Mugabe-style. The resulting widespread misery makes it ever-less-likely that any middle class will be able to muster enough force to depose said tyrant.
Russia will be able to throw its weight around, but it's still "resource curse." Until such a time as the Russian leadership decides it wants to empower a real middle class outside of Moscow and St. Petersburg, what they're mostly buying is "regime purchasing influence."
Russ: not true -- Mugabe-eque hyperinflation scares the bejeebuz out of folks. Asian economies are heading down the tubes fast thanks to inflation, to the point that many expect the Chinese (for example) to reign in dollar purchase and money supply in general once the Olympics are past.
What's even scarier is that now that the Shine-Ola has hit the fan, folks are still talking about inflation as the principal danger in the U.S. (which it is to a small extent due to commodity prices), but the destruction of jobs and bank credit that we're seeing seems far more indicative of deflation, which no-one seems to be talking about. Commodities chasing fewer and fewer remaining dollars in our pockets is a NASTY scenario.
Yes, Jim, but in outright tyrannies, what scares folks is effectively irrelevant. So long as the mine, pump, logs, or whatever keep providing funds to the regime, the regime could care less.
I'm not talking about "managed democracies," or even fascist corporate states like China or Russia, but true tyrannies. You think Chavez gives a shit about inflation? He has, effectively, single-handedly DESTROYED Vz's oil industry.
If you want to classify them more closely, yes, you're right: the world's "tin-pot dictatorships" will screw themselves right into the ground.
Well, yes. They're the ones who will be forced to recognize international borders. The "other kind" will simply do what they have always done: reach across the table and grab shit that belongs to other people.
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