oil as a weapon...

I posted this on my trapping forum. Russia isn't as big of a deal in the scrap metal world as it is in the wild fur market but as it has been mentioned in other threads over time, low oil prices and a strong dollar aren't a scrap metal recycler's friends...

An old professor of mine was down at my facility visiting the other day. Sooner or later the conversation got around to cheap gas prices. I expressed my opinion it was probably due to lower global demand because of the economic slowdown and increased production. He countered that the high production in the face of lower oil prices might be on purpose in some hardball geopolitics to punish Russia. I know this guy is a big NYT reader and probably saw it there first but I found this in Chicago Tribune. Interesting theory, and I can see it being pushed as a policy in the U.S. and Saudi Arabia. But I also took several semesters of Russian history in college and the Russia people have had many centuries of living under despotic leaders and not having much control over their daily lives (one reason why alcoholism is so rampant among Russian men) so the thought that the people's displeasure is some how going to bring pressure on might-mite Putin and the syndicate that runs the country to reform their ways is probably wishful thinking.

Bottom line is probably continued low prices for motor vehicle fuel for North American consumers and crappy prices and/or no markets for trapper's fur. Its still fun, right??!!



Are the U.S. and Saudi Arabia conspiring to keep oil prices low? - Chicago Tribune

The wheels always fly off a debt based currency/economy. We are seeing the vehicle rattle apart. It will get worse before it gets better.

Originally Posted by Scrappah

To my mind OPEC probably has more to do with setting oil prices. They got PO'd at us back in the 70's & wrecked our economy with the Arab oil embargo. It could be argued that they wrecked it again not too long after we invaded Afghanistan.

They have a history of using oil as a weapon.

If you look at the member nations of OPEC you can see that many aren't / weren't friendly to American interests.

OPEC : Member Countries

One of the key member nations is Iran. Iran is more closely allied with Russia.

The theory that we are beating up on the Russians doesn't seem to hold. I don't think we exert that much influence over the market. The idea of global demand being off seems to make more sense.

If you take OPEC's mission statement at face value they may simply be trying to stabilize the global economy with fair prices.

OPEC : Our Mission

Now that we're mostly out of the Middle East they have no dispute with us. Better to get back to business as usual and stop making problems for the people who were making problems for them ?

You could be right, but it would probably work about as well as pumping trillions of dollars into the economy to make money cheap. We have seen how well that is working.

Ummm ... i dunno. It seems two things that are different from one another

On the one hand there was an economic thing where in my opinion they were creating tons of money on the sly. You gotta remember that a lot of this was done pre-recession. It heated up the global economy and things were banging along pretty good for awhile. The high scrap prices that we so dearly loved were probably a direct result of this.

Then came the crash where they had to create even more money to keep the banking system from collapsing.

It's kinda like party hardy with no limits and let the good times roll.

Then .... comes the morning after. You got a wicked hangover and are as sick as a dog for days.

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Oil is a commodity just like scrap. It makes sense that the price of oil would drop just like other commodities during the deflationary phase of a recession ?

Originally Posted by ChildhoodDream

food for thought

I remember reading a article years back on the plastic pellets that were made from oil here in the U.S. and then the plastic pellets were shipped to China, Mexico and elsewhere and then made into the plastic items that are exported and sold to consumers and business.

I bring this up as it seems that if there is less of a demand for items made from these plastic pellets that there would be a over supply of oil that needs to be used somewhere else.

So cheaper gasoline prices.

Here is another oil related subject that I have not been able to track down the proper answers for.

I use some heating oil and have noticed the price go up as if there was a TAX on it. I tried to track down just where this extra added cost was going. All I could find out was that it was going into some special fund of some sort and was NOT a TAX for generating revenue.

Anyone in the know on this extra added cost to heating fuel?

Don't know anything about a fund but research the supply chain. Focus on the refineries. There are certain parts of the year when they focus on production of gasoline. During other parts of the year they focus on heating oil & other petroleum products.

Best time i've found to buy heating oil is in mid August. If you check out the historical charts that's generally when the price is lowest.

Originally Posted by Scrappah

Ummm ... i dunno. It seems two things that are different from one another

On the one hand there was an economic thing where in my opinion they were creating tons of money on the sly. You gotta remember that a lot of this was done pre-recession. It heated up the global economy and things were banging along pretty good for awhile. The high scrap prices that we so dearly loved were probably a direct result of this.

Then came the crash where they had to create even more money to keep the banking system from collapsing.

It's kinda like party hardy with no limits and let the good times roll.

Then .... comes the morning after. You got a wicked hangover and are as sick as a dog for days.

---------
Oil is a commodity just like scrap. It makes sense that the price of oil would drop just like other commodities during the deflationary phase of a recession ?

Sigh... I was agreeing with you, Scrappah. Money and oil are the same thing. The U.S. dollar is also a commodity. Ever heard of petro-dollah? I was pretty sure QE started the end of '08 and has continued until today, and we will probably have another billions dumped the beginning of next year. Don't worry, it will probably work this time.