Editorial: Pinched Purses & Howls From The Forecourt
At time of writing, the price of Brent crude oil stands at $84 per barrel, a four year low on the global markets. As we discussed here last week, this now 25 per cent drop in value since the high of $115 barely four months ago is due to a number of macroeconomic factors. Now we can add to those, the fact that the Federal Republic of Germany, the beating heart of the 18 member Eurozone, is about to suffer a bout of angina, slipping into its third recession in the past six years.
In late November, the 166th OPEC Meeting will take place in Vienna, bringing together oil minsters from six Middle Eastern, four African and two South American nations.
In September 2014, the cartel’s oil output reached 30.96 million barrels per day, roughly 30 per cent of global daily production. Within OPEC itself, Saudi Arabia is responsible for approximately one third of that total. And according to sources inside the financial complex, the Kingdom would not be averse to crude at $80 per barrel from now until late 2016.
While prolonged price drop would significantly affect the bottom lines of the heavily oil dependent OPEC nations – particularly the likes of a fiscally bereft Venezuela and an Iranian state in remission from the sapping effects of sanctions – $80 per barrel serves a more constructive purpose. An $80 dollar barrel of oil limits investment in the more costly oil and gas projects, such as unconventional and deepwater developments, loosening the grip of Western powers in the hydrocarbons arena.
At the same time as the Gulf nations safeguard their market dominance from threats to the West, in the East the Russian bear is also wincing at the prospect of falling prices.
Diminishing domestic demands and swingeing sanctions have pushed the Russian economy to the limit. Growth is forecast at as little as 0.9 per cent for 2015, and fulfilment of central government spending is predicated on oil at $100.
In a world of increasingly fractious international relations, the added dimension of an impending oil war is the last thing that shaky economies need. And, in the short-term, the only winners are howling with laughter at the pump….