What Explains the Current Volatility in the Oil and Gas Markets? Why is the Price of Gasoline Going Back Up Again?on Saturday, February 28, 2015
Riding a Rollercoaster of Rising and Falling Gasoline Prices
At the Price-Point of a Barrel of American Shale Oil
by Scott Rohter
Just a couple of weeks ago the price of a barrel of crude oil was under fifty dollars and the cost of a gallon of gasoline had dropped to less than two dollars for the first time in almost six years. It took only three months for the price of gasoline to fall from over four dollars a gallon to under two dollars a gallon all across America. But now in a matter of only two short weeks the price of gasoline has risen back up to almost three dollars a gallon again ! What can explain this wild fluctuation in the price of oil and gas and why is the petroleum market so unstable right now?
There is only one thing in my opinion that can account for the current volatility in oil prices. If you read my last article on the rapidly falling price of gasoline then you know I said that the Islamic State was responsible for the declining prices. The downward trend in the price of gasoline began right about the same time that ISIS took control of the Iraqi oil fields near the city of Mosul in northern Iraq.
In order to finance their Sunni led Islamic revolution in the Middle East ISIS was selling their newly acquired Iraqi oil on the Black Market the only way they could… cheap. Not being a member of OPEC that is the only way they can sell there oil, but rather than allow ISIS to derive any profits from the sale of their newly confiscated Iraqi oil reserves Saudi Arabia was matching the price that ISIS was charging on the Black Market. All of the other members of OPEC were simply going along for the ride with Saudi Arabia and the Saudis were hoping to starve their Sunni rivals in control of ISIS of the money and the support they need to finance their Islamic caliphate. Now all of a sudden the price of oil and gas is going back up again. It is not just going up. It is rising rapidly like there is no tomorrow. So why the mad rush? Why is everybody in such a big hurry to raise the price of oil and gas again? What is causing this rapid increase in prices? In a word it is greed.
The reason everybody is in such a big hurry to raise the price of oil again is that those lower prices were hurting the economies of many oil producing nations, not just Russia. It was damaging the Saudi Arabian economy and it was damaging certain sectors of our own economy. But that was the goal, to hurt our economy in order to obtain a very important concession from America. They weren’t trying to prevent us from developing our own domestic shale oil reserves. If that was the case they would have dropped the price of oil many years ago before the fracking revolution in the oil industry actually took off, but they didn’t do that. Instead they were trying to extract a promise from President Obama.
No oil producing country or combination of oil producing countries and no chairman of the board of directors of any major American oil company would voluntarily agree to reduce their prices or profits so low that it would hurt their bottom line like they have been doing for the past three months unless there was a very good reason. The price or oil had dropped so low that it wasn’t even profitable to frack for oil. In order for fracking to be economically viable the price of a barrel of crude oil has to be somewhere around ninety dollars, but it had fallen to below fifty dollars a barrel. Of course there was a very good reason why the Saudis dropped the price of oil so low. There is something very unusual going on in the oil business right now that defies logic which has not been reported at all in the mainstream media. I believe that the price of oil was deliberately being manipulated downward by the Saudis reluctantly in order to achieve some up until now inexplicable goal that the press and our government is not telling us about.
I have speculated that the Saudi Royal Family views ISIS as an existential threat. That is why they were willing to drop the price of crude oil on the international market, not because they wanted to reduce their profits, but because they want to remain in power and they want to stay alive. They have been trying to stop the flow of money to ISIS revolutionaries in the Middle East so that their own heads don’t wind up on a pole in the center of downtown Riyadh. But now the price of oil is starting to go back up again and Saudi Arabia does not feel the need to keep the price of oil low anymore in order to compete with ISIS on the Black Market. So what has dramatically changed in the past two weeks to alter the Saudi perspective? Let me speculate for you.
Perhaps the Saudis have cut some kind of a secret deal with ISIS so that they don’t have to fear for their lives in the event of the rise of a future Islamic State… or maybe ISIS might be having a hard time selling their confiscated Iraqi oil reserves on the Black Market right now… or more than likely it is a little piece of information that barely got mentioned in the news last week. The Obama Administration has just committed the United States military to sending American ground forces back to Iraq in the spring to help its Shiite led government recapture the northern Iraqi city of Mosul and the oil fields that are currently under ISIS control. That is not mere speculation on my part. It is a fact and it helps explain why the Saudis feel safe now to raise the price of oil once again. They got the promise they wanted from the Obama Administration which was extracted at the price point of a barrel of shale oil.
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