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| Economy |
| Cheap Oil's Effect on US foreign relations |
| 2014-12-26 |
| [NYTimes] A plunge in oil prices has sent tremors through the global political and economic order, setting off an abrupt shift in fortunes that has bolstered the interests of the United States and pushed several big oil-exporting nations — particularly those hostile to the West, like Russia, Iran and Venezuela — to the brink of financial crisis. The price drop, said Edward N. Luttwak, a longtime Pentagon adviser and author of several books on geopolitical and economic strategy, “is knocking down America’s principal opponents without us even trying.” For Iran, which is estimated to be losing $1 billion a month because of the fall, it is as if Congress had passed the much tougher sanctions that the White House lobbied against, he said. Iran has been hit so hard that its government, looking for ways to fill a widening hole in its budget, is offering young men the option of buying their way out of an obligatory two years of military service. “We are on the eve of a major crisis,” an Iranian economist, Hossein Raghfar, told the Etemaad newspaper on Sunday. “The government needs money badly.” “It is a big boost for the U.S. when three out of four of our active antagonists are seriously weakened, when their room for maneuver is seriously reduced,” Mr. Luttwak said, referring to Russia, Iran and Venezuela. The only major United States antagonist not hurt by the drop in oil prices is North Korea, which imports all of its petroleum. Even some of the indirect consequences of the price slump, like last week’s break in the half-century diplomatic logjam between Washington and Havana, have generally worked in the United States’ favor. Fearful that Venezuela, its main benefactor, might cut off supplies of cash and cheap oil, Cuba sealed a historic deal that has in turn lifted a shadow over the United States’ standing in much of Latin America. Hard-hit anti-American oil producers have blamed foreign machinations for their woes, suggesting that Washington, in cahoots with Saudi Arabia, has deliberately driven down prices. This view is particularly strong in Russia, where former K.G.B. agents close to Mr. Putin have long believed that Washington engineered the collapse of the Soviet Union by getting Saudi Arabia to increase oil output, driving down prices and thus starving Moscow of revenue. China became the world’s largest importer of oil in 2013, surpassing the United States, and so stands to benefit from plummeting prices. Bank of America Merrill Lynch estimated last month that every 10 percent decline in the price of oil could increase China’s economic growth by 0.15 percent. Seems too good to be true. I remember the fall of 2008 and early 2009. A similar sudden and massive drop in oil prices didn't last long. |
| Posted by:Anguper Hupomosing9418 |
| #4 If it's in the NYT, I don't believe it. |
| Posted by: Raj 2014-12-26 11:19 |
| #3 I remember the fall of 2008 and early 2009 That price rise was driven by pure market speculation. When the financial institutions could no longer back the paper in the game (cause of the imploding mortgage market), the whole oil thing imploded as well. The balloon could have been stopped far earlier in its tracks if the 'regulating agencies' had call margin far sooner. However those agencies have long since been 'captured' and compromised by the industry they're suppose to be watching. |
| Posted by: Procopius2k 2014-12-26 09:24 |
| #2 Relying on oil that you swap with other people for real wealth (created by a real economy based on "price = demand/supply") is never going to work. |
| Posted by: Bright Pebbles 2014-12-26 09:20 |
| #1 This view is particularly strong in Russia, where former K.G.B. agents close to Mr. Putin have long believed that Washington engineered the collapse of the Soviet Union by getting Saudi Arabia to increase oil output, driving down prices and thus starving Moscow of revenue. Therein lies the problem with a 'one trick pony' portfolio. Good luck with those stacking dolls. |
| Posted by: Besoeker 2014-12-26 08:14 |