On January 13th, Reuters reported in “Iran’s President Rouhani says countries behind oil price drop will suffer”, that:
“Iranian President Hassan Rouhani said that countries behind the fall in global oil prices would regret their decision and warned that Saudi Arabia and Kuwait would suffer alongside Iran from the price drop. ‘Those that have planned to decrease the prices against other countries will regret this decision,’ Rouhani said in a speech broadcast on state television as oil plunged to near six year lows on international markets. ‘If Iran suffers from the drop in oil prices, know that other oil-producing countries such as Saudi Arabia and Kuwait will suffer more than Iran.’
Will the falling price of crude oil causes Iran to instigate some form of reprisal, vengeance or even violence against the Saudis or Kuwait? Assassinations? Bombings? Covert support for political dissidents within Saudi Arabia and/or Kuwait?
Will the current fall in oil prices be stopped by the economic forces of supply and demand or by military forces of bang-bang and ka-boom!?
Some nations produce virtually nothing but crude oil. Their national revenues might already be down as much as 60% due to the falling price of crude. That fall in revenues isn’t merely painful for the people of those countries—it also exposes their governments to internal strife, chaos and possible overthrow.
The oil-producing nations that have been damaged by the fall in the price of crude oil must be furious at nations like Saudi Arabia and Kuwait that are deemed responsible for the price fall.
Can we expect one or more oil-producing countries to take some form of physical or economic vengeance against the Saudi’s and Kuwaitis? Will some members of OPEC launch some sort of attack?
What about Russia? Russia is being damaged by the falling oil prices. Could Russia arrange to assassinate or more Saudi or Kuwaiti leaders? How many Saudi and/or Kuwaiti leaders would have to die before those countries limited their production of crude oil and caused the global price of crude to rise? I’ll bet the answer is “not many”.
How ‘bout corporations that work the “oil patch” and whose financial survival is threatened by the falling oil prices? Is there a CEO who’s desperate enough to whack a couple of Saudi or Kuwaiti leaders in order to boost corporate profits?
What about nations which aren’t financially dependent on the price of crude oil, but have issued trillions of dollars of “derivatives” designed to protect investors against dramatic changes in the price of crude? If the falling price of crude triggers demands on those derivatives, and if the derivatives’ liabilities are too great to be repaid, could a significant default in derivatives collapse the US or even global economies? Does any nation care enough about the financial stability of the US and/or global economies to subject Saudi Arabia or Kuwait to some surgically-placed violence?
The longer the price of oil stays down, the more likely it is that one or more oil-producing nations assault Saudi Arabia and/or Kuwait.
It therefore seems strange that the Saudi’s and Kuwaitis would dare to continue to threaten corporations, governments, nations and even the global economy by helping to suppress the price of crude. Are Saudi Arabia and Kuwait ignorant of the risks they’re taking and the possibility that they might suffer some sort of retaliation?
What happens to the global economy, if one oil-producing nation takes it upon itself to bomb the pipelines or refineries of Saudi Arabia or Kuwait? How hard would it be to attack a pipeline as a false flag event that might be blamed on some other Muslim country, ISIS, Israel or even the US?
How hard would it be to shoot, poison or bomb one, two—maybe four—key leaders of Saudi Arabia or Kuwait and thereby cause the price of crude oil to rise? A half a dozen bullets might be more than enough to “send a message” to cause the Saudis and Kuwaitis to slow production and raise the price of crude oil. Some oil-producing nations or even corporations might find the temptation to fire those bullets almost irresistible.
Unless some people who are far more powerful than the Saudis and Kuwaitis want the price of crude to fall further, it seems likely that “pressures” are already being exerted on Saudi Arabia and Kuwait to reduce oil production. These pressures—including threats of violence—are almost certainly being exerted by nations other than Iran.
I’m betting that Saudis and Kuwaitis will soon respond to these threats by cutting production of crude oil in order to increase its price. I’m not saying that the price of crude will start rising this month, but I am saying it might at least not fall much further. In fact, if I had to bet, I’d bet that the price of crude will not go much below $45/barrel. I think the “bottom” for crude has been reached.
If I’m wrong, then some very powerful forces must want the price of crude to fall further and thereby encourage deflation and increase the probability of a global depression.