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Crude Oil And Politics

Summary

Another article brought up an interesting perspective.

Saudi isolationism is dangerous - double dealing comes at a price.

Marriages of convenience.

The U.S. and crude - a slippery slope.

Crude oil technicals - shades of 2008?

As a young man in 1980, I debated two career choices, the commodity business or law school. I went for commodities because I knew that every day would be different, and I would never get bored. The global nature of the business attracted me. After studying in Europe during college and traveling, I was keenly aware that the world extended far beyond my backyard in Brooklyn, New York.

I was lucky enough to work for the most influential physical commodities trading company in the world at the time, Philipp Brothers. I learned the raw material trading and logistics business from the bottom up.

Over the years, I was exposed to shipping experts, financiers, market analysts, and traders. I learned that price forecasting for the future was a compilation of many factors. Fundamental supply and demand in physical commodities is an important determinate of future prices. Understanding fundamentals can be a tedious exercise of data accumulation of supply, demand, and inventories. Technical analysis focuses on price patterns and momentum applying statistical tools to price charts. Governmental policy, rules, and regulations are other factors that can influence prices. Finally, geopolitical trends and shifts often have a tremendous impact on commodity prices. Having been involved in all aspects of the commodities business over the years has been an invaluable education in economics as well as world politics.

Each commodity has individual idiosyncratic characteristics. When it comes to crude oil, the fact is that more than half the world's reserves reside in one of the most turbulent regions of the world, the Middle East. Therefore, politics often trumps many other factors when it comes to the path of least resistance for the price of the energy commodity.

Another article brought up an interesting perspective

In an article written for Seeking Alpha on April 25, What The U.S. Position On Saudi Arabia Means For Oil Prices, author Robert Boslego argues that a low oil price is in the strategic interest of the world's largest producer. He states that " low prices are in Saudis' security interest, and higher prices are in America's oil security interest. One would naturally assume that the Saudis would prefer higher oil prices, and the U.S. prefers lower oil prices. Higher prices mean more income to Saudi Arabia. Lower prices means less cost to an oil importer such as the United States.

But with lower oil prices, the Saudis get protection of their wealth, due to the continued dependence of the U.S. on imported oil. With higher oil prices, U.S. shale output would rise again, and the U.S. could meet all of its oil needs from domestic production of oil, sooner rather than later." I enjoyed Robert's piece; I thought he added a nice touch when he reviewed the history of the co-dependent relationship between the Saudis and America. While I agree with his conclusions, I felt there was more to say about the current state of the Saudi-U.S. relationship on crude oil. So this piece is not another view, rather it is a continuation of the examination of the politics, economics and historical ramifications that will eventually resolve themselves in a path of least resistance for the price of crude oil which I believe will continue to be as volatile as the Middle East.

Saudi isolationism is dangerous - double dealing comes at a price

Saudi Arabia's present King Salman took over the throne in January 2015 upon the death of King Abdullah. The rise of oil consumption in the world has brought great wealth to the Saudi Kingdom. Aside from being the most oil-rich nation in the world, Saudi Arabia is also the home to the two most holy sites in the Muslim world, Mecca and Medina. Mecca is the holiest site in Islam, an once-in-a-lifetime pilgrimage there is required by each able-bodied Muslim, who can afford to go. Medina is the second holiest city for the religion.

The modern day House of Saud has ruled the nation since 1932. There are approximately 15,000 members of the Royal Family, but only 2,000 hold considerable power and wealth. Over 31.6 million people live in the nation; the vast majority of...


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