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comment by b_b
b_b  ·  2997 days ago  ·  link  ·    ·  parent  ·  post: Sell everything ahead of stock market crash, say RBS economists

I have a hard time with the gloom and doom oil scenarios. There kind of is a price floor for oil, in that it's not going to drop below the cost of producing the cheapest oil. Fracking will dry up before that point, and meanwhile the Saudis will have blown through a huge portion of their cash reserves. One of the ways they're fighting the war of attrition with the US, Russia, et al, is that they have a mountain of cash. In 2015, the war cost them 20% of their reserves. 20% of a huge amount of money. That's not sustainable, even for a prince. Anyway, who the hell knows if there's going to be a multi-state sectarian war that will cause a massive supply disruption. Can RBS or anyone else predict that? My point isn't that they're wrong, per se; it's that we always need to take forecasts with a grain of salt. The number of incorrect predictions always vastly outnumbers the number of correct ones for the simple reason that there are infinite possibilities, but only one thing can actually happen. Good on RBS for predicting gloom and doom and inciting panic. Very mature.





kleinbl00  ·  2997 days ago  ·  link  ·  

That the Kingdom is floating the idea of a Saudi Aramco IPO speaks volumes to the magnitude of the issue, though. Mauldin et. al. hold that the Saudis didn't lower production precisely because fracking costs more than Saudi oil, but that the Saudis miscalculated poorly enough on the fracking breakeven that now they're trapped in a death spiral. The number I heard was $50 a barrel yet here's breitbart claiming $25. $40 a barrel killed the fuck out of arctic drilling. I guess $20 kills tar sands.

So I don't know that I agree with the "price floor" metaphor. Better to say that the lower prices go, the more suffering certain geopolitical players face. Russia at $120 a barrel sure ain't fighting ISIS. Saudi Arabia at $80 a barrel isn't executing Shia to prove they're in control.

They sure as fuck ain't floating an Aramco IPO.

I agree with you on your main point - the article looks like an April Fool's spoof. I'll also paraphrase a quote from Winning the Loser's Game - "no one ever got rich predicting prosperity."

b_b  ·  2997 days ago  ·  link  ·  

I read that about Aramco in the piece you posted the other day, and I have to admit that I was shocked. I also think perhaps it's some kind of ruse. Could it be? If so, for what purpose? Would the royal family really publicize that kind of sensitive information? It sure makes them look like they're in dire straights.

My boss was recently offered a collaboration with a Saudi scientist. I told him to say no. I don't want any part of working with those people. He can't even go visit their lab until he gets a new passport, as they won't let anyone in the country who has a stamp from Israel. If there's any place that's way over due for a popular uprising...

kleinbl00  ·  2997 days ago  ·  link  ·  

Call me jaded, but I suspect that if the Saudis were better at manipulation and intrigue they'd have a lot more influence. As it is, they're deep pocket extremists whose most successful project to date is the Taliban. That particular pigfuck hasn't gone very far since the Americans pulled out. They're also less than a year into a new King. There's also this.

    I've received word that Aramco is actually going to be entirely restructured, and that the initial reports of a separation from the Ministry of Oil are oversimplified. From what I know, Aramco is actually going to be split, with downstream operations (refining and processing crude oil into various products) being merged with SABIC (a Saudi commercial behemoth, involved in petrochemicals), and upstream operations (oil exploration and extraction) being rolled entirely into the Ministry of Oil.

    By rolling upstream operations entirely into the Ministry of Oil, it gives the ministry total control over oil production and much greater oversight over global oil price trends.

    But most important of all, I've received word that Ali Naimi, the current Minister of Oil (and a non-Royal, remember), is going to be replaced by Abdulaziz bin Salman, another of King Salman's sons. This means that, for the first time in Saudi Arabia's history, the country's oil is going to be controlled by a Royal.

Dunno. I've said a few times that Saudi Arabia is basically Texas run by hyper-religious Kardashians. Seems like the new guy wants more bling.

"My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel."

Rashid bin Saeed AL Maktoum, one of the founders of Dubai

If you know that the gig is up, if you know that the die is cast, you might as well bust it out. Not that the Saudis have ever been particularly austere. But if Saudi oil is going to be worth less in the future than it is now, the time to sell is now.

b_b  ·  2997 days ago  ·  link  ·  
This comment has been deleted.
wasoxygen  ·  2997 days ago  ·  link  ·  

    I have a hard time with the gloom and doom oil scenarios. There kind of is a price floor for oil, in that it's not going to drop below the cost of producing the cheapest oil.

I was slow in getting around to offering double-or-nothing on the bet, and was a bit unnerved to find just now that oil has lost another 23% since the first ten-year term ended on December 1.

Does "gloom and doom" now mean dirt-cheap energy, instead of sky-high prices? It's always gloom and doom. I wish I could buy shares in gloom and doom.

b_b  ·  2997 days ago  ·  link  ·  

I'm agnostic on whether $10/barrel oil is good or bad for the world economy as a whole. i'm not smart enough to know what the broad implications are. I am smart enough to know that forecasters typically look at what has happened in the last month or year and do a linear extrapolation. I remember AAA's top economists released a report in summer 2014 telling the US with the full confidence of their best minds that $3/gallon gas was history. We will never see anything close to it again. I remember summer 2008 reading all sorts of brilliant people telling me that oil was going to be $400/barrel by this time next year. I remember also in 2008 Goldman telling us that oil was going to be $200/barrel for the foreseeable future, then 6 months in 2009 later telling us to expect a protracted price slump. With these predictions in mind, from the people who know the most about oil of anyone in the world,and all miserable inaccurate, it's hard to take any prognostication seriously. The thing that each of these incorrect predictions has in common is that each is based on a data set that was limited to a several month period preceding the prediction. Gloom and doom means whatever the prognosticators want it to mean at the time it is uttered, but of course if any of us actually knew what the future held it wouldn't be gloom and doom at all, because we could exploit that knowledge to make a shitload of money.