Friday, December 19, 2014

CRUSHING OIL PRICES - DO NOT PUSH THE BEAR TO THE WALL. IN A DESPERATE MOVE, HE COULD RETALIATE & TURN OIL TAPS OFF TO WESTERN EUROPE, DESTROYING THEIR FRAGILE ECONOMIES AND IN TURN THE WORLD ECONOMY.

President Putin, picture courtesy Wikepedia.org

The decline of oil prices from $100 in mid 2014 to $57 now is no coincidence, nor does it have anything do with supply and demand as oil demand has certainly not halved in six months.

It is seriously suspected that oil prices are being manipulated by U.S. to crush Russia and to make them pay for re-possessing Crimea from Ukraine. When sanctions and all else failed, U.S. seems to have decided to hit Russia, where it hurts most - in the pocket. The Russian Ruble is in a free fall and despite a recent raise in Russian Central Bank rate from 10 to 17%, the Ruble is not even half its worth what it was a year ago.
According to some estimates, it is costing Russia around $70  a barrel to extract oil, if that is accurate, Russia is in net loss of $13 per barrel it produces and sells. This could hit Russian economy hard, inflation could sky rocket, post Soviet style bread lines could form again with possible loss of popularity for Putin from its current 85% level. And that is exactly what U.S. may be hoping to accomplish. Such a policy may have a short term impact, but long term, it could have a devastating effect on the world economy.
A desperate Putin with his back to the wall could adopt 'Destroy West' policy by turning off oil taps overnight to Western Europe, which is heavily dependent on Russian oil. The already fragile European economies will not be able to withstand such a shock and may go into recession or even a depression, which in turn would hit all the economies of the world, including that of the U.S. resulting in a 1930s style worldwide depression.
The Obama Administration needs to reign in its anti Russia hawks and think long and hard about the consequences such a policy. Better sense should prevail before the bear hits back with a vengeance.

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