Huge consequences with the sharp decline in oil prices over the last five months. I have been writing about it in this column for quite some time now because it has brought big changes in our world. Ever since the “Fuel your promos” blog of October 13th that the decline has been unprecedented and surprising, and most people did not see it coming except the ones that are pulling the strings behind this whole strategy. Events are unraveling with a domino effect. Let’s see:
- Opec- has decided not reduce production to force prices up. The Arabs are siding with the US on the current strategy and also with another intention, to see what happens with the booming fracking production going on in the US currently that has a higher production cost of around $60/barrel-it is a more expensive method of production than the conventional method. Already small energy companies in the US are starting to feel the squeeze and will go down if the price remains below $60. The Arabs are not dumb, they have been investing in other sources of energy for years, they know that oil will not last forever, but still compete with the rest of the world in oil production that is why they are testing the fracking producers.
- Rusia- it was known that the country was going into recession next year. Well, the ruble depreciated in half last week causing panic and stampede. Going forward, their alternatives looking at the big picture are to back off Ukraine and negotiate with the west to alleviate sanctions, maintain its firm posture and endure the crisis passing the burden to the Russian people and going into a deep recession and/or the Oligarchs will remove Putin and start negotiating with the west to ease things. So far the situation looks very grim for the country. Another option and very scary one, is to start a fight- alone or with allies- with someone just to create havoc and instability around the world, let’s hope not.
- Venezuela (Argentina, Bolivia, Ecuador, Nicaragua)- President Maduro start packing your bags, huge problems coming your way, the revolution is coming to your doorstep. The situation in Venezuela is probably about to implode. How can it be that one of the top oil producers in the world-they’ve had a great price per barrel run- can have an economy in shambles that most Venezuelans have to endure?, unless you belong to government. Well, the party is over for them and all the other satellite countries that been living la”Vida Loca” off them with free oil a lo Robin Hood including Cuba and their opium dream of “La Revolucion Bolivariana”. Party Over.
- Cuba– announced December 17, 2015, Historic Day, the US and Cuba will resume negotiations after over five decades of friction and sanctions. Very controversial move made by President Obama but that promises results. I have a feeling that this move has been conditioned that once Fidel passes away-he already has one foot in the other world- his brother Raul or the party will start opening for democracy. I don’t see it any other way, the pressure is going to be immense. The Cubans have no other choice. Long gone are the days of subsidies from the USSR and most recently the free oil from Venezuela. They have nothing to eat anymore other than rice, beans and bananas. They could be free soon.
- Iran– big oil producer as well, they are having it hard as well with the sanctions and recently have been flirting with the west to an agreement. Most likely, this will bring them faster to the negotiation table to reach an agreement with regards to the nuclear arms development issue.
- US Economy- the surge in the economy these last few weeks has been great news. This week was announced a 5% GDP growth for the last quarter. This is attributed to many factors that this column has been mentioning recently and optimism is increasing. Optimism is contagious and increases over time which drives the economy forward because it creates momentum but it can also be shattered overnight when you have an stampede like we saw in Russia last week, and confidence is lost immediately when this happens. Most economic indicators look good and next year should be a consolidation year-even though it will be a political year- and focusing on creating jobs, jobs, jobs, and increasing purchasing power of the general public. Could be a good one 2015.
Happy Holidays and a Prosperous New Year